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Efficient retailing No.19: Business basics 4

In the latest of our series of insights into running an efficient dealership, Thurlby Motors managing director Chris Roberts looks further into business basics

The parts department is often overlooked when reviewing underperforming dealerships.

As the service department is generally its biggest customer it is often assumed that as long as service performs well, then parts will too.

However, while a high performing service department can have a huge effect on parts, it is by no means the only influencing factor in parts performance.

Parts departments have many fundamental areas that affect both their success and profitability; correct stock holding being one of the most important.

As with vehicle stock, the right mix is vital.

Years ago parts departments used to carry a huge depth of stock, but with the advent of daily stock orders most businesses have had the opportunity to reduce the value of their stock, thereby saving stocking costs.

However, in some cases, dealerships haven’t taken the opportunity to improve the breadth of stock in line with the reduction in depth.

The effect of this is reduced first pick availability and increased lost sales.

Most dealer management systems have the ability to produce a lost sales report, so take some time to sit down with your parts manager and review your own performance.

Small changes can reap massive rewards in profitability, workshop efficiencies and customer satisfaction.

Another key area around stock management is ageing and obsolescence.

Again a huge variety of control practices can be found in different businesses with most major groups and PLCs generally having a strict policy and many other operations having a weak policy or even none at all.

As an initial step it is worth checking your own write down procedure and ensuring it is being enforced by both the parts manager and accounts.

A 50% write down at 12 months and total write off at 24 months is a good starting point, but many high performing sites are more aggressive.

When looking at this issue it is vital to check that stock is not being re-aged to avoid writing it down or off.

Obsolete stock can be sold in a number of ways, with many aftermarket specialists often offering competitive prices for items that fit cars a couple of models out of date.

Remember, if the parts are written off, recovering even 20% of wholesale value is better than scrapping the items.

However, the key to selling obsolete stock is effort and focus.

Often, as it is not part of the day job, that effort doesn’t always exist, so try setting some targets for sales of obsolete stock and maybe offer a bonus if these targets are achieved.

As a final thought on obsolescence, why not try selling over the internet.

This can be a goldmine of older vehicle owners all looking for parts they believe they can’t source locally.

Stock turn is the key to a successful parts operation. Aim for a minimum objective of eight times per annum and a double figure target where good processes exist.

Remember, once again, parts stock is effectively tied up cash, so make it work for you.

 

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