What a year it has been again for ACG "Smart Parts" Managers, and for our industry in general. From Sales, to Service, Collision Centers and our Parts Departments, 2023 has dealt quite a hand to all of us, whether dealing with the UAW Strike or not.
The UAW Strike just added to what many of us were already going through prior to and have been going through now for quite some time dating back to Covid-19. Although, I have noticed that during these last few years, we have definitely changed how we manage our dealerships, especially in the Parts Department.
The "status quo" has changed and is much different today than it was just a few short years back. In my opinion, the culture in the average automotive dealership is where the big change has evolved. Dealership managers have become even more sharper and more educated than prior years.
Department Managers are becoming more involved in other departments in multi-lateral ways and support. Parts Managers learning more about Service, Service Managers becoming more involved in Parts, and lastly, and more importantly, Dealers becoming more involved in Fixed Operations than ever before.
I'm not talking about Dealers just getting involved from the financial side, I'm talking about getting involved literally in the Parts & Service Departments. In the Parts Department, they are actually learning how to run reports and create Stock Orders. When has this ever happened?
More importantly, what have we really learned these last couple years, especially this year that has taken this all to a new level? What has changed us, and perhaps for many years to come on how we manage and run the Parts Department?
It's time to review this last year and finish it off with a bang with our December 2023 issue on the "Eight Essential Habits" of the New Generation ACG Smart Parts Manager!
In this issue of ACG "Smart Parts", we will detail what I refer to as the New "Eight Essential Habits" of the New Generation ACG "Smart Parts" Manager. We will learn from a collective of new "tricks of the trade" from dozens and dozens of Parts Managers that I have had the privilege of working with over this past year during these tough times.
In the Parts Department, it all starts with providing the part. When that technician, advisor, customer or manager comes to that counter looking for a part, our job has just begun. The tough part is yet to come as hopefully we have that part 75% - 85% of the time, but either way having the part, or finding the part is always our challenge.
Believe it or not, this simple process is not so simple anymore as we start with our first "Essential Eight Habits" of the New Generation ACG "Smart Parts" Manager!...
#1.) Parts Ordering/Acquisition
Whether we are ordering the part from the manufacturer, or trying to locate the part, this simple task has changed enormously. This simple task just got more complicated as we now have to know what "order type" will get us that part more efficiently.
Ordering parts through our normal channels doesn't get us that part anymore as we have to now know the new "tricks of the trade" in order to acquire certain parts. Otherwise, they may just sit on back order for weeks and even months.
On locating parts, we now have to have all the necessary links like D2D Link, OEConnect and all the latest vendor lists to find those parts that are not available from the manufacturer. Price has become no object as cycling jobs through the Service Shop and the Collision Center has taken center stage.
Parts Departments are going out of their way more than ever to acquire parts, and Service, Collision Centers and Dealer Principle should show their appreciation for their efforts. This is also a "culture change" from what we have been used to seeing in many Parts Departments in the past.
#2.) Increasing Stocking Levels
Here's another "culture change" that has hit us these last few years, especially if you are a dealer that just endured the last UAW Strike. Even if your manufacturer was not involved, Parts Stocking Levels of fast-moving parts appear to be on the rise.
The industry guideline of 45 Days Supply is slowly increasing due to Supply Chain Issues, Strike, or no Strike. Emergency Purchases are rising as well as this industry guideline of 10% or less is also rising, Strike, or no Strike.
All of a sudden, just getting or having the part is the Number One Priority, and quite honestly, it should have always been the Number One Priority. It seems for years, and I hate to say this, but many Parts Managers have never had that "sense of urgency" until recently.
#3.) Hoarding/Hiding Parts
This new "Eight Essential Habit" has now become an "Eight Essential Daily Habit". Parts Managers have now learned how to acquire certain parts that maybe other Parts Managers have not, thus the "hoarding" begins. After all, why sell a part to another dealer that we worked hard to get at less than retail?
The New Generation "Smart Parts" Manager has also learned a new "trick of the trade" on how to hide these parts from E-Commerce sites, OEConnect and D2D Link as well in their Dealer Management Systems, (DMS) under different Parts Sources, or other means hidden from view on these websites.
This new practice is actually not uncommon for many dealers as they want to make sure that their customers are not compromised during these times, Strike, or no Strike. Thus, only releasing these parts to other dealers that "scratch each other's back" so to speak.
Profitability in itself is no new concept and one might ask why this is our Number Four new "Eight Essential Habit", but what is new is that many, many of the Parts Managers I have worked with this past year have sustained, or even gained gross profit retention through all this.
How can that be when we have to pay more for parts we have to chase, or even pay more for shipping, drivers, different order types or any other added cost in acquiring parts?
We've all heard the term of passing on our costs down to the consumer, but we can't do that in many cases, especially on warranty repair orders. This sustainment or increased gross profit retention that these New Generation "Smart Parts" Managers are attaining simply comes from Smart Pricing Strategies.
They are always up to speed on manufacturer and vendor pricing increases and updating competitive parts, menu parts, and price matrices and modifying when necessary. It's still amazing to me that even though parts, oil and tire prices keep rising, many dealers do not adjust their prices to compensate for these cost increases.
#5.) Manufacturer Loyalty
Here is another huge culture change in our industry these past few years. In my opinion, it's actually a cultural change that has gone viral on the extreme side with both parties. Many manufacturers have expanded their grip on the dealers by requiring more qualifiers in their programs.
They are tightening their belts by requiring more parts coverage, or "breadth" by the dealer. So called "Inventory Protection" is no more than a "Return Policy" as not all purchased parts in these programs are "protected".
If they were "protected", I wouldn't see so many obsolete parts on dealers' shelves that were purchased on these Vendor Managed Inventory, (VMI) Programs. All because they didn't "qualify" for return, resulting in increased dealer parts obsolescence as well as increased acquisition and holding costs.
Many manufacturers are also increasing their penalties for noncompliance if they don't comply. This has resulted in a lot of "pushback" from many dealers and many of these dealers have actually "backed out" of many of these programs in defiance.
Many dealers have actually done the math and weighed the cost versus the benefits and realized that the Return On Investment, (ROI) was simply not there. For many, the added cost from the penalties was far less than the added risk of Parts Inventory Over Stock and Obsolescence.
#6.) Holding Obsolescence
Speaking of obsolescence, our Number Six "Essential Eight Habits" has to include Obsolescence Control now more than ever. With Parts Life Cycles shorter than ever and the cost of holding parts inventory rising, ridding and controlling obsolescence has moved to the forefront.
In the past, many dealers wouldn't sell their obsolescence, especially on pennies to the dollar. This is a huge "culture change" that is a welcome change for any Parts Managers. This "Monkey on the Back" for many Parts Managers is now finally being addressed.
Dealers are finally seeing the actual cost of holding obsolete inventory that prevents them from obtaining industry guidelines in areas such as Inventory Gross & True Turns, First Time Off Shelf Fill Rates and Normal Stocking Parts Percentages just to name a few.
#7.) Parts Storage Capacity
Our Number Seven "Essential Eight Habit" pertains to our ability to "house" the Proper Inventory Levels needed to meet customer demand. Often times, I witness that Parts Managers actually hold back from ordering the proper amount of parts inventory due to space restrictions.
This, to me is one of the biggest "Cardinal Sins" that a dealer could commit or allow to happen. In dealer "layman's terms", I'm quite sure if the dealer was selling lots on New & Used Vehicles, but did not have a big enough lot, they would either buy, rent or lease additional land to park these New & Used Vehicles.
Same goes for the Parts Department, and finally, we are seeing more dealers "see the light" on this issue by actually working on better parts shelving capacity. Actually, many Parts Departments already have enough "air space". They just need to be a better plan on utilizing that air space more efficiently.
There are actually many Shelving Companies out there that will perform an onsite "laser" evaluation of the existing air space in the Parts Department. Often times, existing Parts Inventory can be shelved and stocked in 40% of the existing air space utilizing more efficient, modern shelving equipment.
#8.) Management Training
Our Number Eight "Essential Eight Habit" of the New Generation "Smart Parts" Manager is probably the most essential. In my opinion, and if we look back prior to Covid-19, Parts Managers were hardly ever involved in Parts Manager Training, or Dealership Training.
Parts Managers were rarely invited to 20 Group Meetings, reviewing Composite Information, or even involved with the overall status of the dealership as a whole. Parts Managers, unfortunately, and in my opinion, were not in the same class as other dealership managers.
Parts Manager Training was also on the back burner and low on the dealer's priority list. After all, how difficult can it be to manage a Parts Department? The answer to that question has drastically changed as dealers today are definitely changing their culture and thought process, especially in the Parts Department
This welcome culture change has, in my opinion, can now bring the whole dealership into full circle. Now, the dealer's second biggest asset can now work for them with the right training, personnel and overall inclusion, along with Sales and Service.
Are you a New Generation "Smart Parts" Manager and are these "Essential Eight Habits" Part of Your Playbook?...
If Not...It's Time to Join the New Generation of "Smart Parts" Managers!"
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...