Happy New Year "Smart Parts" Readers!
It's time to reset the clock for another year and prepare for what's ahead. If you have been in our Automotive Industry as long as I have, it means that the past is now just the past and our dealers are looking for even higher expectations in the year ahead.
To me it has always been exciting to set new goals and expectations on not only our Parts Department Goals, but on ourselves as "Smart Parts" Managers. As the old saying goes, if we are not leading, then we are just following from behind.
As we enter the New Year, we wanted to take a look ahead and take what we have learned this past year and prepare for what we may expect, but mostly for what we may not expect. In doing so, we do have to look back and apply it forward into the New Year.
In our first issue of 2026, we wanted to focus on what the key issues that have been "topics of discussion" over the past year versus prior years. Even though the topics we discuss are not new, they have been brought to the surface and may send us into new or different directions going forward in 2026.
Our "Top 10 Parts Hot Topics to Watch in 2026" will reveal how these topics have managed their way the surface in 2025. We will also look at why more and more dealers are contacting me for more information and training in these areas.
So, what exactly is a "Parts Hot Topic" and how does it make our Top 10 List? We could all perhaps come up with our own list, but the Top 10 Parts Hot Topics we will explore, in my opinion, are the topics most discussed this past year and have drawn much attention.
One thing for sure and what I can pretty much guaranty is that Dealers in general and Parts Managers for that matter are more up to speed on what's happening in their Parts Departments and quite frankly, it's about time!
We will list our "Top 10 Parts Hot Topics to Watch in 2026" in order starting with the most frequent topic discussed here at ACG "Smart Parts" all the way to our Number 10. We will offer our professional opinions backed years of experience in all topics discussed.
Most importantly, we will help our "Smart Parts" Managers deal with the topics, manage or achieve their dealers' expectations, and inform on how we can make the right decisions going into the New Year on each "Parts Hot Topic".
It's Time to Kick Off a New Year with ACG "Smart Parts"!.....Let's GO!
Number One: Dealer Management System, (DMS) Conversions
Our Number One Parts Hot Topic in 2025 and I believe will remain the top spot for 2026 is DMS Conversions. In my opinion, there are many reasons as to why we are seeing many dealers switching systems more than we have in the past.
One of the main reasons is price as more and more systems are now available and still evolving. As competition always dictates, more competition dictates lower prices and higher quality. Also, DMS Contracts are more lucrative and much easier to get out of compared to the past.
After all, the books have to be accurate, and the Office Manager has a big say in what system is selected and New & Used Vehicle Sales are a huge priority to the dealer. Unfortunately, the Fixed Operations Departments end up tagging along and getting whatever the system offers.
In 2025, the Top Two Dealer Management Systems that we have seen converted over to are Tekion and Dealertrack. Some reasons include price, Manufacturer Preference, other Dealer Referrals and easier Cloud Based Operations.
Even though we saw many dealers go back and forth from one system to another, these two were the most frequent from an ACG "Smart Parts" perspective. The one thing that I think we can all agree on is that switching to a new DMS is not a welcome sight by employees.
This is especially true in the Parts Department as initial Set Ups & Controls are crucial as the math has to be correct. Switching over to a new DMS can cause catastrophic impacts as each DMS has different ways in approaching proper Set Ups & Controls.
If you want to learn more on which DMS is best for Parts, you can go to our website at www.smartpartstraining.com and open our ACG Smart Parts Archives to our February 2024 issue where we ranked each system.
Number Two: Parts Reconciliation Issues
I can't remember a year where I have fielded so many questions and concerns on Parts Reconciliation between the Parts Ledger Balance Inventory and the Parts Controlled Inventory in the DMS, (PAD). This is happening for good reason as we will uncover more in our other "Top 10 Parts Hot Topics to Watch in 2026".
Parts Reconciliation is a normal procedure that dealers perform each year, usually at the end of each year after the Parts Physical Inventory has been performed. This procedure may be called the "Balancing of the Books" for the Parts Inventory.
In 2025, it seemed that more and more dealers were experiencing some heavy variances between Parts Accounting Inventory and the Controlled Parts Inventory on the DMS, or "PAD" Parts Inventory.
Question is why and how has this discrepancy become an issue all of a sudden? And why has the Parts Accounting Inventory shot up out of control? These negative impacts have led to the need for not only more audits to find out why, but also the need for more Parts Training on Basic Accounting in Parts.
Number Three: Controlling Parts Obsolescence
Our Number Three is also not something new for Parts Managers as parts will always be going obsolete at an annual rate of at least 3% - 5%. What has brought this one more to the surface in 2025 and predicted to continue in 2026 is that the normal rate of parts going obsolete is rising with many Manufacturers.
Parts are not only starting to go obsolete at a higher rate, but they are also going obsolete even quicker. Normally, we would be trying to work off our obsolescence once they hit 12 months or greater, but now we are seeing many dealers working on obsolescence at the 10 - 12 month No Sales Activity Category.
On top of that, Return Reserve Amounts are getting lower from many Manufacturers and harder to accrue. This leads to more obsolescence building up with fewer options to control it from happening.
This is another "Parts Hot Topic" that has been right up there this past year on the hit list with more Dealers and Parts Managers calling not only on how to get rid of it, but also how to control and prevent it in the future.
If you are an avid "Smart Parts" Reader, then you know we have focused on this topic quite heavily in the past, especially in our November 2025 issue. I do predict that Controlling & Preventing Obsolescence will be a "Parts Hot Topic" in 2026 and beyond.
It's not going away, and I believe it will just get even more attention as we approach each and every year. Dealers are more focused on Parts Obsolescence than ever as Parts Acquisition & Holding Cost rise and Reconciliation Issues become more frequent.
Number Four: Parts Core Values
Our Number Four "Parts Hot Topic" was actually featured our last issue of ACG "Smart Parts" in December. Even though not all Dealers are experiencing these massive increases in Parts Core Values depending on the Manufacturer, it's still a "Parts Hot Topic".
Parts Core Values have also been the Number One contributor to many of these negative variances on Parts Reconciliation. With many New & Dirty Core Values increasing to twice the actual cost of the part in some cases, we can already predict that this has and will be a "Parts Hot Topic" going into the New Year.
If we don't start separating our New & Dirty Core Values in Accounting, it will be much tougher to "reconcile" the two Parts Inventories, both in Accounting and in the PAD Inventories each month and year.
That being said, we need to be reconciling these inventories monthly and not waiting until the end of the year. If we wait until year end, the "drill down" becomes that much harder. Even if we don't make the adjustments until the end of the year, we should at least be tracking it monthly.
Number Five: Parts Gross Goals
This one has probably been the "hottest" of all our "Parts Hot Topics" in 2025 in the terms of aggressiveness. More and more dealers are seeing many of their 20 Group Dealers pushing the envelope to higher expectations, over and above current industry guidelines.
I will say though, even though it's an "aggressive" topic, we need to err on the side of caution in some respects. Everyone's market is different and what one dealer may be able to get in one market doesn't necessarily mean that another dealer can achieve the same higher Parts Gross Goals in another.
I've always said that I would rather get 42% of $200,000.00 in Parts Sales than 50% of $100,000.00. We can't spend that percentage, but we can spend the actual Parts Gross Dollars. This is also why I've always said that I could put the same Parts Matrix in five different stores and receive five different results.
As mentioned, each market is different and Parts Sales are also different between parts that sell with or without the matrix applied. We all know that higher cost parts like powertrain parts do not usually have the matrix applied, even though these sales weigh heavy in the overall Parts Retained Gross Percentages.
In my opinion, having the right Parts Pricing Strategy on Customer Pay Repair Orders should be measured by the Upsell Closing Ratio. Upsell Closing Ratios in Service should be 30% - 35%. If Closing Ratios are down, pricing may be an issue as well as Service Advisor Sales Training.
Number Six: Parts Supply Chain Issues
We have all experienced Parts Supply Chain Issues from every aspect from Manufacturers to Local Vendors, especially since the Covid-19 Crisis. The good news is that Parts Managers are telling me that these Supply Chain Issues are actually diminishing overall.
This does not mean though that some Manufacturers are still experiencing higher Parts Back Order Issues or "VIN Specific" Parts that are involved in on-going recalls. It just seems to be that the Supply Chain Issues may be on a positive upswing in 2026.
ACG "Smart Parts" predicts that more vendor options will be available in the upcoming year with more competitive pricing. Even though some of these options may come from the aftermarket, Parts Managers may have more options in filling customer demands.
We are also seeing that some Manufacturers such as Toyota, Honda and even Chrysler are increasing their "First Time Fill Rates" with dealers versus just a couple years ago. In my opinion, Toyota has always led the way in Dealer Fill Rates with better Return Policies.
Number Seven: Manufacturer Controls & Promotions
This one never ceases to amaze me as more and more Manufacturers are making it tougher for dealers to meet Overall Compliance Levels. Again, some Manufacturers more than others are requiring Dealers to buy more while receiving less on the back end.
In 2025, we experienced more Manufacturer Programs requiring Parts Managers to buy more by increasing Purchase Minimum Quantities on Faster Moving Parts. We believe that trend will continue for some Manufacturers in 2026.
Some Manufacturers have also raised the bar on "inclusiveness" in their Parts Promotions by tying in the Front-End Sales Department in Vehicle Allocations and overall New Vehicle Sales. This results in many dealers buying more parts than what they actually need in order to meet Program Requirements.
We also believe that this trend will continue in 2026 as more Manufacturers try to "get more" from dealers opposed to "giving more" back in the way of parts discounts and back end "funny money" as I refer to.
Number Eight: Parts Posting Procedures
Our Number Eight is always an issue, or "Parts Hot Topic" going forward into 2026. Lost Sales Posting is still and will always be an issue in increasing Overall First Time Fill Rates. Even if we are using the Manufacturers Vendor Managed Inventory Programs, posting Lost Sales Demands still remains a focal point.
The only way we can increase overall Parts First Time Fill Rates is to be posting qualified Lost Sales at a rate of at least 10% of Total Sales at Cost. It's just a fact that if we are not posting Lost Sales at a rate of at least 10% of Total Sales at cost, we will never achieve a First Time Fill Rate of at least 75%.
In addition, if we are not receiving parts to the right Parts Source, or Parts Stocking Group, we will just be adding to the Parts Reconciliation Nightmare. All Parts Employees that are allowed to order and receive parts into the DMS have to know how to receipt parts properly in order to receive and relieve the proper Sales & Cost of Sales Accounts.
Proper posting on parts that should be considered Emergency Purchases, Outside Purchases on non-Manufacturer Parts and Stock Order Purchases from all Vendors can make a huge difference on overall Stocking Status.
Number Nine: Overall Parts First Time Fill Rates
One of the most confusing categories is Parts Fill Rates as there are actually many "Fill Rates" that are measured with different definitions. The most common mistake many dealers make is that they confuse "Overall Fill Rate" with "First Time Fill Rate".
The Overall Fill Rate Calculation is "Total Sales at Cost Minus Lost Sales at Cost". In other words, if we don't post Lost Sales, our Overall Fill Rate would be 100%, no matter when or where we get the part and "fill the order".
In my opinion, the percentage of time we fill the parts request the "first time" is most important. First Time Fill Rate is defined as "Total Sales of Normal Stocking Parts at Cost Divided by Total Sales at Cost, Minus Emergency Purchases at Cost".
Seems like a pretty long definition but it makes sense as the parts we sell the most are the parts we stock. The exceptions would be those times that we run out of a part that we normally stock and had to chase for a customer resulting in an Emergency Purchase.
We predict that "First Time Off Shelf Fill Rates" will play a big part of "Closing the Sale" into 2026 and beyond. After all, it's much easier to close the sale if we have the part 75%-85% of the time.
Just like up front in the Sales Department, it's much easier to get the customer to say "Yes" if the vehicle is on the lot. If we have the right part at the right time, or the right vehicle at the right time, history tells us that higher Closing Ratios will follow.
Number Ten: Parts Days Supply
Even though this is our Number Ten, I am reaching out with my biggest prediction for 2026. Industry Guide for Parts Days Supply has been 45 Days Supply for years and I believe that Parts Days Supply will increase to 50 - 55 Days Supply in many dealerships in 2026 and beyond.
Parts Managers have learned these past several years that nothing is guaranteed and back orders will happen, even on Fast Moving Parts. If there is one category that I have witnessed this past year is that Parts Managers are "stocking up", especially on Fast Moving Parts.
I've also witnessed more "Parts Hoarding" than I have ever seen before as Parts Managers are less willing to give up what they know they may need if Supply Chain Issues continue.
Even though the guideline hasn't changed for years, I am seeing more and more dealers allowing their Parts Managers to carry more of the good parts than they have in the past. This is a combination of Parts Managers knowing what they know about Parts Supply Chain Issues and Dealers taking more interest in their Parts Departments.
There is one important aspect of carrying more "Days Supply" of these Normal Stocking Parts and that is that Obsolescence has to be controlled. In order to carry these "Extra Days Supply", we have to be managing the Parts Obsolescence to Industry Guidelines.
The bad side of this if we want to carry more than a "45 Days Supply" of the good parts is if we carry a higher than desired amount of Parts Obsolescence. It's much more difficult to convince our dealers to carry more of the good parts if we already have an obsolescence problem.
The "Days Supply" calculation includes ALL Parts at cost, including Obsolescence. It also figures into our Parts Gross & True Turn Calculations. If we are carrying more than a desirable amount of Parts Obsolescence, than the Parts Manager can't afford to carry "Extra Days Supply" of the good stuff.
In 2025, I have seen many SMART "Smart Parts" Managers take advantage of "hoarding" and increasing their Days Supply of faster moving parts. The have also taken it to the next level in doing whatever it takes to get these parts, even if they are deemed as "not available".
This to me is an art and these Parts Managers that can afford to "stock up" and "hoard" is because they have earned it. Their dealers trust them with their purchases and their decisions. Ironically, these are the same Parts Managers that have extremely high "First Time Fill Rates", High Gross & True Turns and Higher Gross Profit Retention.
One thing that all these "Smart Parts" Managers have in common is that they are always on these "Parts Hot Topics", whether this past year, next year or beyond. They know how to view history, follow current trends and most important...prepare for what's ahead!
2026 is here and I believe that our ACG "Smart Parts" Predictions for the upcoming year are real. I also believe that if we look at all these "Top 10 Parts Hot Topics to Watch in 2026", they should always be our "Top 10 Parts Hot Topics" to watch at all times!
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...
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