Your parts department plays an important role in generating profits for your diesel repair shop. A typical diesel repair shop should keep the cost of parts at or below 25% of sales. Making adequate profit margins on parts and having the right parts on hand is critical to long-term profitability. Balancing these two components to ensure speedy service and customer satisfaction is the ultimate goal of your parts department. They need to make a fair profit on parts sales, minimize repair cycle time, and give your customers a good reason to keep coming back. This may sound like a big responsibility for your parts department to assume, but their performance plays a key role in the overall profitability of your shop.
A good parts department is worth their weight in gold if they have a thorough understanding of the diesel repair parts market, and use that knowledge to support the needs of the customer service department and repair technicians. The key to developing a successful parts department is to have a long-term strategy for profitability that can be sustained through good management methods.
Here are some good management methods you can implement:
- Utilize a comprehensive, electronic parts management system with a dashboard that provides real-time vendor purchasing history, pricing, and profit per sale metrics, so the parts manager can see how the department’s performance impacts shop profits.
- Research and know part profit numbers by manufacturuer. This will help you make smart, timely purchase decisions.
- Be deliberate about pricing your parts. Determine the margins you need, and back into a parts pricing matrix. Insert that matrix into your parts management system so you can easily access it when you sell a part.
- Consider purchasing aftermarket parts, whenever possible. More profit can be gained from aftermarket parts versus OEM, and the quality and warranty can be just as good, or better.
- Work with your parts vendors to get better discounts. Most suppliers have volume purchase programs that can save you money on the parts you use most.
- Don’t always go for the lowest price if it takes too long to get the part and causes a delay in repair cycle time. The small profit percentage you make won’t offset the cost of a dissatisfied customer.
- Charge for every miscellaneous part that gets used on a repair job. Those small clips and bolts that get thrown in for free can add up to hundreds of dollars by year-end.
- Reduce or eliminate errors in ordering. Ordering the wrong part and arranging returns and replacements increases costs and reduces margins. Train staff to improve accuracy.
- Use your service department to build incremental parts sales. Have your technicians perform a full inspection at each customer visit, highlighting problems and recommending repairs.
- Track your parts inventory turnover rate closely. Keep fast-moving parts well-stocked and minimize slow-moving inventory. Analyze the information over time to identify trends so you can automate the ordering of fast-moving parts, saving you time.
To learn more about how to increase your profits, CLICK HERE to download our FREE White Paper: How to Maximize Your Diesel Repair Shop Profits.