The effects of the declining economy on the auto industry are likely to change the way business is conducted.
One potential change that will be welcome is greater involvement in and understanding of fixed operations by dealer principals and general managers.
I conduct inventory control and management training for auto makers. We have created parts department training programs. Over the years, I've spoken to thousands of parts managers, parts and service directors, and service managers.
The majority attending training sessions have a consistent lament: “This is a great class, I wish my dealer principal or general manager would attend.”
Their gripe confirms there still is a huge disconnect between upper management and the back end. Granted this does not exist in all dealerships. But it's hard to believe it exists anywhere.
One would think a solid understanding of all the dealerships departments is the best road to profitability. Unfortunately, the only time attention is turned toward fixed ops is when vehicle sales go soft.
It's hard to get your arms around something that you don't understand. So let me ask a question of those dealers and general managers with little knowledge of the back end, particularly the parts department.
What do you think happens if you have a weak and untrained manager in the position of parts manager?
Consider the possibilities of mismanagement of inventory dollars, excess inventory, obsolescence, lost customers (not only in the parts department but in the service and sales department), and low service department productivity.
The average dealership parts department inventory is about $250,000. If the investment is not being made in selling parts, your financial hole is only being dug that much deeper.
Ah, but the wealth effect is a cunning demon. When cash flows, it's easy to overlook poor management and wasted capital.
A shortsighted general manager once told me that anyone off the street can be a parts manager. If that's the case, shouldn't all of the dealerships investments be entrusted to anyone off the street?
When I walk into a parts department or parts warehouse, I don't see parts on the shelf, I see objects representing stacks of money.
So here is another question. If you're considering making a personal investment, would you give $250,000 to a person who is untrained in investments and ask him or her to invest that for you?
On top of that, would you allow them to invest such money each and every month? Certainly not! Yet, this takes place in dealership parts departments all across the country.
For those dealers that survive this industry downturn, it may not be too late.
Here are some suggestions for the parts manager and staff:
- Make sure the parts manager and necessary parts staff is trained and have deep understanding of the dealer-management system. Lack of DMS understanding can cost you big.
- Make sure the parts manager receives proper up-to-date training offered by the vehicle manufacturer. For example, the program we've created and help create for our clients contain cutting edge techniques for inventory control and management.
For the dealer principal and general manager:
- Get a handle on what constitutes parts department best practices. This includes understanding of key performance indicators and even understanding how DMS changes and purchasing affects them.)
- Get familiar with the DMS management reports. (Especially month end reports.)
- Get as much training as possible to expand your understanding of this asset investment. Attend the classes your department managers attend. Get consulting help if needed. Above all, continue to invest in training your dealership employees.
Parts expert Gary Naples can be reached at 570-824-1528 or [email protected].