"DELIVER” PARTS TO THE SHOP TECHNICIANS?
ARE YOU KIDDING ME?
by: Bruce Gamble
Having been a parts manager in a former life, I would have reacted the same way if my boss had asked me to deliver parts to a technicians’ work area. Those guys never remembered what I had IN stock - only what I DIDN’T HAVE!! Why would I want to cater to those prima donnas? I’ll tell you why.
In the course of visiting a dealership I review department financials. It’s not uncommon to find that the service operation typically generates from 70 to 85 percent of the parts department’s “bill paying” revenue. Many managers don’t see it from this perspective.
Below is an example of a store I recently visited:
The parts manager boasted, “See? My wholesale/retail generated 54.1% of the sales for my department – Wholesale is KING!” I pointed out that his service operation generated 64% of his bill paying money! They were expending twice the effort for half the profit margin. I didn’t want him to discontinue wholesale business. I wanted him to put more effort into improving service to his in-house customers. We then talked about delivering parts to the stalls. He asked, “How can that help?” I’ll tell you how.
Over several days we observed technicians going to the counter for parts. We estimated that they did this about 5 times a day and spent an average of 5 minutes and sometimes more, in the process. What if we cut that 25-minute figure in half – let’s say to 13 minutes a day? What would the potential profit impact be to their paycheck?
Let’s do the math:
| 1) |
10 |
Techs |
2) |
2520 |
min@mo |
3) |
504 |
prod hrs |
4) |
$32,130 |
Add Svc profit |
| x |
12 |
min@day |
÷ |
60 |
min@hr |
x |
$85 |
ELR |
x |
$0.38 |
pts to lbe ratio |
| x |
21 |
days@mo |
x |
12 |
mo@yr |
x |
75% |
GP% |
= |
$12,209 |
Add pts profit |
| = |
2520 |
min@mo |
= |
504 |
prod hrs |
= |
$32,130 |
Add Svc profit |
|
$44,339 |
Combined |
I showed him where he would maintain about $0.38 of parts gross to labor gross and how that translated into over $12,000 of additional net for his department. I saw the light bulb click on over his head. The parts manager was excited because he now understood how he could increase his pay without any additional expense. His shop counter person got excited because an element of his pay was based on shop production hours. We haven’t even talked about the increase of parts purchase discount on the additional parts purchased or the increase in return allowance, but over a year it could be ENORMOUS.
This is a WIN-WIN for all parties:
- Service – Increased production hours + increased shop output = WIN!
- Parts – Increased sales and profit + increase in obsolescence return and no increase in expense = WIN!
- Dealer – Fixed operations move forward + he now moves to the left side of his 20 Group page = WIN-WIN!
DELIVER TO THE TECHNICIANS? You’re darn straight - EVERYBODY WINS!
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