Effective inventory management makes all the difference not only in your parts department but also in your dealership as a whole. After all, the parts inventory is the second-largest investment dealers make. According to NADA, dealerships service and parts sales totaled more than $120 billion in 2019. Getting a great return on that investment is essential for dealership profit, but with so many variables within the parts and service department, it can be hard for new and seasoned parts managers alike to know what to monitor regularly for success. Here are our top 5 aspects to monitor regularly for record profits and efficiency in your parts department.
DMS and Manufacturer Programs
While the DMS is your most powerful asset for monitoring your inventory, if it’s not set up properly, it can add more confusion then clarity to your operation. Ensuring your DMS is set up with many categories will ultimately give you more control and granular pricing strategies as you continue to refine your settings.
Many parts managers rely heavily on their manufacturer program to determine stocking choices, but unfortunately, your manufacturer may not have your best interest in mind. Keeping a close eye on your auto-replenishment program is essential to keeping your inventory free of stock you don’t need. Relying too much on your manufacturer’s program can lead to serious overstocking and waste.
Special orders are a common culprit for obsolescence and waste within your parts department. We all know the story: a customer needs a special part for a non-essential repair so the technician orders the part they think they’ll need plus one backup part so the repair can be done all at once and the customer never returns. Or if they do, they use one part and the other goes on the shelf. Keeping a close eye on your special orders is essential to attacking obsolescence at its root. If you’re noticing a recurring issue with special orders, consider revising your policies about when parts are ordered (for instance after the repair appointment is scheduled vs before), how customers are followed up with, and what happens to a part once a repair falls through.
Obsolescence can come from many areas within your department. DMS set up, un-strategic stock orders, manufacturer program minimum mandates, and special orders can all be to blame. Here are a few strategies to find out where your obsolescence is coming from.
Service Department Communication
Communicating regularly and clearly with your service department is absolutely essential to a healthy operation. Breakdowns in communication lead to frustration, confusion, and overstocking. By creating a plan for regular touch-bases, you can avoid larger breakdowns in the future.
Employee Management and Education
Simply put if your employees aren’t clear on what’s needed from them or lacking in the education or resources to do it, nothing will go right in your parts department. Creating customer service standards, follow up systems, and regular communication points with your team develops rapport and clarity, resulting in a more efficient and pleasant work environment. On that same token, expecting employees to do a great job without the proper tools will invariably result in frustration. As a department manager, you must advocate for investing in tools and education to support your team.
Do you agree? What areas do you feel are necessary to monitor your Parts Department’s success? Leave a comment below!
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