How to Boost the Profitability of Your Parts Department
Is your parts department as profitable as it can be?
Or is profitability only a secondary consideration?
For many Powersports dealers, their primary objective is to have in stock, for immediate delivery, just about every part a customer is ever likely to ask for—even if it’s only suitable for equipment that’s decades old and obsolete. So their dealer parts list software is loaded with parts that very few or no customers ever buy—taking up valuable space and wasting purchasing dollars that could be put to far better use.
And their parts department personnel waste valuable time manually checking the inventory of these parts, re-ordering new parts (if still available), updating the price of every part…and dusting off all the old boxes.
If your parts department is anything like this, it may be time to reconsider your priorities.
The primary customer of your parts department, many experts say, should be your service department—not the end-user. Therefore, your parts department’s inventory should consist primarily of whatever parts your service department uses most often, and for brands and models, you currently sell or sold in recent years.
It should not be a warehouse packed with aging parts that might, just might, be requested by somebody with an obsolete piece of equipment he’s trying to keep running instead of buying a brand new one…or even a used one.
And the longer you keep old parts in stock—unless they’re gold-plated—the less they’re usually worth. (Keep this in mind when conducting inventories and putting a dollar value on each item.)
Unless a profitable part of your business is operating a parts warehouse for other dealers (as some car and truck dealers do), your parts department should not strive for a 100% fill rate; 80% to 85% is good enough.
Depending on your location, you can probably get almost any new part you want from the manufacturer or distributor within 24 to 48 hours, and most customers are willing to wait at least that long.
If they can’t or won’t, call other dealers nearby to see if they have the part in stock and (if so) either buy it from them or send the customer there.
As is the case with everything else you sell, dealer shop management software— when properly and effectively used—makes it incredibly fast and easy to keep track of every SKU in your parts department. If you regularly enter the appropriate data for each and every part, you can instantly find out how many units are in stock, how many need to be re-ordered, who bought each unit sold, when each was bought, the price paid, what kind of equipment each purchaser uses, its age, whether it was bought from you, what related items might be promoted, etc.
And when you see, thanks to your dealer management software, that a particular customer is constantly buying replacement parts for a particular machine, you can say to him: “You may be able to save a lot of money by purchasing a new machine. It comes complete with all the parts you need!”