Parts departments are responsible for producing nearly 50% of overall dealership profit yet, in our experience, they are often undervalued, neglected, and under-supported. As the market has shifted in the wake of the pandemic, more dealers seem to be realizing the incredible opportunity for growth that lies in parts and service. After all, the parts inventory is the second largest capital investment a dealership makes! While it’s fantastic that so many are beginning to value their parts department, after years of neglect, many departments are facing a messy inventory, under-supported staff, and high employee turnover as a result. Here are five key indicators that suggest your parts and service departments need more support.
High obsolescence
While some amount of obsolescence is inevitable, there has been a trend in the past few years of obsolescence creeping upward. Obsolescence used to hover right around 10% for non-manufacturer guaranteed parts, but many dealerships are now witnessing obsolescence heading up toward 15-20%. With the complexities of inventory management, high obsolescence is a clear indicator that something isn’t working well. Obsolescence coming from special orders is a sure tell that your department needs more support, tools, or both.
Discrepancies in inventory
It’s nearly impossible to have your digital and physical inventories match perfectly, but there is a level of discrepancies that indicate a much, much larger issue. Our friend Steve Schussler, a Physical Inventory Consultant, saw at one dealership $170,000 in inventory with $78,000 of it obsolete! Another thought they had $200,000 invested in their inventory but actually had $245,000 and with $45,000 of it totally obsolete. When managers and employees are stretched too thin, things get messy. Regular physical inventories plus proactive daily, weekly, and monthly audits are crucial for a productive inventory- but fall by the wayside when there isn’t enough time.
High turnover
If the environment in your parts department doesn’t leave team members feeling supported and empowered to give it their all, they’ll move on. Simple as that. High employee turnover is a sure sign your operation needs a shift- and it could need to be a big one. While support, tools, and education are essential aspects to supporting employees, if your leadership culture relies upon domination and neglects respect, it will undermine any attempts at supporting your employees in other ways.
Stagnant in growth and profit
If your profits have stalled and your operation isn’t evolving, it may mark a deeper issue. Exponential growth in all aspects of your parts operation is not a reasonable goal- and in some market areas- it’s utterly impossible. But the goal of a proactive approach that produces evolving systems, technology, and feedback-based learning is the difference between a stretched, stagnant department and a healthy, supported one. Profits and growth in terms of market share are the wonderful results of a department that has adequate support to be creative and try new things.
Low customer ratings
A somewhat self-explanatory red flag- if customers are leaving low ratings and complaining about interactions with your parts and service department, you might have a problem. Some ratings are unavoidable results of things beyond your control- but what you can control is how your team communicates and supports customers through any hiccup or difficulty. Hiring the right, and enough, folks for customer service is crucial to improving your retention and referral business as well as impacting the bottom line of your parts department.
PartsEdge is the powertool for your parts inventory and was designed by a Parts Manager and a DMS specialist who saw the gap between the demands on Parts Managers’ and the lack of resources to get everything done. PartsEdge saves Parts Managers hundreds of hours each year by taking all the guesswork out of DMS management and sourcing setup and optimization and allowing them to focus on creating a successful operation. As a result, our clients see an average 20% drop in total inventory, 15% less idle inventory, a 50% increase in ROI, and a 20% increase in parts sales.. If you’re ready to put our parts power-tool to work, send us a message! We’ve been helping dealerships for over 20 years and our testimonials speak for themselves.