Parts Inventory

Parts inventory may not be a sexy topic however, it could not be any more critical in achieving peak performance in your fixed operations. Many dealerships make the mistake of managing their parts inventories by the number of dollars instead of having what is needed. They believe aged inventory isn’t a real cost and they refuse to discount this below what they paid for it. Today I hope to challenge this viewpoint and express the critical nature of dealing with parts inventory.

It’s important to monitor the technician fill rate and understand the loss of revenue when a part is not currently in stock. Too many times the technician has to put the vehicle back together and pull it out of the bay uncompleted while they wait on parts to arrive. When the parts do finally arrive they have to pull it back in and disassemble to install the part. The real loss in revenue to the dealership is a minimum of .5 of labor time whenever the part isn’t in stock. I always use the $150 cost per technician hour to be conservative and calculate this loss in parts and labor sales.

If you do the math and have 200 lost sales in a month the opportunity is huge! If you have parts inventory over two years old chance of you selling it is only 5%. The best practice is to discount those items at least 50% below dealer cost and aggressively bring in new items to improve technician fill rates. Most dealerships have challenges when it comes to tracking lost sales and adding inventory when considering the investment. This is why dealerships need to study their parts retail matrix program and take advantage of our Margin Plus program to get retail pricing on warranty repairs. Attractive margins are the key to your success when it comes to fixed operations!

Sincerely,   
Rob Gehring, President
Fixed Performance Inc.
​Margin Plus
rgehring@fixedperformance.com
Cell: (419) 282-1351
1-888-205-871
Fixed Performance complete fixed operations coaching consulting

Have you filed for warranty parts and labor increase yet? We will review two months of repair order data for $395. By reviewing every order, we can look for ways to improve warranty margins and at the same time take your customer pay results to new levels of profitability! When you are ready to get serious about your margins, give us a call at 1 (888) 205-8718! 

Sincerely,   
Rob Gehring, President
Fixed Performance Inc.
​Margin Plus
rgehring@fixedperformance.com
Cell: (419) 282-1351
1-888-205-871
Fixed Performance complete fixed operations consulting coaching