June 2026: Special Ordered Parts: "Purchased Obsolescence Without a Process?"

As we approach the midway point of 2026, this month's issue of ACG "Smart Parts" will once again focus on the basics. That being said, it's pretty interesting that some of these "basics" we focus on each month are very relevant.

It is not our intent to bring up something new each month, even though we have introduced many new ideas, concepts and approaches in our ACG "Smart Parts" Blogs over the last 14+ years.

More importantly than all that, one of our most common phrases, not only in our ACG "Smart Parts" Training Program, but also in our ACG "Smart Service" Training Program as well is...

"Don't Ask Yourself if You Know It, Instead Ask Yourself How Good You Are at It!"

In other words, we may already know what the process is and have known for years, but how good are we at that process? Especially when it comes down to managing Special Ordered Parts and preventing Parts Obsolescence as a whole.

If You Don't Already Know It, Here's a News Flash!...

"One of the Biggest Contributors to the Dealers Obsolescence is Special Ordered Parts that Never Get Sold!"

In many dealerships today, it shouldn't be a question of "do we have a process?", it should be more of a question of "do we have the right process?" None can be truer with our "Special Order Parts Process".

Special Order Parts can be one of our biggest contributors to Parts Obsolescence and if we don't have the right process, we could be purchasing obsolescence right from the start. Even though we may have a process, in many cases there are few restrictions and most important, there is usually a lack of accountability.

In this issue of ACG "Smart Parts", we will detail our Special Order Parts Process that will help minimize obsolescence while increasing overall parts sales. Keep in mind that these Special Order Parts should be considered as "pre-sold work, or "pre-sold parts sales".

Let's Begin...

As we mentioned, having a process in many of our daily routines is not uncommon. It's more of having the right process that leads to expected results and determines the success of any process.

As we go through and detail our Special Order Parts Process, you may notice that it may contain some process items that are already being followed in most dealerships today. It's more of what we aren't doing in our current process that we should be focusing on.

Number One: Special Order Parts Authorization

Much like most problems that lead to undesired results in any process, it all starts in the beginning, and initiating a Parts Special Order Process is no different. We should be first looking at just who is authorized to order these Special Order Parts in the first place.

In many dealerships today, just about anyone can Special Order a part without any accountability or incur any consequences. In all actuality, whoever authorizes the initial Special Order should be held accountable for the sale of that part.

Authorized personnel should only include Parts Personnel, Department Managers, Service Advisors and of course, the customer. Technicians do not order parts as they are not usually held accountable. They can tell us what a vehicle requires, but they are not authorized to order Special Order Part(s).

All Special Order Parts need to be authorized and signed for to start the accountability trail. If these parts are not eventually installed, or sold, then the authorized person or department generating the Special Order should be held accountable to any return fees.

The authorizing party should also be signing off on when they are notified when the Special Order Part(s) have arrived as well. Often times, the Parts Department just lays a Special Order Part receipt on their desk and goes unnoticed and lost in a paper shuffle.

This is crucial because in my opinion, if the Special Order Part does not get installed or sold, then it should be returned after 30 days, no matter the cost. Otherwise, it will just be added to the inventory and future parts obsolescence.

Number Two: Parts Pre-Payments, Restrictions

This part of the process is usually common in most dealerships today when applicable. Problem with this one is that we can't ask for a deposit or pre-payment on Warranty Parts or Internals. These are also the parts that we are stuck with if not installed or sold, once again adding to Parts Obsolescence.

Of course, acquiring deposits and pre-payments is extremely important and involves the Accounting Department in processing these payments up front. It also requires the proper billing procedures in order to relieve these payments on RO's and Counter Tickets.

Special Order Parts "restrictions" on the other hand are not often followed enough in many dealerships. Proper signage and wording on Repair Orders and Counter Tickets have to include these restrictions, exclusions or added fees.

Restrictions and conditions should include; No Returns on Electrical Items, No Special Order Parts Returns after (30) Days, Packaging Restrictions, and Return Fees May Apply just to name a few.

Keep in mind that these Return Fees should also apply to other departments, even if these fees are charged internally to the authorized department as an expense. Even though there are really no "monies" realized, the expense should be applied, and the part should be returned to the manufacturer or scrapped.

Back when I was a Parts Manager, and when Special Order Parts reached (30) Days without being sold, the authorizing person or department was given final notification. I would then give them a two week "grace period" to get those parts sold.

Once the (45) days have elapsed, these Special Order Parts were either sent back to the manufacturer or scrapped. The return fees or scrapping fees would then be charged to the authorizing department as there has to be accountability with consequences.

I have learned over the years that if we followed these guidelines and stuck to them; the problem seemed to go away. Most importantly, the dealer had to support this part of the process with no exceptions.

Number Three: Pre-Billed Special Order Parts

In my opinion and in the past, I would never Special Order a part for Service unless I had one of two things, which would be an RO or a Future Appointment set for the customer. In most Dealer Management Systems, a future appointment can be created, attaching the Special Order Part to a customer.

Prebilling a Special Order part to an RO or a Future Appointment is essentially the same thing and "allocates" the Special Order Part to either the RO or the Future Appointment with a Lead Time of at least 3-5 days. If a Special Ordered Part is Back Ordered, Service is notified and the Future Appointment is "modified", not deleted to an alternate Future Appointment Date.

Billing a Special Ordered Part to a Future Appointment would also allow the Service Department to remove parts from an RO, which we all hate in Parts. If a part is removed from an RO for any reason, the Special Order Part should then be billed to a Future Appointment.

It's also much easier for the Service Advisors to "pre-schedule" these appointments as opposed to waiting for parts to arrive and fit these customers into their schedules. Communication is key though as we don't want customers coming in for their appointments and the part hasn't arrived for whatever reason.

The Parts & Service Departments also have to do their prework before the customer arrives to ensure the right parts were ordered and received. This "prework" should be in place no matter if the customer had a Future Appointment or not and should apply to all Special Order Parts.

Believe it or not, this happens often as Special Order Parts are ordered wrong for whatever reason or person. Another "Purchased Obsolescence" Scenario happens when the Tech Special Orders additional parts "just in case" they may need it, or the diagnosis is not clear on the needed parts.

Number Four: Special Order Parts Notification

If there was one area where the ball gets dropped in this whole process is this one as everyone seems to point the finger at someone else. Every DMS out there has a "Universal Special Order Communication System". There should not be calls going back and forth between Parts and Service to see if Special Order Parts have arrived.

Maybe the Counter Person just dropped the slip on the Service Advisors desk without personally notifying the advisor, or the Service Advisor was notified and didn't call the customer. Whatever the "excuse", this one seems to always lead to "Process Failure".

First of all, if we had set a Future Appointment in the first place and the Parts Department made sure the part was there for that Future Appointment and we verified we had the right part beforehand, things would flow smoothly.

I realize that if all that happens correctly, then things would flow smoothly, but unfortunately, when the process fails just one time, it gets dropped completely. Instead of finding out where the slipup was and fixing it, we tend drop this "good practice" process completely.

Number Five: Special Order Parts Bin Sequence

Lastly, one of the areas that most often gets overlooked is where we "bin" these Special Order Parts in the first place. In many, if not most dealerships, Special Order Parts are kept out back near the shipping & receiving area mostly for convenience. Out of sight and out of mind when they should be prioritized for obvious reasons.

In my opinion, Special Order Parts should be closer to the front counter in order to stay on top of them and reduce the chances of being stuck with them. After all, we already know that these parts could eventually be added to our obsolescence.

In addition, we should also "bin" them differently as most Special Order Bins are set up in alphabetical order sequence by the first letter of the customers' last name. This has been pretty much how we have binned Special Order Parts for years.

Quite a few years ago I happened to visit a dealer that literally had no issues with Special Order Parts Aged over (30) Days, which is the industry guideline. When I asked to see his Special Order Bins, I was confused as I didn't see these Special Order Bins labelled with the letters A - Z for the first letter of the customers last name.

Instead, what I observed were Special Order Bins with the Service Advisor's Names at the top and four shelves below. Each shelf had fluorescent tape to the left starting with green on the first shelf, yellow for the second, blue for the third and the fourth shelf labeled with red fluorescent tape.

Each shelf indicating how long that the Special Ordered Part(s) had been received and on the shelf waiting to be installed and sold. This "visual" was amazing to me as it really made it easy to manage these Special Ordered Parts.

Each day, one of the Parts Staff would update and move these Special Ordered Parts to the appropriate shelf based on the receipt date. The Service Manager also insisted that his Service Advisors walk these shelfs to make sure they did not end up on the bottom shelf, which was week four.

This "visual" Special Order Management idea was so simple to me and so practical in order to keep these Special Order Parts cycled through every (30) days. Other than the exceptions of back ordered parts, restricted parts and rescheduling customers became much easier to manage.

Everyone involved has to have a sense of urgency and accountability to this whole process. Those days of just saying..."The customer never showed up so just put it back in inventory and we will sell it to someone else"...are long gone.

Bottom line is that Special Ordered Parts that do not get installed or sold are just adding to the dealer's obsolescence and acquisition and holding costs. Most importantly, Special Ordered Parts could be referred to as "presold work" and we should consider them as such.

We all work very hard to increase Parts & Service Sales each and every day and these parts are just sitting there waiting to be installed and sold. Keep in mind that simply ordering Special Order Parts doesn't complete the task as it's just beginning.

f you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

May 2026: The Net Effects of "Choosing Not" to Stock the Right Parts

After writing these Monthly Blogs for over 14 years, I never thought I would get so excited and anxious to write this one. Writing about something that hits the "core" of what I believe to be our primary reason for being a Parts Manager in the first place.

That reason is to service and provide the "right" part to our customers at a high level on the first visit to our parts counters and be profitable. We not only have to provide these parts, (according to Industry Guidelines) 75% - 85% on first visit, we also must protect the dealer's investment.

Protecting the dealer's investment meaning we must minimize parts from going obsolete. Being a Parts Manager is not easy as we have to have the right parts and keep the inventory "clean".

I will admit that this "two-way street" usually leans to one or the other in many dealerships today. Either we have a "clean" inventory with a Low First Time Fill Rate, or we may have a High First Time Fill Rate but have issues with Obsolescence.

The truth and the fact of the matter is that we can have both High First Time Fill Rates and Controlled Obsolescence. The real question is which one of these three mentioned do we want to be?

In this issue of ACG "Smart Parts", we will reveal the secret of many Parts Managers that "Choose Not" to stock the right parts just to keep their inventory clean from obsolescence. Even if it comes at the expense of technicians, dealers and ultimately, the customer.

The parts that I'm referring to that are purposely not stocked, even if they meet Stocking Guidelines are as follows. Parts such as bolts, washers, gaskets, turbos, some suspension and driveline parts, brake repair parts, emission parts, etc.

I am not referring to engines, transmissions, collision parts, recall parts and perhaps restricted parts for obvious reasons. Even though I do have many dealers that do stock some of these above parts in higher volume stores because they have met the Criteria.

Keep in mind that these Parts Managers that "Choose Not" to stock the right parts, other than fast moving parts don't have to actually face the customer. They are just sitting in the background essentially controlling the dealer's money and other people's lives.

In some respects, I hate to be blunt, but on the other hand I will be blunt as my passion has always been to be the best Parts Manager I can be. That doesn't mean that our primary reason and goal as Parts Manager is to keep our inventory clean.

It's time to expose this "Parts Management Style", or preference by listing out ALL the effects of what this style or primary goal can cause. Keep in mind that I work with many Parts Managers that are doing it right, but unfortunately, I also know and have worked with many that purposely "Choose Not" to stock the right parts.

So "Smart Parts" Managers!...Let's Put All the Cards on the Table Face Up and Reveal the Effects of Purposely Not Stocking the Right Parts!

First and foremost, let's start by looking at the "mindset", or profile of many Parts Managers out there today. Parts Managers typically have personality traits that include critical thinking, are worrisome, not trusting, and always wondering what may happen.

One of the Parts Managers biggest worries is the dealer and what might happen if we end up with too much obsolescence. After all, in our role as Parts Managers, we are supposed to protect the dealer's investment and that's what they expect.

This is not a bad thing for sure, but I guess the real question or concern is what lengths they are willing to go to protect from obsolescence amounts, even at the expense of others. Even if it affects the bottom line, they will still put obsolescence protection first.

Let's Get Started on What "Choosing Not" to Stock the Right Parts Can Cause...

Service Scheduling Issues:

Service Departments that have an "Obsolescence First" minded Parts Manager seem to get used to the fact that Maintenance Parts are great and are readily available. When it comes down to repair parts though, it's not uncommon that we diagnose the problem today and repair the next day and beyond.

This obviously causes a scheduling nightmare because even if we diagnose the problem today, the repairs are put off later that day or another day. We just seem to get used to it and schedule "around" the Parts Managers stocking preferences.

If you think about this aspect alone and the Lost Productivity, and with time being a perishable inventory, this "down time" is costing the dealer tons of money. The Parts Manager may feel that they will eventually get that sale and that's all that matters to them.

What they may not realize is that they could get two jobs done in two days instead of one job in those two days, which would double the amount of Parts & Labor Sales in that same time frame of two days.

The lost time waiting for a part that we should have on the shelf cannot be replaced, whether later that day or the next day. Customers are forced to wait longer to get their vehicle back, and/or we have to put them into a Rental or Loaner Vehicle.

Even worse, waiting to complete the repairs because the Parts Manager "chooses" not to stock the part and "order as needed" takes up more appointment slots. Diagnosing today, repair tomorrow and take up another appointment slot.

Lastly on this effect, technicians now must have two lifts as vehicles are tied up waiting for critical repair parts we should have had in the first place. 

Thus, reducing efficiency and stall utilization with one stall waiting for parts and the other to complete the repairs on the parts ordered yesterday and received today.

Lack of Lost Sales Reporting:

This effect is pretty interesting as these Parts Managers that put Inventory Protection first also tend to not want to report Lost Sales on certain parts. They don't even want to stock them in the first place because they don't want to be stuck with them, potentially going into the obsolescence category.

This also leads to a major problem in Lost Sales Reporting to begin with as more and more restrictions are put on what to report as Lost Sales. The Exception becomes the Rule, and the Counter Staff doesn't even know what a Lost Sale is anymore.

Even if the Lost Sale leads to meeting Phase-In Stocking Guidelines, the Parts Manager will not accept it anyway. Parts are only going to be stocked if it is a fast-moving part such as Filters, Brake Pads & Rotors, Wipers, Fluids, etc.

Any Parts Manager can look like a hero and keep the inventory "clean" and essentially free from obsolescence if all we are going to have on the shelf are fast-moving parts. It takes a "skilled" Parts Manager to have ALL the right parts and keep the inventory clean.

If we are going to have this mindset, what's the point of even posting any Lost Sales? There is a reason every DMS out there has a Lost Sales Posting Function and that is to track non-stock demands of ALL parts for potential Phase-In.

Technician & Service Advisor Mindset:

This effect is crucial and shameful at the same time as Technicians and Service Advisors can develop a "mindset" working with this type of Parts Manager. They will actually NOT recommend additional work, or "upsells" because they know they won't have the part anyways, so why bother.

This is unbelievable but it happens and the sad part is that not only is the dealer losing opportunities, but the customer may also be leaving the dealership with needed repairs. The safety of that family's vehicle now falls on the dealer.

If there was one single thing that these Parts Managers with this mindset do not realize is that their decision to protect them from obsolescence first can indirectly affect the eventual safety of the customer's vehicle.

Even if the Technicians and Service Advisors are on the front line, their "mindset" is shifted. They feel there is no point in making recommendations because they won't have the part anyways, so why bother and potentially affect their paychecks.

They end up going with and recommending quantity versus quality. By this I mean that they will only recommend upsells that include faster moving parts such as flushes, wiper blades, tires, alignments, etc.

Repair recommendations such as oil leaks, idler pulleys, weak suspension components, belts & hoses, etc. may be noticed, but not documented. Or perhaps they may be documented but not presented to the customer. 

Our jobs, duties & responsibilities are to inform our customers of the condition of their vehicle, whether they choose to have them done or not. In my opinion, first and foremost, we must have a genuine concern for our customers.

The liabilities and care for our customers alone should be reason enough to want to do what's right for our customers. On top of that, our sales and profits will also increase as it's a "win-win" for everyone.

But due to human nature, and the Parts Managers preferences, we could be responsible and liable for our choices, in-actions and preferences. The service we are supposed to provide our customers should not be determined by this potential trickle-down effect.

Lack of Stock Order Utilization:

This is another effect that goes unnoticed as this Parts Manager Mindset tends to not run their Stock Orders or Supplemental Stock Orders nearly enough. After all, if we are only going to carry the fast-moving parts, we can do that calculation ourselves.

Plus, the Stock Order recommendations may be more than we want as we want to keep those purchases down to make my Gross & True Turns look better. After all, why should we carry 3 cases of that oil filter when I can get by with 2 cases.

And why should I carry 3 sets of those brake pads when I can get by with 2? We can always chase a set if we run out in the Aftermarket or another local dealer. These scenarios are real and happen every day in many dealerships. 

Running a Suggested Stock Order is just that, it's just a report on what the system recommends, (with the right math of course) and it is not a Stock Order until we submit it. It is not uncommon for these Parts Managers to pretty much run their own Stock Orders in their head because they feel they have better control.

In addition to all the above, many Parts Manager only utilize their Manufacturers' Vendor Managed Inventory, (VMI) for Stock Order Replenishment. The DMS Stock Order is never utilized for Supplemental Stock Orders for those parts that are not qualified in their Programs.

The sad thing is that most of these Manufacturer VMI Programs only tend to cover approximately 50% of the Manufacturers' total "breadth" of Inventory. They cover primarily the fast-moving parts, and many "captive" parts are left out of the program.

Many vehicles in Service are left tied up on the lifts waiting for the "right parts" to be chased or Special Ordered later in the day, the next day, or even longer. Once again, "Choosing Not" to stock the right parts impacts Overall Shop Productivity.

The "Unseen" Effect:

If you were to ask any owner that has this type of Parts Manager, they would most likely say that they are doing a great job because their inventory is so clean and they are profitable. It's the "Unseen Effect" that they are missing even though they are still profitable.

You won't see any Missed Opportunities on any Financial or any Parts Monthly Analysis Report. You won't see the Service MPI's that do not have ALL the recommendations or items that require attention if they are not there or presented to the customer.

To reveal this one, simply run a report of vehicles that have been in your shop over 100,000 miles and leaving with just an oil change and perhaps a tire rotation. The "unseen" would then be revealed as these vehicles are leaving our shops with needed repairs and/or maintenance.

These "Unseen Effects" can add up to tons of Missed Opportunities, Lost Sales & Gross Profits, Lower Service Productivity and potentially, Lost Customers. If more and more dealers would look at these Missed Opportunities, they may just find that what looks good on paper is not the reality overall.

The Only Benefits: Low Obsolescence, Clean Inventory & Higher Turn Rates

These benefits are obviously important, but if we are living and operating our Parts Departments on these three priorities, we are missing our purpose as Parts Managers. If you think about it, the Parts Manager is in control of the overall outcome.

All the while, they operate in the background mostly without any customer interaction other than Counter Retail & Wholesale Operations. Just to make things look better to the dealer on paper, which may indicate that the Parts Manager is doing a great job.

In the case of "Choosing Not" stocking the right parts has far more negative outcomes compared to the few benefits. I'm not saying that we let obsolescence go rampant by stocking more of the right parts as we should be doing both.

Many dealers that I'm associated with are doing just that by keeping obsolescence under control while having a very High First Time Fill Rate. These are the real Parts Managers that are getting the job done in all aspects and are what I call the "Real Smart Parts Managers".

We could have the best Parts Set Ups & Controls with the right math on Parts Phase-In, Parts Phase-Out and Stocking Levels, but if we don't have the right "mindset", it won't matter. The Parts Manager has to use the information and act appropriately to what the math is telling us.

To me, this type of Parts Management Style is "Old School" and should be addressed. If you want to know the truth, just speak with your Technicians & Service Advisors and they will agree that most vehicles are tied up because we don't have the right part(s).

Keep in mind that I do realize that there are a lot of legitimate reasons why they may be tied up for a part due to limited availability, restrictions, etc. Those are the normal, acceptable reasons, but the Parts Managers should still be doing their best to find these parts and not letting them sit on a backorder status.

Our real success in our Fixed Operations is determined on Quality Service and Parts and how well we cycle vehicles through our dealerships with the right processes. Quite simply, none of our customers want their vehicles tied up longer than they should be, they will simply go elsewhere.

If you are one of these Parts Managers, your secret is now out, and you may just want to reconsider where your priorities lie. My advice to dealers is to not look at your Parts Department on face value alone on the Financial and your Parts Monthly Reports.

The "Unseen" Effects of "Choosing Not" to stock the Right Parts will just end up as Missed Opportunities and unhappy Technicians, Service Advisors and most important, Unhappy Customers that may never return.

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

April 2026: Normal Stock vs. Non-Stock Parts: "What's Our Real Number?"

Our April Issue of ACG "Smart Parts" will be focused on a topic that really impacts one of our most important Industry Guidelines. To me, other than Parts Gross Profit, Parts Stocking Status is perhaps the most important as it effects so many other important Parts Industry Guidelines.

Unfortunately, it's also one of the most misunderstood and inaccurate number, or "percentage" in many Dealer Management Systems, (DMS) today. Each system has basic Set Ups like Phase-In Criteria that should give us an idea what a "Normal Stocking Part", or "Active Part" should be versus Non-Stock, or "In-Active Parts.

Sounds simple up front as we set our own Phase-In Criteria that if met, and we choose to accept a part for phase-in, it "should" consider that part a Normal Stocking, or Active Part. Unfortunately, especially in today's world, this is not so simple anymore.

The ramifications of having an inaccurate percentage listed in our DMS could lead to a trickle-down effect of inaccuracies in other Industry Guideline areas as well. If our percentage of Normal Stocking Parts is inaccurate, then our First Time Off Shelf Fill Rate and Parts True Turns will also be inaccurate.

The lack of Lost Sales Reporting can also impact our Stocking Status as many demands go unrecorded that may drive more parts into that Normal Stocking or Active Status after potential Phase-In. Parts Phase-In is determined initially by Total Demands which are Parts Sales and Lost Sales.

When I mentioned above "in today's world", I was referring to parts that we purchase or "accept" today as New Proposals in the Manufacturers'' Vendor Managed Inventory, (VMI) Programs. This one impact alone will give every dealer in these programs inaccurate Stocking Status Percentages, which I will prove moving forward.

The Manufacturers' VMI Programs are just one of our "5 Factors" that impact our Stocking Status Percentages from either Stock, (Active), or Non-Stock, (In-Active). All "5 Factors" do all have one thing in common as they are all driven by initial DMS Set Ups.

You don't have to take my word for it; you can make that judgement for yourself when we break it all down. I'm quite sure that many of these "5 Factors" that we break down are currently impacting your Stocking Status Percentages.

Once again "Smart Parts" Readers! It's time to begin...

Back in the day, it was quite simple to distinguish what parts were Normal Stocking Parts versus those parts we considered as Non-Stock Parts. First of all, and in some systems, we have now added this new Stocking Status term of "Active" or "In-Active".

That in itself has added more confusion in Stocking Status Terms as believe it or not, we could have a Normal Stocking Part that is In-Active. On the other hand, we could have an Active Part that is a Non-Stock Part.

After all, we could have a part that has "Phased-In" based on our criteria as a Normal Stocking Part. Then, this part hits the Phase-Out Cycle point, but has not sold. Thus, we could have a part that's been on our shelf for a couple years as a Normal Stocking Part, but it's now "In-Active"!....are you confused yet?

Let's start with our "5 Factors that impact our Parts Stocking Status right from the beginning...

Number One: Parts Phase-In

Back in the day, we would start out by selecting our own Parts Phase-In Criteria, pretty much like we do today. Let's say that want to "potentially" Phase-In a part as a Normal Stock if the part had at least one demand, (Sale or Lost Sale) in 3 Separate Periods, (or Months) over the course of 7 Months.

Once we accept a part that has met the criteria, it would flip over to a Normal Stocking Part Status. Any part that has not met the criteria would remain in the Non-Stock "Default" Status, which is pretty simple math.

Once a part has run its course and starts to slow down, we would perhaps set our Parts Phase-Out Period, (or Month) at least one Period, (or Month) after the Phase-In Months Cycle. If our Phase-In Cycle covers 7 Months as we mentioned above, then the Parts Phase-Out Cycle has to be at least one day, or Month after the initial 7 Month Phase-In Cycle.

Unfortunately, and in many dealerships today, the Parts Phase-Out Criteria is set incorrectly. Many have their Parts Phase-Out Period or Month set before the Phase-In Cycle has completed.

An example would be to have the Parts Phase-Out begin at 6 Months when the Phase-In Period covers 7 Months. The end result is that parts will not Phase-Out properly and could be reordered again and be back on the shelf as "Purchased Obsolescence".

Number Two: Dealer Management Systems, (DMS)

Here's where things could potentially go downhill with inaccurate Parts Stocking Status depending on which DMS is used. Some systems still use the simple version of Normal Stocking Parts versus Non-Stock Parts as Stocking Status Criteria.

Now, we have many more systems out there that have thrown in "Active" or "In-Active" in their terminology for Normal Stocking Parts versus Non-Stock Parts with some using both terminologies. Stock, Non-Stock, Active and In-Active Parts are all suddenly in the mix and the confusion starts.

In my mind, an "Active" Part is a part that "sells" in the "Active" Cycle of 0 - 12 Months and that could even include Special Orders. An "In-Active" Part is a part that has not sold over 12 Months, based on Industry Guidelines.

Once a part hits the "correct" Phase-Out Period, it could be stated as "In-Active" but still be considered a Normal Stocking Part as it met Phase-In Criteria way back in the beginning. Depending on the DMS, Stocking Status can be affected or not affected and give false percentages in what is truly a Normal Stocking Part and a Non-Stock Part.

To me, and to keep it simple, a Normal Stocking Parts has to meet Phase-In Criteria. Once the part Phases-Out and goes beyond 12 Months - No Sales, it is a Non-Stock Part. Even in the case of GM which requires holding their RIM Parts for 15 Months. 

They still need to be considered Non-Stock, or In-Active because they no longer meet Normal Stocking, or Active Status Guidelines. Problem is that some systems will not allow changing Stocking Status and make it "stick" as they will revert back to the previous Stocking Status.

Number Three: Manufacturers' Vendor Managed Inventory, (VMI) Programs

This one is the biggest contributor in inaccurate Stocking Status Percentages by far. If we accept a New Proposal of a part that the Manufacturer recommends based on Program Guidelines, we could be receipting and stocking a Non-Stock Part in our system right up front.

Quite simply and by the math, if we accept a part as a New Proposal, and if that part has not met our own Phase-In Criteria, it will be a Non-Stock Part in our DMS. Some systems allow the Parts Manager to do what's called a "Dealer Phase-In", (DP), but some systems do not allow the Parts Manager to force that part to Phase-In.

Dealertrack for example has a function to Change Status from "In-Active" to "Active", but the next day, it reverts back to "In-Active" Status. Even though we are accepting the Manufacturers' New Proposal as a Normal Stocking Part, it's considered a Non-Stock, or In-Active Part in the DMS.

As you can see, this will throw the percentages off between Normal Stocking Parts versus Non-Stock Parts. Especially when we have to meet basic Compliance Levels on these programs, many of these parts are considered Non-Stock, or "In-Active" until they potentially meet the DMS Phase-In Criteria.

If our DMS does allow us to manually "Dealer Phase-In" a part, the Parts Manager has to be aware and change these parts when they accept these New Proposals. Constant maintenance and awareness are key to getting the right Stocking Status Percentages.

Perhaps most important in any DMS is to have the right Phase-In Criteria to begin with. I've been into dealerships where the DMS has the wrong Phase-In Criteria that requires way too many demands to even have a chance to ever Phase-In.

Each DMS has their own particular "language" in setting Phase-In Criteria just by how it's worded. We may want parts to Phase-In with at Least 1 Demand in 3 Separate Periods, (or Months) over 7 Months, but if we don't read the wording correctly, it may end up as at Least 3 Demands in 3 Separate Periods, (or Months) over 7 Months.

The end result is that a part would have to have a total of 9 or more total demands in order to even be considered a Normal Stocking Part. A part may never even have a chance to become part of the Normal Stocking Part Family.

This could also affect VMI Parts from the Manufacturer as when they get accepted as a New Proposal, they would still have to meet the Phase-In Criteria in the DMS. This section could also be included in our Number One and our Number Two, but as you can see, these overall effects can be felt all around and impact Stocking Status Percentages.

Number Four: Sales Activity Over 12 Months

More confusion on its way on this one!...

Many Parts Managers and Dealers confuse Parts Sales Activity with Parts Obsolescence, which will be our Number 5 after this one. The key on this one is that we are referring to "Sales Activity" and not "No Sales" as we would consider as Obsolescence.

If a part sells that has been on the shelf that "sells" over 12 Months, that would be "Sales Activity" as the part was on the shelf for over 12 Months and now, we have a sale. This is important as this may impact whether a part is "Active" or "In-Active" depending on the DMS.

We could also have a part that is in the DMS as a Normal Stocking Part and has not sold in over 2 years. Stocking Status of Normal Stocking or Non-Stock should not be confused with overall "Sales Activity", even though it's tough not to be confused on this one.

Keep in mind that even though we may be confused, the DMS is not when it comes down to Stocking Status. Reason being that the DMS has to have input, such as criteria right up front to determine Stocking Status.

It's up to us as Parts Managers to determine what criteria we want initially that will give us the Proper Stocking Status. Input will determine the output and most important, accurate information that affects so many areas in meeting Industry Guidelines.

Number Five: Parts Obsolescence

Our Number "5 Factor" on Parts Stocking Status also plays a huge role in determining what parts we have that may be considered Normal Stocking Parts, or Active Parts versus Non-Stock Parts, or In-Active Parts.

Let's start out by defining what is Obsolescence by referring to a few facts that have been determined by Industry Analysts for years. If a part has not sold in 12 months, there is a 98% chance of No Future Sales.

On top of that, the IRS Straight Line Accounting Method says that any inventory, not just automotive parts are only worth half their value with No Sales over 12 months. This is why it has been pretty much a standard that Obsolescence Vendors start their offers at .50 cents or less on the dollar.

To keep it simple and with the above stated information, in my opinion, any part that does not sell over 12 Months is Obsolescence. Even though GM for example requires RIM Return Qualifications at 15 Months.

Whether we choose the 12 Months - No Sales timeline, or if we go with 18 Months - No Sales, the Stocking Status needs to be Non-Stock, In-Active, or whatever they call them in our DMS. Whether the DMS changes the Stocking Status or not, we have to find our own way of keeping up with the proper Stocking Status.

If we don't, we will never truly know what parts we have on our shelves are Normal Stocking Parts or Non-Stock Parts. Whether they are Active or not, the bottom line is that Obsolete Parts do not sell as we all know. 

Our true Stocking Status Percentages of Normal Stocking, or Active versus Non-Stock, or In-Active Parts need to be as close as possible to being accurate. Otherwise, we cannot expect our First Time Fill Rates and Parts True Turns to be accurate as well.

Not as simple as it was years ago, but the purpose is still the same and what has not changed is the Initial Set Ups and Criteria have to be accurate first. We all know that phrase that still holds true today..."Garbage In, Garbage Out!"

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

March 2026: "Drilling Down Parts Industry Guidelines"

As we move into the end of the First Quarter of 2026, ACG "Smart Parts" will be focusing on a topic that has been around for decades. Every one of us strives to achieve our dealership goals and guidelines as well as what goals and guidelines dictated and set by our industry.

That being said, we thought that it would only be appropriate to focus on these Parts Goals & Guidelines right after the National Automobile Dealer Association, (NADA) had its Annual Convention early in February of this year in Las Vegas, NV.

NADA has been out there for decades dating back to the early 1900's bringing Automotive Dealers together to share ideas and develop a "standard" of goals and guidelines for all dealership departments.

By breaking down dealerships into individual groups by like franchises, performance levels, and demographics, they have been able to bring dealers together to share best ideas and best "practices".

These "20 Group Meetings" go on throughout each year for all dealership departments where information is shared and listed from below average, average and above average performance listed from all Key Performance Indicators, (KPI's). From there, they developed their Dealer Composite that ranks each dealer in these KPI areas top to bottom.

From there, dealers share their ideas on how they achieved above average performance, or perhaps how to achieve higher results if the results are less than desired. This information gathering and sharing creates a bond between group members and an overall goal of helping everyone achieve the overall "Group Goals".

Once a year, NADA and other like groups have their National Convention where all come together to see the latest products, services and ideas out there from vendors throughout our industry. It's also a time for dealers to come together on a national platform to celebrate and enjoy this years' venue and get away from the daily grind.

Having been fortunate to attend this event several times and even present at this event, I've also found that preparing to attend this event, (if one is fortunate) is key to getting the most out of it.

It's easy to get caught up in the "pomp & circumstance", but I believe we all have to prepare and have a plan when we attend. The overall excitement can be overwhelming, but we have to know what we want to learn, what we will take away and most important, what we will do when we get back to our dealerships.

To me, we have to go back and ask ourselves why we are there and why we are involved in these groups in the first place. The information gathered from all these dealers is compiled, analyzed and compared to come up with our "Industry Standards" in all dealership departments and that's what it's really about.

Now it's time to break it all down from the standpoint of the Parts Department and what these "Industry Standards" represent and what "Guidelines" have been set. They also have to be universal for all dealer franchises and most important, they have to be SMART.

They have to be Specific, Measurable, Attainable, Relevant and Time Focused for all dealer franchises, size, demographics and capabilities. In the area of the Parts Department, this is no different and we now have to "measure up" to these Industry Guidelines as one united front.

It's time to break down and look at what is expected from ALL ACG "Smart Parts" Managers!

Let's Begin...

Parts Receivables: 50% of Average Monthly Parts Sales

This is a great one to start with because I would guess that the majority of Parts Managers don't even know about this one, let alone know what it means or represents. Many dealers sell parts on Accounts Receivable and wait for their money to be paid at a later date.

The reason this one is so important is that we truly don't sell the part until it's been paid for. We have to follow the money, especially if we have a lot of charge accounts and are into the wholesale or fleet businesses.

If accounts are allowed to go past 30, 60 or even 90 days, we are not making money as it's just "paper money". This Industry Guideline is extremely important to measure our "good accounts" from our "bad accounts" and what a "good customer" really is.

It's also a very easy guideline to follow, measure and to have an idea of how much we should allow on our Accounts Receivable. If we sell $250,000.00 in Parts Sales each month, then our Accounts Receivable should not exceed $125,000.00 per month on average.

Parts Department Absorption Rate: w/Body Shop - 20%, w/o Body Shop - 25%

Another great guideline that measures just how much the Parts Department "absorbs" the dealers' expenses minus Owners Salaries and Variable Expense. We all have to do our part as to how much gross profit we generate to cover the dealership expenses.

This one to me is the true measurement on just how well the Parts Department performs from a gross profit standpoint. Sure, we can talk about Parts Obsolescence, Asset Management, First Time Fill Rates, (which are all important!), but we are in business first to make money.

At the end of the day, how much the Fixed Operations "absorbs" their portion of the dealers' expenses can be the determining factor on the dealers' overall success. Having to rely on Front End Sales can make the dealer profitable, but it's the Fixed Operations that ensures the overall success.

Parts Productivity: Inventory Gross Turns: 8 Annual Turns

This Parts Productivity area often gets confused as Annual Gross Turns will happen no matter if we have a Parts Inventory on the shelf or not. It simply determines what the "desired" Parts Inventory Level, or Amount should be based on a 45 Days Supply, or 1.5 Months.

It represents "sales" going through the Accounting Ledger and not necessarily parts being sold off the shelf. An example would be if I sold $100,000.00 in cost of parts on average each month, it means that we should have $150,000.00 in the Parts Inventory representing a 45 Days Supply of parts in "dollars".

After all, it's possible, but not really conceivable that we can sell $100,000.00 in parts cost of sales each month without really selling a dime off our own shelves. We could technically buy and sell parts without an inventory at all and still have a Gross Turn Rate.

Parts Inventory "True Turns" on the other hand is the only "turn rate" that actually measures how well we are selling our Normal Stocking Parts off the shelf. Although not listed in NADA's Parts Operating & Expense Profiles of 2025, the Overall Industry Guideline for Parts True Turns is 5 Annual Turns.

Parts Productivity: Sales Activity 0 - 6 Months: 85%

This is also a very important guideline as it dictates where our parts sales are coming from. In other words, we should be selling 85% of our parts within that 0 - 6 Month time frame, or "Activity Cycle". It's can also be an indicator of the actual "life span" of parts today.

If 85% of our parts sales are supposed to happen within that 0 - 6 Month Activity Cycle, it can also mean that the Parts Life Cycle is on its way out beyond this point. Hard to believe, but Parts Obsolescence starts at a very early age in its life span.

Parts Productivity: Sales Activity 7 - 12 Months: 10% - 15%

This Sales Activity Cycle of those parts that sell between 7 - 12 Months is what I call my "Stop the Bleeding!" Category. If we can maintain this industry guideline of 10% - 15%, it's much easier to control parts that will eventually become obsolete after 12 months.

If we can let these parts just phase out if the sale happens in this Activity Cycle and not reorder them, preventing obsolescence from happening on parts that haven't sold over 12 months is much easier.

After a part is born and continues through its "life cycle", the chances for "no future sales" grows higher and higher as the months go by. Even though we may sell parts that have been on our shelves for months and years, the overall percentages are staggering.

If a part hasn't sold in 9 months for example, there is two thirds chance that it will never sell again. Even though some manufacturers require us to hold these parts beyond 12 months in order to get full return credit, the bottom line is that we have a 98% chance of no future sales after 12 months.

Part Productivity: Over 12 Months: 5% or Less

This Parts Sales Activity Cycle of over 12 Months goes without saying as the guideline indicates. The trick is to minimize these parts in the Activity Cycle to begin with and deal with them in the previous Sales Activity Cycle of 7 - 12 Months.

This Activity Cycle also gets confused with Parts Obsolescence in general as we are talking about "Sales Activity" and not Parts with No Sales Over 12 Months. All of the Activity Cycles mentioned simply means that last sale happened in these date ranges in months.

Parts Sales Per Employee: $70,000.00 per Month

This is a pretty good guideline to look at when we are trying to determine how many Parts Employees we should have. Keep in mind that even though it gives us an idea of how many total Parts Employees we should have; it does not detail Parts Staffing Metrics.

For example, not all Parts Employees generate parts sales as there are many Parts Employees such as drivers, shipping & receiving staff, or even inventory clerks that do not generate parts sales.

That being said, a Counter Person needs to generate twice as much in sales to offset "nonproductive" Parts Personnel at a 2:1 Sales to Support Ratio. In my opinion, Parts Sales Personnel should produce at least $140,000.00 in parts sales per month.

Parts Gross Per Employee: $28,000.00 per Month

This category kind of "dovetails" to the previous one on Sales per Parts Employee with a little different twist, especially if there are a lot of wholesale sales. To me, this is the one I would use as Sales per Employee can be misleading if we don't generate enough parts gross profit to support the Parts Staff we have.

Parts Sales does indicate how much a Parts Counter or "Sales" Person should be able to handle from a sales standpoint, but it's up to the Parts Manager to keep the gross. This is why maintaining Industry Guidelines on all Parts Gross Categories is so important.

Parts to Labor Ratio: $1.00 Parts to $1.00 Labor, (1:1) - Customer Pay

This is a good guideline to look at once a month to see if we may have pricing issues, or "opportunities" in either Customer Pay Parts or Customer Pay Labor. Although it is not an indicator to measure if we are charging too much for either one, it just means that we may be missing opportunities.

An example would be if our Parts to Labor Ratio is high on the parts side, it may be that our Effective Labor Rate may be low. On the other hand, if the Labor Ratio is higher than the Parts Ratio, we may want to check our Customer Pay Parts Gross Retention, or our Upsell Closing Ratios.

Believe it or not, Service Advisor Pay Plans can also shift our Parts to Labor Ratios if Advisor Commissions lean more towards Labor than Parts. Everyone works their pay plans and if I can make more commission on labor, then I would overhaul a transmission versus a replacement, even though replacing it would be best for the customer.

Customer Pay Parts Pricing Policy: Matrix When Applicable from Cost

Most dealership Parts Managers utilize a Parts Pricing Matrix, but having a Parts Pricing Matrix does not ensure Customer Parts Gross Retention will be at desired levels. We could put the same matrix in five different dealerships with different results.

The key to an "effective" Parts Pricing Matrix is to have the right "recipe" that works for the individual dealer. There are many parts that are sold where the matrix is not applied such as powertrain parts, completive parts, accessories and tires just to name a few.

There are also many dealerships that allow parts pricing overrides and discounts way beyond control which obviously impacts the overall results. Just having a matrix is no guaranty of getting the right Customer Pay Retained Gross Percentages. It takes the right recipe, accountability and constant "tweaking" to achieve desired results.

Level of Service: 90% - 95%

Another confusing Industry Guideline as "Level of Service" is simply "Overall Parts Fill Rate" and defined differently depending in the DMS used. Level of Service, or Overall Fill Rate simply means that we filled the request, minus any Lost Sales posted against it.

In other words, if we don't post any Lost Sales, our Level of Service, or Overall Fill Rate would be 100% and we would look like a hero. This above definition is easy to confirm as the Industry Guideline for Lost Sales Posting is 5% - 10%, which is the exact opposite of this Level of Service Guideline of 90% - 95%.

To me, the most important Parts Fill Rate is "First Time Off Shelf Fill Rate", which represents the percentage of time we fill these parts requests on first visit. This First Time Fill Rate must be calculated manually as the Dealer Management Systems will not provide this Fill Rate Percentage, except for CDK's "Sales from Stock Ratio".

Parts Expense to Gross: Personnel: Mid 30% Range

Depending on the Manufacturer, the Industry Guideline for the percentage of Parts Personnel Expense to Parts Gross is in the mid-30% range. This allows the Dealer and Parts Manager to determine the amount of personnel expense compared to the gross generated from Parts Sales.

Along with the Parts Sales & Parts Gross per Employee, these guidelines help us to maintain a healthy "bottom line" while having the right number of Parts Employees. It also helps us to determine if we are spending too much or not enough on our most valuable asset, which is our people.

There are only two ways to maintain Industry Guidelines in of these Expense Categories and that is to either reduce expense or increase gross profit. We have to be careful here in my opinion, as lowering expense in order to be profitable isn't always the answer.

Parts Expense to Gross: Semi - Fixed Expense: 13% - 15%

Again, depending on the Manufacturer, the Parts Semi-Fixed Expense should be in the mid-teen percentage range. They are called "Semi-Fixed" Expenses for a reason as even though they are always going to be there, we do have some control of these expenses, thus the name "Semi-Fixed".

Expenses in this category may include Freight Expense, Parts Policy, Training, Advertising, Office Supplies and Outside Services to name a few. Even though we may not be able to control all of these expenses, we need to be aware of them and challenge them every month.

Parts Fixed Expense to Gross: 12% - 14%

Again, the actual Fixed Expense to Gross Guideline depends on the Manufacturer, but they also call them "Fixed Expenses" for a reason. Fixed Expense in every dealership department needs to be "fair" in my opinion and not weighted to one department more than the other.

Fixed Expense should be calculated based on occupancy percentage compared to total dealership building and land usage. In other words, if the Parts Department occupies 40% of the building and land square footage, then the rent should also reflect that percentage. 

Ultimately though, it's up to the dealer on how these Fixed Expenses are allocated. This also goes for building square footage on Heat, Power & Lights, Legal Expenses and Building Depreciation. Other Fixed Expenses such as Equipment Depreciation, Equipment Rental and Repairs to Equipment can be individualized by department.

Parts Gross Profit: Customer Pay: 40% - 42%

Even though this Industry Guideline is being pushed even higher, closer to 45%, we believe that the guideline is "fair" at 40% - 42%. There are many factors that can dictate what is available in different markets and demographics, but in the end, we think that this Industry Guideline is fair and achievable.

Proper use of the Cost-Plus Parts Matrix, Competitive Pricing on Parts Menu Items and Coupon Pricing needs to be reviewed at least a couple times a year. Parts prices go up often throughout the year, especially on "flat priced" parts and not updating these "out the door" prices often enough will just lead to lower gross amounts.

Parts Gross Profit: Warranty: 28% - 40%

Depending on if the Manufacturer allows the dealer to apply for a "Warranty Uplift" or not, this Industry Guideline can vary. There are still a few states that have not passed legislation to allow dealers to apply for a "Warranty Uplift" closer to, or even above the Customer Pay Parts Gross Profit Retention Percentage Guideline of 40% - 42%.

Much like applying for a Warranty Labor Rate Increase, applying for this Warranty Parts Increase requires comparing previous month's Parts Customer Pay Retention Percentages to determine the approved Parts "Warranty Uplift" Percentage.

Parts Gross Profit: Internal: 40% - 42%

There are still many dealers out there that still have their own reduced Internal Parts Pricing Policy. It is in our opinion that the Parts Internal Rate should be the same as the Customer Pay Parts Pricing Policy, whether MSRP, or Parts Matrix Price. 

Having a reduced Internal Parts Pricing Policy only passes this discount onto the customer. Often times, the difference from the reduced Internal Parts Pricing Policy compared to average MSRP will only make a difference of less than $50.00 per Used Vehicle sold.

Parts Net Profit to Gross Profit: 35% - 40%

Lastly, and again, depending on the Manufacturer, the Parts Net Profit to Gross Percentage Industry Guideline is the highest of all dealership departments. Achieving this Industry Guideline requires a combination of a lot of the previous key elements.

It all starts with Parts Sales, then retaining the proper Gross Guidelines, and then finally, maintaining and managing all the Parts Expense Categories of Personnel, Semi-Fixed and Fixed Expenses.

I've always said that we may not be able to control where all of our sales come from, but we can manage what we keep on the gross side. We can also manage, to a great degree, our Parts Expenses if we are looking at them each and every month.

Being the "Best of the Best" in the Parts Department and especially if your dealer is a member of a 20 Group, whether NADA or NCM, we have all the resources to succeed in all of the Industry Guideline Categories.

In my opinion, there is no greater feeling than to achieve these high levels with the support of those in the same group. The resources in these groups are many and to be driven to these higher expectations by those who are there and have been there will lead to your own desire to be there as well!

If you want to learn more about ACG Smart Parts "Eight Habits of Highly Successful Parts Managers", visit our website @ www.smartpartstraining.com, or...just pick up the phone and call me at :

(786) 521 - 1720...After all, not knowing is not worth not "fixing" it...

....