Parts Departments: the key to dealership success

In my work with hundreds of parts departments, I’ve witnessed time and time again parts and service departments being undervalued and neglected by dealers and owners.

In the past few years, as more operations confronted shortages, there seems to be a shift as dealers have begun to understand how valuable their parts departments are for overall dealership health and how much they can support in times of low inventory and amidst other unforeseen challenges. 

The Undervalued Parts Department

For far too long, parts departments have disregarded and left to handle their responsibilities with little to no support and investment. According to NADA, the parts and service department is responsible for nearly 50% of a dealership’s gross profits, generating $75 billion directly from parts sales. Not only that, the parts inventory is the second largest capital investment, second only to vehicle inventory. It’s high time dealers start appreciating the parts department and the critical role they play in dealership success. 

Challenges and Opportunities

The automotive industry has faced various challenges since 2020, including a hiring crisis, backorders and parts shortages, and low vehicle inventory. With more support and resources, parts departments can be a powerful tool for navigating changing times- generating a consistent stream of customers and building ongoing relationships that result in loyalty. Things like ongoing education, more personnel, and tools for improved fixed ops marketing, inventory health, and increased online parts sales can strengthen your parts operation and allow it to carry more weight when inventory is waning, and customers aren’t buying new vehicles.

"With this crucial support, parts managers can shift from reactive to proactive thinking, allowing them the time and resources to manage inventory effectively." 

The Power of Parts

Parts departments hold immense potential for growth and expansion. For instance, online parts sales create the opportunity to reach a broader and larger market than ever before. Parts departments also hold much of the power when it comes to customer loyalty and retention, as they are the folks interacting with customers beyond the sale. A survey by Cox Automotive revealed that 55% of consumers choose a dealership because its service personnel knows their vehicle better, only underscoring just how much parts can drive dealership success.

By making it easier for customers to find the parts they need and providing exceptional service, dealerships can enhance their reputation and customer satisfaction and retention. With a defined process and strategy, achieving this becomes attainable. 

Addressing Inventory Challenges

One of the critical aspects of managing a parts department is addressing inventory challenges. Simply put, your inventory needs the width to meet varying demand but not such a depth that you’re unnecessarily stocking parts you don’t need.

The idle inventory trend is a current concern for many parts managers, with obsolescence exceeding 18% in far too many inventories. To combat this, dealerships should aim for 0% obsolescence- trust me, I’ve seen it! By micro-categorizing inventory sources and tracking performance closely, parts managers gain control over excess inventory, forced stock, and technical obsolescence. Regular check-ins and forecasting can help maintain a healthy balance and reduce wasted shelf space and capital. Achieving success in parts departments requires striking a balance between obsolescence control and proactive management. I’ve found most issues stem from the lack of time for Parts Managers to think proactively.

Though by investing in the parts team, dealerships can unlock endless possibilities with increased online sales, improved customer loyalty, reduced turnover, and record profits.

Inventory control is the cornerstone of a thriving parts and service department. By investing in the untapped potential of parts departments, dealers can maximize profits, increase customer loyalty, and navigate shifts in the market with ease.