Monday, July 7, 2014

"The Evolution Of The Modern Day Parts Manager" Part Three: Circa 2000 - 2014

When I first became a parts manager back in 1980, it was just about "selling parts" and almost anybody could do it. As a matter of fact, that's how many of us got our first "gig" as parts managers.

Some, like myself, crossing over from the aftermarket, or maybe even a promotion from within the dealership. In my opinion, managing a dealership parts department today has become an art.

Even though we had to and still have to grow with these changes over the years, running a successful and profitable parts department requires the right person with the right skills. It's no longer an "entry level" position within the dealership anymore.

Let me explain why...

As the decade began in the year 2000, we started to see a new evolution begin in the way we do business and the way we have to "manufacture" our gross profit. In a way, our parts business was getting more like the new and used vehicle sales departments.

The manufacturer's began to take more of an "active role" in the dealer parts departments by offering more volume discounts as well as discounts for maintaining compliance levels on the manufacturer's stock replenishment programs.

All of a sudden, just like in the sales department, selling at cost is profitable! Once those parts discounts, allowances and return reserves come through on the parts statements, another major profit center is born. The only bad news from this though is, just like in sales, the "little guy" is now being cut off.

Managing the parts inventory by itself became a "juggling act" as purchasing parts and managing obsolescence has now become, in itself, an art form. Taking full advantage of every discount, allowance and return reserve without over stocking and/or building obsolescence is not as easy as one would think.

Along with "moving" and "juggling" the parts inventory, the parts manager still has to provide a high level of service by having the "right parts, the first time". Meeting high levels of "first time" off shelf fill rates plays a crucial part in meeting productivity levels in the dealer's fixed operations.

Now the game begins as we see why this "evolution" requires the right person with the proper skills and knowledge to manage a successful, profitable parts department. The parts manager now has to be a "mover of inventory" in order to "manufacture" gross profit along with providing high levels of service.

Even though all the other parts gross areas are extremely important, it seems in many dealerships, it's these added discounts, allowances and return reserves that actually put the bottom line in the black.

"Moving" inventory, in many cases has replaced "selling" inventory as parts are now sold in higher volumes. Many are also sold at cost or even below in some cases in order to take advantage of the "back end" gross from the manufacturer.

The wholesale parts market has also changed drastically in recent years. More and more each year, wholesale collision parts grosses are being controlled by insurance companies working directly with the manufacturer or only specific dealers.

Thus the reason that many dealer parts managers are choosing to get out of the wholesale collision parts business altogether as profit margins get smaller and acquisition/holding costs get higher. In my opinion, we are not far away from seeing satellite collision parts distribution centers operated by insurance companies. 

Another area of wholesale that has drastically changed is "mechanical" wholesale parts sales. Some aftermarket parts vendors are now purchasing manufacturer parts from dealers at cost or below in massive volumes and in some cases, repackaged with different labeling for resale.

Dealers are then rewarded for their increased manufacturer parts purchases with higher discounts and return reserve allowances. It's a whole new ball game out there now and the list goes on!

New market areas have also increased since the beginning of the millennium with social media and the internet becoming of age. Dealer parts managers are now selling and acquiring parts world wide through search engines and websites such as ECommerce, Ebay and Partsvoice, just to name a few.

We are now seeing "partnerships" between aftermarket parts vendors and the manufacturer. Dealer Management Systems, (D.M.S.) are being integrated to accommodate aftermarket inventories.

No need to call "downtown" anymore to see if the local aftermarket parts store has the part or not. Parts counter staff can check parts availability just like any other manufacturer's part in house. 

Things have certainly changed over the last thirty plus years since the day I unlocked the part department door for the first time.

To me, it's amazing to see how much change we have endured over this period of time. I guess once we put it all in perspective, it has been a "gradual" change, but if you look back at where we were and where we are now, the parts manager position has definitely become more valuable.

Over the next two months we will be looking at just what it takes to be the "Ultimate Parts Manager". I believe that this series on "The Evolution Of The Modern Day Parts Manager" proves that being a parts manager "ain't what it used to be"!

What kind of special person does it take to manage a successful and profitable parts department today?

We will find the answer to that question and more over the next couple months with part one of "The Ultimate Parts Manager" beginning in August!....Don't Miss It!

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTMThe only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at Vist our Website at