Efficient service and parts departments are engines of profitability, and dealerships need to look for innovative ways to drive those engines. That includes both management strategies and new technology, say “The Fixed Ops Efficiency Playbook” panelists on a recent Ted Ings Fixed Ops Roundtable.
“We are at a tipping point; the world is moving faster and faster in innovation,” says panelist David Spisak, president and CEO of Disruptive Growth Solutions, a consultancy. “You can’t have technology be the only innovation. You need innovative leadership (and) innovation in the sales and parts departments.”
For panelist Tully Williams, fixed operations director at The Niello Co., a Northern California dealership group, innovation begins with a focus on selling service hours, which requires proper staffing in the parts department.
“How you drive efficiency starts with parts,” Williams says. “Without parts, you can’t sell hours.”
If the service doesn’t have the part it needs to complete a repair, the repair takes longer and “we have to get people in and out in a day or two,” he says.
Williams enhances the importance of his parts department by equalizing pay for parts managers and service managers. “Then they are together to sell hours,” he says.
The Niello Co. has an hours forecast for everyone in the store, Williams says, and parts-counter people and service advisors alike are paid on the hours forecast.
Issues with a parts department can have a cascading effect on proper cost appraisal on a trade-in, says panelist Brian Kramer, executive vice president, dealer growth and success at Cars Commerce. “They either over- or underestimate the cost” of reconditioning, he says.
Wholesale for Customer Retention
Innovations to accelerate wholesaling parts are another area dealerships should focus on to boost their bottom line, panelists say.
Dealerships may dismiss wholesaling parts because the profit margins are too thin. But they are ignoring the other advantages of a wholesale operation.
“I don’t care about the money,” Williams says. “I want to own the wholesale market.”
He wants all body shops in the Niello market to be parts customers. The Niello Co. includes nine franchises and a body shop.
Securing and retaining wholesale customers helps prevent parts obsolescence, the bane of any parts department. “I believe the parts department inventory never needs to grow old,” Williams says.
E-commerce is one tool The Niello Co. uses to help move parts.
But good old shoe leather is another tool, Spisak says.
Dealerships measure new-car market share obsessively, but they don’t do the same in their parts department, he says. A small dealership he works with visited collision centers in its area with Starbucks gift cards to chat people up.
The dealer found that the collision centers weren’t buying parts from the dealership because they thought the return payment terms were too strict.
“He changed that and now (the dealership) has all the business,” Spisak says.
The Benefits of Wholesale Parts
The wholesale parts business can also generate new-car sales. Collision center customers are often in the market for a new car, he says.
“Consider every person you do business with is a referral for new-car business,” Spisak says.
Customer retention is another benefit of nourishing a wholesale parts business, says panelist Amanda Poe, director of demand generation at RevolutionParts.
Dealers say, “We don’t want to do wholesale (or) e-commerce because the margins are too low,” she says. But “you aren’t losing money by not making as much profit. You are gaining sales you would never have had otherwise!”
RevolutionParts is a software platform that uses Artificial Intelligence to improve fixed operations efficiency. Its Fixed Operations Efficiency and Automation Toolkit includes a Parts Scorecard designed by The Niello Co.’s Williams to track parts inventory performance across multiple dealership locations.
The data collected by such platforms is “the currency of the future” to make fixed ops more efficient, Spisak says. It helps determine what parts are and aren’t selling, and how to make a dealership’s wholesale parts more likely to appear on an internet search.
Since AI powers many search engines now, “if dealers don’t have a link to their wholesale parts (on their website), they will be irrelevant in the future,” Spisak says.
Alignment Needed
Getting everybody in the parts and service department on board with AI can be a problem, the panelists say. And that is crucial to executing an AI-focused strategy, Cars Commerce’s Kramer says.
That execution starts with hiring the right people. Rather than hiring someone with 10 years of experience who doesn’t believe in wholesale, hire managers and employees who have a high emotional quotient, with drive and critical thinking, Spisak says.
Then, the dealership can use AI to free up employees’ time to “exert their superpowers” in creating a superior customer experience, he says.
That may require laying off staff who resist change, but a great manager or employee is “the gift that keeps on giving,” Spisak says. “They make people work harder and make you look like the smartest person in the room.”
