Dealership Parts Excellence: ADMI’s 360 Approach

ADMI 360 brings excellence in dealership parts operations “full circle” by implementing and sustaining best practices and processes in all parts-related areas through parts manager training, action planning, progress monitoring, inventory performance analysis, advanced tools, experienced guidance, and support. It unlocks the power of your people by equipping them with what they need to be successful.

Key Points

The Parts Department is a stand-alone profit center on its own but should also be an enabler of additional profit for all departments and increased satisfaction for customers and employees. The Parts Department’s ability to provide parts and accessories in a timely fashion has a direct link to the service department’s capacity to open and close repair orders efficiently and impacts expenses like loaner vehicles. It has an indirect link to customers coming back to your dealership for their next repair visit or vehicle purchase. There’s a lot more that goes on within the Parts Department than most realize. Outsiders often only see one area, the Parts Counter, but running a successful parts operation is much more than just looking up and billing out parts. There are many other business segments that must be managed effectively.

The Parts Manager has a significant list of expectations and responsibilities that most others are not fully aware of. It is much more than just ordering and selling parts. Parts inventories are often the largest cash investment in a dealership, second to unfloored vehicles, and can range from hundreds of thousands to millions of dollars. Managed effectively, this investment will produce fantastic returns on investment. Unnecessary hidden expenses can quickly consume profits. Hidden, because there is no box on the financial statement or report in your DMS to identify them. A missed discount, an unnecessary surcharge or fee, an unsold special-order part added to inventory, unsold aged inventory, missed return opportunities, a charged-back warranty claim including parts AND labor, and many other scenarios are all realities that eat up significant bottom-line profits.

Key Segments

ADMI 360 focuses on eight (8) key segments of the business. Within each segment there are obstacles that can be turned into opportunities – by aligning knowledge, implementing the most efficient and effective processes, utilizing data and tools – and then measuring and sustaining the results.

STOCK OPTIMIZATION

Having the right parts on the shelf at the right time means an investment in parts that provide maximum off-the-shelf fill rates while not contributing to idle growth up and above manufacturer returns and allowances. An optimized in-stock inventory makes life better for everyone; customers, technicians, service staff, and parts personnel. It’s also the most economical and profitable way to buy parts for stock and enables Service to open and close more repair orders each day.

INCREASE SERVICE THROUGHPUT VELOCITY

The right in-stock inventory aligned with forward deployment of parts to technicians allows for maximum service throughput velocity. Expand shop capacity while increasing tech efficiency without adding techs, bays, or extending shop hours. A high availability inventory with a plan to get parts into the hands of technicians as quickly as possible will allow you to open and close more repair orders per day.

IDLE MANAGEMENT

Parts are assets until they become liabilities. All parts will eventually slow in demand and become idle but properly managing this normal and expected occurrence will save thousands per month in expensive obsolete inventory growth and frozen capital. Idle parts should be identified and returned or sold at peak values on time—at the right time.

SPECIAL ORDERS MANAGEMENT 

Special Orders are great producers of parts and labor profit, but anytime they go unsold, they eat away at profits through return fees, idle inventory growth, and wasted man-hours. Many unsold special orders can be prevented with good upfront communication, policies, and procedures. Many dealers have policies in place, but they still have unsold special-order problems. The expectation should be that dealers will receive the full parts and associated labor profit with each special ordered part. The percentage of special orders sold versus returned or added to stock should be extremely high when this segment is effectively managed.

DATA ACCURACY

All reports and tools rely on the data being accurate. The on-hand count and bin location showing in the DMS should reflect what is physically in the warehouse. Open orders should match what is really expected and on the way. The accounting G/L inventory values should match what the DMS shows. When there are variances, you really don’t know what you have, what you are supposed to have, what you need to purchase, what you need to return, where it’s located, or even how much profit you truly made. It’s sort of a guess until things are reconciled through a physical inventory. It shouldn’t be this way. You can know with certainty how your parts inventory investment is performing. There is a way of transacting business along with good checks and balances that keep your data accurate.

WAREHOUSE MANAGEMENT

Warehouses and all parts storage areas should be safe, secure, clean, organized, and well lit. Parts can be arranged in specific ways to maximize efficiency.

BACK-END PROCESSES

Shipping, Receiving, Claims, Cores, Warranty Retention, and Stockkeeping are just some of the back-of-house processes that have to be managed. Each area represents opportunities for optimization and bolstered efficiency.

SALES, PRICING, AND PROFITABILITY

There is more to selling parts than just looking up part numbers and quoting the pricing and availability. Top notch organizations train on selling and customer service skills. They set up their DMS to charge fair, competitive, and profitable pricing without the need for overrides or aggressive pricing matrixes. They market through various methods to attract additional retail and wholesale customers. Over time, the parts department can grow its own customer base and increase year-over-year sales as a stand-alone department.

ADMI 360 works with dealers in all of these areas. Do you know a dealership that could benefit from ADMI 360? For more information, contact us today or sign up to receive a free copy of our brochure. Visit our website to learn more about the ADMI 360 product.

By Jay Graham