Nourishing your Parts Department
Let’s be real; money is tight with everything happening today. So, how can you create a well-organized and efficient parts department?
I’ve spent the last 14 years working in the parts industry across multiple dealerships. Every one of them had at least one of the following issues. Let’s review some common problems and solutions that will help you now and in the future.
Problem: Disorganized Parts Inventory
Solution: A clean and organized department is essential for keeping inventory values down. Often, the same part can be stored in multiple places, leading to unnecessary reorders when stock is available elsewhere. That’s why physical inventory should always start with organization. Every part should be labeled and assigned a bin location in the system.
My team developed a strategy for conducting a thorough physical inventory in the store. Display areas should be clean and easy to scan using a barcode gun. Systems like Lightspeed streamline this process with their mobile app, which allows you to scan parts directly into the system from your phone or other device like an iPad.
In addition to initial organization, implementing regular cycle counts is highly recommended. Frequent checks ensure inventory accuracy, particularly for high-value or fast-moving items.
Problem: Lack of Standardized Processes
Solution: Develop clear procedures for receiving, stocking, and selling inventory, and ensure that all employees are trained in these processes. The parts department is the backbone of a dealership—all other departments rely on it.
A great Parts Manager and Parts Receiver are two of the most critical roles in your dealership. These employees oversee your inventory, which is a significant financial investment. Hiring a strong leader as Parts Manager ensures that the Receiver and other staff operate efficiently and contribute to a profitable department.
Problem: Inadequate Employee Training and Accountability
Solution:
● Train Staff: Conduct regular training sessions on inventory management best practices, including proper handling, storage, and counting techniques.
● Assign Responsibilities: Designate employees to oversee inventory management to ensure accountability and accuracy.
● Encourage Feedback: Foster open communication so employees feel comfortable reporting issues and suggesting improvements.
Problem: Lack of Goals
Solution: What goals have you and/or your Parts Manager set for the team? Goals give employees something to strive for. Weekly and monthly targets help motivate both individuals and the department as a whole.
Problem: Ineffective Pay Plans
Solution: Are you paying commissions in the parts department? Carefully structure your pay plans to avoid unnecessary competition among employees. When commissions are tied to each part’s margin, employees may engage in questionable behaviors—such as stockpiling special orders at the end of the month or returning parts under someone else’s name at the close of a pay period.
Design a compensation structure that incentivizes performance without fostering internal conflicts.
Problem: Not Using a Parts Escalator
Solution: Parts escalators are essential for maintaining profitability and operational efficiency. Prices fluctuate due to inflation, manufacturing costs, tariffs, and supply chain shifts. Escalators automatically adjust pricing without requiring constant manual intervention.
A well-implemented escalator helps keep pricing competitive. However, poor communication can lead to customer dissatisfaction. Transparency is key—clearly explain how prices are adjusted to maintain trust and avoid confusion.
Problem: Unclaimed Special Orders
Solution: Give customers a clear deadline for picking up special orders after they’ve been notified. Keep in mind that OEMs often have strict return windows, so enforcing a firm pickup policy is crucial. Communicate your special-order policy clearly and, most importantly, stick to it.
Problem: Underutilized Supplier Returns
Solution: Are you taking full advantage of your manufacturer’s supplier’s return allowance each year? If not, you should be. This ties back to creating standardized processes, establishing a structured return policy and maximizing supplier return opportunities.
Moving Forward
By implementing advanced inventory systems, fostering strong supplier relationships, and continuously training staff, your Parts Department can become a major contributor to both profitability and overall dealership success.
Commit to excellence, innovation, and adaptability to transform your parts department into an industry benchmark for efficiency and customer satisfaction.