Monday, 30 September 2002 17:00

Improving your position with OEM parts dealers

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They can help you improve your shop's cycle time. They can offer ideas to make your shop's parts ordering more efficient. And they certainly can have an impact on your parts profit.

They're dealership parts managers, and shops may find a lot of what they have to say about the industry interesting and helpful.

Parts managers say that shop owners may have some misperceptions about dealership parts departments that keep the shop and parts departments from having as good a relationship as they could.

Shops, for example, may assume every part they return can be returned by the dealer to the factory for a full credit.

"The manufacturers are getting stricter and stricter on what they will accept back for returns, or if they will accept it back, the penalties they will charge you," said Scot Strong of Norris Auto Mall in Ohio. "With Kia, for example, if I want to return a part, it has to sit in my inventory for 12 months before they'll take it back."

Shops probably don't have an accurate picture of the profit margins parts managers are working with, and consequently demand unrealistic services and discounts.

"There's a perception we're making 60, 70 or 80 percent gross profit margin, when in fact the Toyota dealer margin right now is under 19 percent," a parts manager in Ohio said. "And that's (based on) selling at a 25% discount (to the shop)."

Other parts managers shared similar numbers, with some seeing margins dip closer to 10 percent as discounts nudge up.

Seven ways to make sure you get credit for a returned part

Return it promptly

Two out of three parts managers say they have denied credit for a part return because of how much time had passed since it was purchased. Tim Howard, wholesale parts manager for Byers Imports in Columbus, Ohio, for example, ranked this as among the top three reasons a part is unreturnable.

Make sure it is like-new

Even a higher percentage of parts managers - eight out of 10 - say they have denied issuing a credit because of the condition of a returned part. Painted, damaged or dirty parts, and parts that have obviously once been installed could result in delayed, denied or reduced credit.

"If you're sending a part back, think about if it's in a condition you'd accept if we delivered that part the next time you ordered it," one parts manager suggests. "If you wouldn't accept it as a new part, you can't expect to get full credit."

Care for the packaging

Believe it or not, the condition of the parts packaging is every bit as important as the condition of the part. The condition or lack of packing is the No. 1 reason cited by parts managers for denial of credit. Don't tear or crush boxes, don't write on packaging (use removable labels to mark them as needed), keep all labels intact, don't open stripe boxes until checking the sample on the outside of the box, try to keep packaging reasonably free of dirt, dust and paint.

"The factory depots over the last three years have gotten very strict and stringent with their return guidelines," Dave Fisher, parts manager at Metro Toyota in Ohio, said. "We can no longer have masking tape, magic marker, or greasy fingerprints on the box, it has to have the original wrapping inside the box, and it has to have their depot-generated label on the box, or they won't take it."

Gary Poduch, parts manager of Arlington Toyota in Illinois, agrees. "Toyota parts have a little 10-digit part number label, and that thing has to be flawless or I can't return it," he said. "We try to let our customers know that the first time they send a part back with a ripped label, we'll take it back and hope we can sell it. The next time, there could be a restocking charge. And the next time we might not take it back at all. It's like a 'Strike Three' rule."

Know what's returnable

After the condition of the part and packaging, the third most common reason parts managers say they deny credit is that the part was indicated as non-returnable. This might include airbags and certain accessories, Carl Hoffman, parts manager of Village Ford in Dearborn, Mich. said. George Kosellinski, parts manager at West Suburban Imports in Illinois, said special orders - in his case, from Sweden or Germany - also fall into this category,

Get your parts area organized

Your return parts are much more likely to get picked up quickly if you make it easy for parts drivers to know about and find the parts. Post a sign in the parts area indicating which suppliers have return parts to pick up; one west coast shop has a sign wired with lights that can be turned on to indicate which dealers have return parts waiting, but an inexpensive dry erase board can be equally effective.

Include some paperwork

Parts managers say they are amazed at the number of parts they get returned that arrive with little or no indication of what shop bought them or when. Processing other credits for returns will take priority over these "mystery parts" so keep your return parts out of that "black hole" by providing the parts department with the information it needs to process your credit more quickly. Some shops make a copy of the invoice to go back with parts returned - or use a simple 2-part form to list the purchase order number and the parts being returned. Getting the parts driver to sign the form when they pick up the returns isn't a bad idea.

Track returns in-house

Keep a copy of the parts return form, or other paperwork you sent back with the parts, to check against your billing statement to make sure your credits appear.

"The value of deep discounts should be considered in relationship to the level of service the wholesaler will provide," Gerry Rozeboom, parts director from Berger Chevrolet in Grand Rapids, Mich., said. "When the shop has a vehicle stopped in the middle of repair because it needs a part, what is the cost of waiting for a day or two for a special order to arrive? The cost of the downtime can be calculated, and when the 'downtime meter' is running, are you satisfied that your vendor is doing all they can to get the part you need, or is that too costly a service to provide (based on the discount they're offering)?"

Have you ever thought about what it might take to become a parts department's best customer? Think about how that might benefit you: This type of status can result in referrals of business, better overall service, better response to special requests in those "crunch times," and improved discounts or payment policies.

So what do dealership parts departments look for when they think about who their best shop customers are?

1. Increase your volume.

No surprise here: The more parts you buy, the more valued your account. But being the biggest buyer isn't always as valuable as being a "growing" buyer. One parts manager, for example, said one mid-sized shop customer approached him with a unique plan: The shop asked for a better discount to help fund a very specific marketing plan. In exchange for the added discount, the shop owner guaranteed his parts purchases would increase by a set percentage over the following four, eight and 12 months - or else he would lose the discount and pay a cash penalty equal to half of the added discount he received over that period. "I was impressed, because he wasn't just hammering on me for a discount," the parts manager said. "He showed how he was going to earn it, and was willing to share some of the risk if he didn't increase his parts purchases."

Refer business

A west coast shop owner who knew his shop would never be a dealer's biggest customer also found a unique way to become one of that dealer's best customers. He "increased his volume" by pledging that within six months he'd get at least three other shops in the area to start buying from that dealer - improving the dealership's parts sales and earning himself a discount generally reserved for much larger shops.

2. Pay on time, all the time

Smaller and mid-sized shops may be happy to learn that a survey of more than 60 parts managers nationwide found that prompt payment is only slightly less important than sales volume when they consider who their best shop customers are.

"The biggest thing to me is who pays their bills within the agreed upon time," said David Badiner, parts manager at DeNooyer Jaguar in Illinois. "It doesn't matter how big you are or how small you are. Payment history is right up there at the top."

3. Reduce your returns.

While sales volume and payment history share the top spot, the percentage of parts a shop returns wasn't far behind in terms of a parts manager's ranking of customers. More than 95 percent of the parts managers surveyed say they track the percentage of parts a shop returns. And many said it has impacted their decisions about the value of a shop's business.

"One group of shops came to me asking for another 2 percent discount," one Illinois Dodge parts manager said. "I told them that if they kept their return rate down to a certain percentage - which was much higher than the average return rate - and kept their account current, I'd give them a 2 percent rebate at the end of the month. They ran away from that program. They didn't even want to hear it. But I think it's a very sensible program for a guy looking for more discount."

Other parts mangers complained about shops that "order defensively," ordering parts they probably won't use but want to have on hand "just in case."

"We know when a shop is doing that because they're ordering small, inside parts that they wouldn't even know are necessary unless they've torn the vehicle down," said a San Diego parts manager. "But these orders are coming right off their initial estimates."

 

 

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