Turn Your Parts Department into a Profit Center

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Solomon Godfrey Gibbs
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1 Turn Your Parts Department into a Profit Center Presented by: Rod Davis Dealers Deserve a Return on Investment

2 Course Objectives Pricing Strategies for Increased Profit Margins Customer Driven Processes for Increased Sales Inventory Controls

3 Mark-Up & Profit Margins Markup Versus Margin a) 67% Mark-up is a 40% Gross Profit Margin Based on industry standards, the guide for profit margin is: 40% (Retail) 35% (All Accounts)

4 Pricing Strategies Design Pricing Matrix a) Manufacturer Margin 50% b) Supplier Margin 45% c) Accessory Margin 35% Identify Opportunities for Profit Improvement

5 Sample Variable Pricing Matrix (Manufacture) Cost Plus Matrix (Manufacture) $0.00 to $ % $1.00 to $ % $3.00 to $ % $6.00 to $ % $10.00 to $ % $25.00 to $ % $ to $ % $ to $9,999, %

6 Sample Variable Pricing Matrix (Supplier) Cost Plus Matrix (Supplier) $0.00 to $ % $2.00 to $ % $5.00 to $ % $10.00 to $ % $20.00 to $ % $25.00 to $ % $30.00 to $ % $50.00 to $ % $ to $ % $ to $9,999, %

7 Sample Variable Pricing Matrix (Accessory) Cost Plus Matrix (Accessory) $0.00 to $ % $2.00 to $ % $5.00 to $ % $10.00 to $ % $20.00 to $ % $25.00 to $ % $30.00 to $ % $50.00 to $ % $ to $ % $ to $9,999, %

8 Profit Margins are Important? Profit Margins are one of the few things you should have total control over The management teams responsibility is to reach margins that produce profits Install a Parts Pricing Matrix Eliminate Unauthorized Discounts Offer Choices Gross Profit is a Matter of Discipline

Impact of Un-Authorized Discounts Labor Sale Amount $100.00 Cost of Sale -$30.00 30% Gross Profit $70.00 70% Expenses: Personnel $31.50 45% Semi Fixed $13.30 19% Fixed $11.20 16% Total Expenses $56.

9 Impact of Un-Authorized Discounts Labor Sale Amount $ Cost of Sale -$ % Gross Profit $ % Expenses: Personnel $ % Semi Fixed $ % Fixed $ % Total Expenses $56.00 NET Profit $ % Discount -$ % Net after Discount -$1.00 Parts $ $ % of Sales $ % of Sales $ % of Gross $ % of Gross $ % of Gross $24.00 $ % of Gross -$ % of Sales -$9.00

10 Customer Driven Processes for Increased Sales Parts Walk for all New and Used Sales Those Dealers that perform a good parts walk during the delivery and after, see an additional $ in sales

11 Offer Choices (Why) Why Offer Choices? Customers want it It educates the customer It increases profit margins It increases closing ratio

12 Offer Choices What to Offer Choices on: Sewer hoses Power Adaptors Awnings How to Offer Choices: Show them the accessories and the different options

13 Offer Choices Offer Choices for Fast Moving Parts (Good Better Best) Good Competitive Profit Margins Better Good Profit Margins Best Very Good Profit Margins Offer a minimum of two choices Offer no more than three choices

14 Customer Driven Processes for Increased Sales Maintenance Menus for Service Advisors Reliability Customers want to know about maintenance Increases Sales Increases Gross Increases Customer Satisfaction

19 Customer Driven Processes for Increased Sales Technician Courtesy Inspections for all RVs Safety it gives the customer piece of mind Increases Sales Increases Gross Increases Customer Satisfaction Parts personnel Have Customers come in to see products IE: 5 th wheel hitch, brake controller

20 Customer Name: ABC RV 27-Point Coach Inspection Mileage: Vin #: (Last 8) The following visual inspection is performed at NO CHARGE OK NEEDS ATTENTION 1. Inspection of Step Assembly for Operation and Damage 2. Inspection of Wiper Blades 3. Inspection of Awning Hardware 4. Inspection Exterior Lights 5. Inspection of Tires for Proper Wear 6. Inspection of Smoke and LP Detector for Proper Operation 7. Inspection of CO2 Detector for Proper Operation 8. Inspection of Fire Extinguisher for Service 9. Inspect Coach A/C Filters (if accessible). 10. Inspection of Roof for Sealants and Damage 11. Inspection of Roof Antennas 12. Inspection of Roof Vents 13. Inspection of Engine Air Filter (if accessible) 14. Inspect Radiator and Heater Hoses 15. Inspect Engine Drive Belts 16. Inspect Engine and Transmission for Visible Leaks 17. Inspection of Batteries and Cables for Corrosion and Servicing 18. Inspection of Brake Fluid Condition and Leaks 19. Inspect Generator for Leaks and Servicing 20. Inspection of Leaf Springs and Suspension 21. Inspection of Coach Leveling/Stabilization System for Leaks and Damage 22. Inspection of Slide-Outs for Leaks, Seals and Alignment 23. Inspection of Waste Water and Fresh Water Systems for Visible Leaks 24. Inspection of Shocks for Leakage and Condition 25. Visually Inspect LP Tanks for Damage and Date 26. Inspection of Brake Pads/Shoes (if visible) 27. Inspection of Trailer Coupler

21 Inventory Controls Special Order Parts (POO Sheet) All personnel are responsible for ordered parts The #1 reason for obsolescence Controlled by management All personnel are responsible for controlling SOP Retail Customer must Pre-pay Work In Process Report (WIP) Meet weekly to cover reasons Have a plan for each

22 Special Order Parts (POO Sheet) Parts On Order (POO Sheet) Date Ordered RO Number Owners Name YR Make Parts Ordered ETA Received Appt Date & Time 15-Oct Bob Smith Oct 22-Oct 10/27/14 8:00 AM

23 Inventory Controls Annual versus Continuous (Perpetual) Inventory Annual Inventory An inventory done once a year Continuous (Perpetual) Inventory an inventory that is done perpetually (Daily Weekly Monthly) 10% of your inventory per month

24 Inventory Controls Parts (consumables) under control of the Parts department, not Service bill to R.O. Plumbing fittings Sealers Parts billed to a repair order before they leave the parts department No Exception!

25 Inventory Controls Turning Inventory (What) Definition: How many times the inventory value is sold per year Guide: The inventory should turn 5 times per year Stocking levels for maximum inventory turns Should be: 3 Months supply Parts Inventory in DMS versus the Accounting Inventory from the General Ledger This is what Inventory is about

26 Inventory Controls Manage the DMS to track Obsolescence If history shows no sales in 6 Months Who is empowered to order parts? Limit the number: Advisors only for Work Orders Find your best aftermarket (accessory) vendor Focus on accessories Incentivize Sales staff

27 Low/High Days Supply This is the minimum or maximum days of supply a manager would allow for a part in a particular source. 27

28 Low/High Days Supply When a normal stocking part goes below the minimum days of supply, the system will suggest an order up to the maximum days supply of a particular part number. Note: Days supply may vary pending source stock and movement. 28

29 Questions? Turn Your Parts Department into a Profit Center Presented by: Rod Davis Dealers Deserve a Return on Investment

CHRYSLER GROUP LLC 1

CHRYSLER GROUP LLC 1 1 Benefits of VIN-Specific Menu Pricing Increased Gross & Absorption focuses on Effective Labor Rate focuses Parts Gross Profit Percentage no cost averaging ensures technicians get paid the correct times