Prevent Parts Problems from Derailing Your Repair Shop
Are you having trouble getting the right parts? Are your orders getting mixed up? Markups not making you enough? Parts problems can cause major time delays for your diesel repair shop, costing you money. But there are things you can do to help keep problems like these from costing you too much.
In an earlier post in the series, we talked about work delays in general, and how they can impact your shop, but this post focuses in more specifically on parts problems and the way they cost you both time and money. And, more importantly, how you can fix them. In fact, we've written another blog post about how you can save money by carefully selecting your parts vendors. It can have a bigger impact than you might think.
The occasional parts mix-up is inevitable—you thought you had something inventoried but you don’t, or your local parts store is out of stock. It's when it becomes a frequent issue that you can really see it cutting into your profits. Developing systems for ordering, stocking, and marking up parts can do wonders in helping prevent these issues. There's no need to just accept it as a part of the life of your diesel repair shop. Take action to reclaim those lost profits!
The below infographic helps lay out some key points:
Setting a Goal
A lot of separate pieces could play into the way parts and parts problems affect your bottom line overall, so you want to be sure to set a clear goal that addresses the way you see them impacting your shop specifically. The example goal below shows how you might incorporate several of the issues into one plan:
We want to increase profits by X% in the next year by decreasing time spent looking for parts, wasted inventory, too low of markups, and mixed up orders. We'll address this by implementing systems related to how we find/order parts and how markups are figured.
Deciding on Responsibility
The Shop Owner
As we mention in other posts in this series, part of your main job as the shop owner is to set the long term plans in motion and oversee how they unfold. It's no different here. You need to make solving these parts problems a priority and make sure that the proper systems get implemented to ensure success. Then you need to oversee how they work in the shop. Is your parts manager still having difficulties? Then you might need to edit the systems. Are you seeing drastic improvements? In that case, it's probably fine to continue to monitor the existing systems and see if they continue to work for your shop as it grows.
Your Parts Manager
Your parts manager will play a large role in ensuring the success of this goal. They are in the trenches, working with the technicians and the parts to make sure everyone has what they need to get the jobs done. Ideally, they should advise on the systems you want to implement, to make sure that they're what your shop actually needs. They can also help monitor inventory to cut down on excessive ordering that loses your shop money.
They should also be working with vendors to find the best suppliers for specific parts, as well as any special pricing they might be able to get for frequent or large orders. A lot of suppliers will work with you on this. (Check out our Repair Shop Value Program to see some of the ways HHP can work with you!)
Measuring Your Systems
As you decide how you plan to measure your success in achieving your goal, you should evaluate which parts problems are most impacting your shop. Those should be the ones you focus the most energy on. How much have they cost you, in time, money, or both? Decide how you want to measure going forward—number of errors? Dollars lost? Time wasted? Metrics like these can really show you how your systems are working going forward.
Another thing you may want to measure is your gross profit margin on parts. This number shows you how much money you're actually making on parts. Remember that this is not the same as your parts markup, so it's important to have a good handle on both.
Creating Your Systems
As with any new goal you're trying to achieve in your shop, your success comes down to the systems you implement. Bad systems will only make the problem worse, but the right processes can set your shop on the path for increased profitability. Some systems to think about for this particular goal might be:
- Parts Markups: If your parts markups are too low, you won't end up making any money on the parts you sell to customers. Evaluate yours, and make sure that they're actually covering the costs of purchasing, receiving, and installing, preferably with some left over for the shop. Remember that you don't have to use the same markups for all parts. Fullbay put together an article that gives you an example of how you might go about pricing your parts.
So, to avoid confusion on parts pricing, make sure you have some standards in place that ensure you're actually making money.
- Finding Parts: Stop wasting time sending people out for parts. Instead, create a system that details where you normally get each part from, based on price or availability. That way, no one has to go hunting all over town, nor do they have to pay too much for parts. You can order them from whoever will save you the most money or get the parts to you in the quickest amount of time, depending on the urgency of the job. Make sure that this is accessible and understood by whomever orders your parts.
- Parts Inventoried: Buying in bulk only makes sense if you know you're going to use those parts. Otherwise they just sit in your storeroom, costing you money. So it makes sense to make a process for which parts should be kept in inventory, because they are used so frequently, and which should be purchased on an as-needed basis. This will both help ensure you always have those commonly used parts on hand, and keep you from ordering things you probably don't need. The types of parts will vary from shop to shop, so it's important to do an evaluation of your inventory to decide what these standards should be.
- Shop Management Software: You might consider purchasing shop management software if you don't already have it. This can help you regulate and monitor your parts ordering and help keep everyone in the shop on the same page. If you do decide to go this route, you'll have to set up a separate set of systems on how to implement and use the software in your shop to make sure you're getting the maximum return for your investment.
- Vendor Selection: You want to make sure you're choosing the right vendors when you order parts. Your parts manager should be familiar with the vendors and what they offer. They should be communicating with them to make sure your shop is getting the best prices, including any possible discounts. Also make sure that you're taking shipping and pricing into account. It's possible that someone might have a lower price, but you might end up losing more money on repair delays waiting for the part to arrive. Weigh out the costs of each before deciding on which vendors to use.
It might seem obvious, but don't continue to use suppliers that frequently mess up your orders. That is just throwing time and money down the drain. Instead, work with those who ensure you're getting the right parts, on time. (Call HHP at 844-215-3406 to talk with our certified technicians if you have any diesel engine parts questions. We want to make sure you're getting the parts you need!)
Reviewing Your Systems
Once you have things in place, you want to make sure everything is running as smoothly as you hoped, and that you're well on your way to stopping losing money because of parts problems. Monitoring and reviewing your systems will help with this. Remember those measurement metrics you decided on? This is where they come into play. Use them to see how your systems are working and whether or not any changes need to be made. Don't be afraid of revisions—it's all part of the process!
You don't have to suffer because of issues with your parts any more. Take steps to improve your profits and ease the stress that comes with part problems!
One way you can help fix some of your parts problems is by checking out our Repair Shop Value Program! Join for some great benefits to your shop!