Previous articles have dealt with the mechanics and processes of developing and maintaining a profitable Wholesale business, for the average sized dealer. Do not infer from this that wholesale sales are the most important, but rather are a necessary supplement to Service Workshop and Body Shop sales which generate high gross profits as well as labor revenue. Clearly these sales are the most beneficial to the dealership, and as such are entitled to special attention and considerations.
Let’s explore ways to maximize these opportunities.
As we’ve discussed in the past, selection of part numbers is the key to success today. There was a time when a product line had a limited number of power trains and the body shell had a long change cycle. Engine Management was a carburetor, not a PCM that changes based on production date and update code. One or two water pumps covered the whole line and seals were universally sized. Not so today. We have the greatest number of product lines and model variants that have ever been offered in the life of our industry. Our customers in the service department have been conditioned to a Level of Service that is very difficult to maintain today, and often don’t realize that where two water pumps were sufficient previously, now eight are required along with the corresponding seals, belts, and even specific coolant. The proliferation continues daily, requiring a shift from volume management to micro management.
Thankfully more and more franchisors are moving to Daily Stock Order, which facilitates our ability to respond to these changes in needs. The mix of parts needed also changes every day depending on the vehicle population coming through the shops. There are steps you can take to adapt to these changes.
- Make sure that the Phase In parameters are set in an aggressive mode relative to the franchise you want to control. There are differences in the settings needed for high or low demand level lines, as well as the volume and quality of the Lost Sales posted by your staff into the DMS.
- Separate maintenance, repair, and collision parts through sourcing. This will allow you to control the speed with which these parts will qualify for stock, as well as when they will appear on the stock order and the Days of Supply it will maintain. Usually the Body Shop has advance notice for what they will need for the majority of the parts that are approved for a job. You often times have the ability to place a separate order for them, negating the need for having them in your stock. This is especially true for color and soft trim, which are almost always tied to a specific vehicle and should not be a stocking item. All this is conditional on the service levels from the franchisor’s PDC.
- Post aggressive Lost Sales. We’ve talked about this before, but the number one value of your DMS is its ability to forecast when a part should be stocked, providing you feed enough data into it for an accurate decision to be made.
- Order the parts! Trust the DMS! All too often, after all of the above actions have been taken the person reviewing the order second guesses the recommendation and does not order as suggested. If it meets the criteria, and they are set up correctly, buy the part! Your customers will thank you.
When you don’t have the parts
Let’s face it, no matter how we try to satisfy the demand from our customers we cannot have everything they want on hand. If we did the franchisors would be buying from us, right? Special Orders are inevitable, and as we all know we are judged by what we don’t have, and how well we make it available. This means having an effective and successful Special Order Process (sound familiar?) This is a shared activity with the service folks, and its success is based on how well they handle the customer, both at the time of ordering and when the part is finally installed.
- The Parts department needs to know if the part is really wanted by the customer, not just the technician, and how soon they expect it to be available.
- Use the Special Order function in your DMS. It interfaces with service, tracks orders, is usually capable of being receipted directly to an appointment, and generally makes the whole process more manageable. The problem with most of them is the fact that they do not have a real inventory, and are in fact a memo attached to the inventory system. The part can be successfully sold to the SPO customer or different one, but if the Special Order data is not transferred or completed the DMS will continue to believe it has a valid order. When you attempt to print a follow up report for the service people it will contain a list of jobs that have been completed, making your report useless. Make sure that your people transfer the SPO from the originating RO to the installing one.
- Don‘t keep SPO parts forever. Remember, they are Special Orders because they don’t belong in stock yet. If you have an Ordered in Error return available, use it. These parts are the number one cause of Obsolescence. If the customer hasn’t come back in a reasonable period of time, tell service to get them in or the part will be gone. Then make sure you follow through and make it go away.
Most parts departments operate with a limited staff. This is understandable, but let’s be sure we are not giving our primary customer second class service. Every minute that a technician spends waiting at the shop counter is a minute lost to service forever. They can’t put unsold minutes back on the shelf like we can with parts, so we need to be sure we don’t create unnecessary lost time because of our actions.
- Make sure that workshop counter sales people do only that. They should not take outside or wholesale phone calls, put up stock, or attend to housekeeping duties during active shop hours. These folks should be well trained in their product lines, and the tools they use to look up and order parts.
- Attitude is important. The people working the shop counter should have a positive and enthusiastic demeanor. Technicians should want to work with them. This is a Customer Service position, and everyone who performs this job should understand it and behave accordingly.
- Consider a pay plan that includes completed shop hours as an integral element. When a parts person knows that their pay is based on completed jobs, not just parts billed out, they will work harder to get work finished on a timely basis.
- Close the shop counter. Yes, I said close the counter! The primary function of a counterperson is to properly specify and order parts. The best place to do that is out on the shop floor, with the techs, at the vehicle where they both can see what is needed. Production numbers can be obtained without loss of tech time, and the technical quality of orders will improve. Removed from the distractions of “the counter” your specifiers can handle a greater number of technicians more efficiently. Yes, they will not be able to pull parts, but then you can hire low cost hourly people to work as picker-packers for the increased efficiency you will realize from this change. The age of electronics makes this possible. All you need is an EPC and DMS terminal and you’re up and running.
The average Gross Profit retention rate for the service workshop runs in the 38% to 45% range; in house body shop Gross Profit retention ranges from 30% to 40% (both before transfer for GM dealers.) Wholesale Gross Profit retention is typically seen from 16% to 25%. It isn’t hard to see where your efforts will have to best results for the investment.