Finding a Parts Manager who understands how to run a parts department on a daily basis, at a high level, is like finding a Senior Technician. But then...finding a Parts Manager who is educated in parts inventory control, on a technical level, is like finding a Senior Diesel Technician. Then of course, finding a Parts Manager who has polished Employee Management skills is like finding a Diesel Technician who is also certified in Transmissions.

More on this topic later.

When you send a Used Car to auction, you have a pretty good idea of what to expect in terms of the sale price. But do you know what parts inventory will typically return if you auction them off as a pallet load of parts?

We have seen many pallet loads go out over the course of our careers from multiple dealers. Most pallet quantities of parts inventory Net 10-15% of parts costs.

Wrong.  Totally Wrong.  

Having 2% of total parts inventory over 12+ Months old means you’re not in trouble.  It doesn’t conclude that you have a clean inventory.

Yet it thought that this is the definition. I have a few other posts explaining what non-performing parts inventory is.

Yes, I’m talking about Special Order Parts.  They day they are returned, or put into parts inventory because a job has been canceled, or misdiagnosed – Special Order Parts are a problem at that moment.

Many dealers only classify idle parts as being a problem after month 9 or even 12.  But parts after 9 Months-No-Sale are only 50% of the idle inventory problem. The other 50% of the idle problem are these Special Order Parts.  This could mean Day 17 a part is a problem for your dealership – not day 300.  When the part is finally considered yours, the dealership – we call that Day 1: Problem.

Four Caravans in the Parts Department.  Yes, complete – with great tires.  This is the same dollar amount, and the equivalent, that sits in the average parts department in North America.  $88,000 of Idle Parts Inventory.  If you have over $294,000 in parts inventory, then you have more then 4 Dodge Caravans.

Caravan anyone?

…but what is your plan on Parts Inventory? Besides, it is 30% of the average parts dealer’s inventory. If I looked in your 2018 Forecast and Planning paperwork, would I find one? I know I would for Used Cars. Used Car inventory control is a topic every Monday boardroom meeting. But, Parts Department...?

…that are unsold in Used Car Department. After 60 Days high-performing dealers implement their write-down policy. After 90 days the car goes to a wholesaler or auction. Parts Inventory needs to perform just the same; besides its Working Capital just the same. But where do you turn to recover your full cost besides the OEM return allowance? Which of course isn’t enough. Insert Parts Inventory Control Plan Here:

We need to debunk the misunderstanding of what Idle Parts inventory actually is. Rampant throughout the industry, it’s believed that Idle Parts are only parts that have aged out after 9 or 12 Months-No-Sale. That’s incorrect. Those parts account for only half of the Idle Parts Inventory. The other half, and least understood, are the parts which lack demand, and shouldn’t be there to begin with (Special Order parts unsold, or returned). These are parts which could have been returned on Day 17. They are now a problem on Day 17 – not on Month 10 or 12. These parts account for the other 50% of a dealers Idle Inventory parts problem.

Parts older than 12 Months-No-Sales have less than 5% chance of ever selling again in your dealership. You're better to write them off, and take the loss for tax purposes. That’s why there is a huge push during Year-End at your dealership to write off parts, and get accounting department your numbers. (Note: I say “you’re” better off writing these off – but that’s was the alternative, pre-NADPE days.)