If I was to say that it hasn't been a challenge over these last 18 months during the Covid-19 Pandemic, I would be far from the truth. Even though we aren't through the woods just yet, we are definitely winding down and there has definitely been some great lessons that we all have learned.
In our own personal lives, we have weathered trials, tribulations and turmoil that hopefully, we never have to endure again. On the other hand, we have also weathered and survived, (hopefully) a very difficult time in our industry.
This is especially true for "Smart Parts" Managers as our everyday routines have been turned upside down as even the simplest of tasks such as keeping our shelves adequately stocked with Normal Stocking Parts has been a challenge.
We have had to "think on the fly" just to provide the level of service that our customers expect as well as keeping our dealership owners profitable while protecting and "turning" their second highest business asset.
Of course, the Parts Department isn't the only dealership department that has suffered as supply chains have been interrupted as well in the front end New and Used Vehicle Inventories. Even our Service Department sales and retention has been interrupted as the customer's overall buying power has been reduced during this pandemic.
The first two questions that has to be on everyone's mind is...when will this pandemic end and how will it affect our industry going forward? And probably the most important question should be...
"What Are We Going To DO Going Forward?"
The one thing that has been a constant throughout this pandemic after working with several dealerships, both in-store and remotely is that dealer owners are resilient and will do what it takes to not only "survive" these times...they are are actually "growing" in many ways during these times.
As for the Parts Department, we have adapted and made the necessary modifications and adjustments throughout the pandemic as life goes on as we continue to do the what we do, which is stock and sell parts no matter what the situation.
After the initial impact months of Covid-19, and in my opinion, we have actually grown and gotten busier in our industry. Some of our dealers have actually had record months during this pandemic as they met this crisis head on found ways to even grow during these times.
In this issue of ACG "Smart Parts", will look at five key areas that have significantly changed in our Parts Departments due to the Covid-19 Pandemic. Perhaps some of them will be changed for good and be the new "normal" going forward.
All this being said, and with our focus on how we manage our automotive dealerships going forward...it's time to ask the Million Dollar Question...
"What Have We Learned From Covid-19 And What Are We Doing Different Now?"
Here We Go!...
Number One: Health & Wellness
I think it goes without saying that this has to be our Number One area that has impacted all of us, whether at home, at work, traveling, going to the grocery store, or any other form of social contact. It has changed us all and perhaps for the rest of our lives.
The automotive dealership is no exception as dealerships in general are cleaner, more sanitized, safer and more accommodating for customers and employees. Health and Wellness, in my opinion, has always been taken for granted and this is one area that I see that will not change going forward.
We are all much more aware of our surroundings and perhaps even a little kinder to others as we respect everyone's "space" even though "social distancing" was and is a tough thing for all of us to adapt to, but we all did what we had to do and from this experience, we all learned valuable lessons going forward.
Lastly, in my opinion, the biggest lesson that we learned and one good "takeaway" on this area is respect for others. Providing a clean and safe environment has gone to new heights and for good reason, even though I believe we are ready for choice on the mask thing.
Number Two: Expense Management
One thing for sure that Covid-19 has led to is dealer owners are now running "leaner" than ever before. Surviving this pandemic led to perhaps the biggest sales drop in the automotive dealership than ever before. Dealers had to do what they had to do to survive, even if it meant lowering employee counts.
Dealer managers in every department had to "slim down" their departments from an employee standpoint. Even if it meant more duties & responsibilities for those remaining on staff, including all the managers. Multi-tasking became the new normal as expense management came to the forefront with declining sales.
The re-structure of the dealers employee base, which is the highest expense category also led into more expense management in semi-fixed and fixed expense areas as well as dealers tightened their belts wherever necessary.
This is another category that I think will remain a focus going forward as dealers. For the most part, we started to see sales and profits rise as we pulled out of the initial crisis after five or six months. In many dealerships, the rise in sales and profits saw record net profits due to dealers lowering their expense categories along with the rise in demand from customers.
The net result is that dealers realized that they can actually "get more with less", and that's a good reason to continue with the same mind set going forward. Many dealer have actually told me that they should have done this years ago, but it took a pandemic for them to realize they could actually do more with less.
Number Three: Adapting To Change
Since the Covid-19 Pandemic began, we started to see a major shift in the way we operated our Parts Departments. All of a sudden, even keeping the simplest supply of the parts we need the most was not so easy anymore. Supply chains from the manufacturers and other vendors were interrupted as the "trickle down" affect began.
Even though we are still feeling the impacts, "Smart Parts" Managers had to "think on the fly" in order to keep up with demand. This also meant that we had to make changes in our Dealer Management Systems, (D.M.S.) to adapt to new "lead times" and even reach out to other suppliers to restock our shelves.
Even though we felt a drop in sales initially, slowly the demand raced back as the automotive industry in general is an "essential business". Overall, our transportation industry, though interrupted and modified, still needed to go on in every capacity.
Making the appropriate changes in our D.M.S. was essential and unfortunately, some of these necessary changes were not made resulting in a back log of backorders and delays. The overall results were staggering as service traffic suffered immensely, even though demand was beginning to rise as we all adapted to life during the pandemic.
For those "Smart Parts" Managers making the right decisions "on the fly" has resulted in record months in the Fixed Operations in many dealerships. With the combination of running leaner and meaner, as well as doing what it takes to provide the best customer service possible, no matter what the odds, has ironically resulted in some of the best increases ever.
Number Four: Increased Need For Training
In my opinion, there is one thing in common for those dealers that have actually increased their sales and gross profits over previous years prior to the pandemic is that they knew their staff had to work "harder and smarter".
Managers in every department not only had to adapt with less staff during the pandemic, they also had to think of better ways to grow. They knew they had to be smarter and have a better "quality" of employees instead of "quantity" of employees.
We have experienced this first hand here at ACG Smart Parts & Smart Service Training as the influx of dealers coming on board for training in the Fixed Operations has never been higher. Not only Fixed Ops Training, but the "right" training whether live or remote with expected results.
A big portion of this training had to also adapt to providing training remotely as travel was reduced during the early stages of Covid-19. Developing a program that would fit the dealers needs while abiding to Covid-19 Guidelines provided new opportunities in training for dealers going forward.
In the area of "Smart Parts" Training, the need for Parts Managers to know every aspect of even the basics of how managing parts goes beyond just how long we've been a Parts Manager. It requires knowing the basic concepts and the math of managing the parts inventory.
Having a Dealer Management System, (D.M.S.) and perhaps the Manufacturers Vendor Managed Inventory, (V.M.I.) to manage our parts inventory isn't enough. We have to understand how they operate in order to have "the right part the first time". Parts is a "moving target" and requires constant management as no system is designed to "set it and forget it".
Number Five: The Parts Department's "Elevated" New Role
In my opinion, our role as "Smart Parts" Managers has never been higher than it is right now. With up front New & Used Vehicle Sales diminishing from the impacts of the pandemic and vendor supply chain issues, Service Absorption is where dealers are turning even more attention to than ever before.
Even though, for the most part, Parts Departments are very profitable, they are actually the most profitable department by percentage in most dealerships today. Even though most dealers already know this, what many didn't realize is how the Parts Department impacts the overall dealership profitability, especially in the Service Department.
With all that Covid-19 brought us, one thing it definitely exposed was Service Department Productivity being reduced due to lack of parts, or should I say the lack of the "right parts at the right time". In my opinion, this exposed the need for more parts training as previously mentioned.
We couldn't just rely on our experience as Parts Managers to "manage" parts as we always have, we had to go further and find out how the math really works in the Parts Department. We found out that we can't just rely on our computers, we have to know how the Set Ups & Controls really operate.
Unfortunately, in many, many dealerships today, the D.M.S. Set Ups and Controls are simply wrong and don't follow basic math. The best thing about math is that it doesn't lie and there are no opinions, whether in the D.M.S., or in the Manufacturers Vendor Managed Inventory, (V.M.I.).
Parts Managers need to know how to calculate Gross and True Turns, how to read our Inventory Management Reports in general and most importantly, how obsolescence happens in the first place as obsolescence has to be controlled "before" it happens.
Lastly, our dealers need us now more than ever before and they realize that we have to "elevate" our Parts Department's role in the Fixed Operations to a new level. Being profitable in the Parts Department is one thing, but this "elevated" new role goes much further.
In my opinion, Covid-19 exposed the need for our "elevated" role as dealers realized that it's not just important for their Parts Departments to be profitable, they found out how the Parts Department actually impacts the overall dealership profitability, especially in the Service Department.
Let's welcome this elevated role and take these lessons we have learned from the most recent past and take our Parts Department to new heights with even higher expectations than just profit. Let's help carry the load for our dealers and take what we have learned and used it.