This is Part 1 in a two-part article. Be sure to check back next week for Part 2.
I have been asked by many dealers how to get rid of their obsolete parts, and what they can do to prevent this from happening again. Let me say that getting rid of the obsolete parts is a lot more difficult than preventing them.
Let’s start with the hard part getting rid of the obsolete parts you already have. I know many dealers and even some managers want to know how this ever happens, but let’s face it-they have probably been accumulating over many years. Also, in some instances it could be that more than one manager has created this obsolete part concern. It could also have been caused from being a large wholesale dealer, and not having a return policy that can prevent many of these items from coming back from the wholesalers. Yes, some of the items on the shelves are most likely errors in which the parts personnel have ordered the incorrect part, and never returned it to the manufacturer. It could also be items that a technician said to stock, and now that technician is gone or the part was never sold after the initial need. They can also be accessory items that a new car or used car manager asked you to get, and never produced a vehicle for you to put these items on. And the list goes on and on. So as you can see, there are many scenarios that can create the obsolete parts you currently have, but the key is now how do we get rid of them?
I can tell you from my own experience that it’s highly unlikely you’ll find a dealer that will say, “Just throw those obsolete parts away. We will just write them off.” But I have found some dealer groups that do annually scrap all nonreturnable parts with 12 months no sale. However, let me assure you that those items scrapped come right off the gross profit of the department. Which means for you managers this is probably is going affect your pay. I have seen some dealers accrue money monthly from the gross profit to build a scrap fund to do this. But for the most part, the dealer wants to get something for the parts he paid for.
I’m sure many of you dealers out there are using some of the tools that many of the manufacturers offer, and you’re probably paying for the service to sell some of these obsolete parts. But now you’re spending more money to get rid of something that’s not making you money, and just sitting on your shelves. I’m not saying this doesn’t work. All I’m saying is now you’re paying an expense for something that is already an expense. I also know that some manufacturers require you to be on these types of services, the theory being not only to sell obsolete parts, but to find parts needed that the warehouse has out of stock.
Here are some of the methods I have used to get rid of obsolete parts:
- eBay. This can be a great tool to sell parts to people all over the world. Obviously this would require some work and setting up an account with them. You will also most likely need someone to manage this if not yourself. The big advantage to using this tool is you’re able to take pictures, and display them to all your prospective customers. It is always easier to sell something when they can see what it looks like. Yes, there are fees involved but those fees can be passed on to the client. Now you may not get full retail pricing for these items, but in many cases there is profit available through this venue.
- Another one is Craigslist which is free, and you can use pictures to sell these items, also. Here again, there is some additional work and it needs to be managed on a daily basis.
- I have also used the dealer’s website. Most customers will look online before ever going to a store, and it’s something you’re most likely already paying for, so why not use it? I recommend if you use these Internet sales tools that you put the part number of the item you’re trying to sell in either the header, or the description of the item being sold. This way when someone “Googles” the part number they got from some website or a dealer, the Internet search engine will look for that number throughout the Internet. And probably the most important thing to remember when selling items over the Internet is that you must respond to inquiries ASAP. People that shop on the Internet will not wait three or four days for a response on an inquiry for an item you are trying to sell. So you must be diligent in checking your website and your e-mails.
- Another opportunity to get rid of obsolete items is through some of the larger companies on the Internet that sell auto parts for all makes and models. Many of these companies actively search out dealer inventory to buy. The challenge with most of these companies is that they do not pay very well. I’ve seen some offer as little as $.20 on the dollar, and they do somehow get the pricing of what these items cost or they ask for an inventory list with the cost of parts, also. This is a way to get something for the obsolete parts instead of just throwing them out, and writing them off.
- One of the more popular ways I’ve helped get rid of obsolete parts is to utilize the manufacturer’s bonus money. Most manufacturers have some sort of bonus program that the dealer receives cash back, or a discount when buying parts from them. It’s sometimes in the form of stock order discounts, quantity discounts, or special purchases that offer some discount when you buy them in bulk. Most dealers put this money into a bonus or other income account and it shows up on the financial statement as gross profit. Yes, I know most of you get paid on gross profit, but if your dealer will let you scrap your obsolete parts he will most likely take that money out of your gross profit anyway. The percentage of this money used to scrap parts will most likely be something you need to discuss with your dealer, but this is a great way to pay for the items you may not be able to sell or return.
- Obviously the best way to get rid of obsolete parts is to accrue buyback dollars that many manufacturers give the dealers when they buy parts from them. I’ve seen some stores that accrue more buyback dollars than they can use, and some manufacturers even will give it as credit for those unused dollars. Now if your manufacturer does allow you to accrue buyback dollars, and you don’t have enough to return your obsolete parts, what can be done? Are there any large dealers in your area? Do they have more buyback dollars than they can use? I have seen many of these types of stores buy other dealer’s inventory and $.50 on the dollar. Yes I know it’s only half of what you paid for, but is the current cost of this item you’d like to get rid of the original price you paid for it? Possibly not. Would it be easier for the dealer to sell the part at half of what you paid for it rather than throwing it away? Could you use some of those bonus dollars to make up the difference in what you paid for the obsolete part, and what you sold it to another dealer for? Only your dealer can answer that, but many times as I said before, the dealer wants something for those obsolete parts; he just doesn’t want to throw them away.
Continued next week in Part 2!