It’s good practice to have a monthly checklist to ensure the engine is running on all cylinders. Each dealership has their own requirements, but here’s something to get you started.
Highest-Impact Areas the Parts Manager Should Review Each Month
- Negative on hand / Negative available – sloppy supplier returns and poor inventory controls can lead to a negative on-hand situation
- Cost greater than retail – price tapes often cause these issues when the OEMs discontinue or supersede items
- Negative cost / Zero cost – receiving mistakes, price tape errors, employee dishonesty
- Cost value greater than $1000 – order errors, receiving errors
- On hand quantity greater than 100 – ordering errors, employee mistakes
- Outstanding special orders more than 60 days old – discontinued items, lost shipments, back orders
- Parts margins less than 25% – other than closeout and sale items, most parts should be priced with at least a 25% margin
Other Items the Parts Manager Should Review Each Month
- Discounted invoices – why are items being discounted and to whom; to maintain profitability, discounts should be kept to a minimum
- Open supplier returns – have our suppliers reimbursed us for all shortages and returns
- Inventory aging – how much of our inventory hasn’t been sold in at least 12 months, and what are we doing to get rid of it
- Returned items – when an item is returned what happens to it; do you have a process to review all returns or do they just end up on the shelf; a lack of oversight on returns is one of the most common forms of employee-facilitated theft
It’s easy to get caught up in the day-to-day swirl and let these things slip, but for most dealerships the parts department can tie up a significant amount of cash. It’s way too big an investment to not pay attention to the details.
If you’d like some assistance in improving your P&A game, Spader can help. We offer regional Parts & Accessories Management and Parts Counter Sales workshops during the off-season, and year-round one-on-one consulting for dealers who’d really like to develop a world-class parts operation. Check out Spader.com/training for more information on what we can do for you.
Mark Sheffield is a United States Army Veteran and former dealer principal who currently facilitates multiple 20-groups for Spader Business Management. When he’s not assisting with dealership performance, he can be found at the rifle range or digging holes with his backhoe. Contact him at MSheffield@Spader.com.