Automotive Consultants Group Inc.
  "Smart Parts"
E-Newsletter 

December 2010
Newsletter
"Are You Ready For 2011?"
     
                            "Smart Parts"  with Dave Piecuch, ACG Inc. 
Issue 6-December
-2010 

Hello "Smart Parts" Readers! 

    

  Here we are....December 2010! Our last "Blast" before moving on to another year and our last month to meet all those sales and gross projections we made for 2010. It's also a time to gather up all that data generated in 2010 and prepare our projections for another year ahead. Preparing for the year ahead will be our theme for this month's "Smart Parts" E-Newsletter.

 

  In this issue, we will be focusing on where some of our opportunities are in looking forward to achieving our goals, or as we say at ACG, "How To Achieve Predictable Results". It's not just analyzing the reports or results from the past, it's what we DO with the information to maximize all areas of opportunity that will make the difference in moving forward.

  

  Don't forget to take advantage of our FREE "Take-Aways" each month. If you have just joined our "Smart Parts" Team and haven't received your FREE "Take Aways", simply visit our website at SMARTPARTSEZINE to request this month's as well as past issues. Just enter "Past Issues" in the comment box. Remember, sign up is FREE, so don't miss your opportunity to access these helpful tools that can increase your Parts Department's profitability and performance!

 

   
Sincerely,
 
Dave Piecuch
Vice-President
Automotive Consultants Group Inc.
 
IN THIS ISSUE
"Smart Parts" Readers Welcome
"Smart Parts" Tip Of The Month - "A Little Gross Can Go A Long Way!"
"Ask Dave"

"Smart Parts" Tip Of The Month

    Are you ready for 2011?...Are you "hoping" that this coming year will be better than this past year?...or, are you taking the proper steps in "Achieving Predictable Results in 2011"?
    
    As an avid "Smart Parts" Reader, I KNOW that you are looking for ways to improve EVERY year! This month we are going to focus on Parts Gross Profit and how we can improve on the Retained Gross Percentage. Believe it or not, "A Little Gross Can Go A LONG Way"! 
 
    I know for most of us, we already know our retail retained gross percentages as well as the latest NADA guidelines, but I want to take it a step further. Most Parts Managers don't "manage" their gross profit percentages as well as they should. If you think about it, automotive parts gross profit has one of the lowest retained gross profit margins in the retail market today! If the latest guidelines indicate that the retail parts gross profit margin should be at least 42% - 45%, then why, in most cases don't we achieve at LEAST that?
 
    Managing the retail parts gross margin is actually the easiest profit margin to manage in the whole dealership if done wisely and ethically. This means "managing" your parts pricing matrix in the right cost ranges AND on the right parts more frequently to remain competitive. 
 
  For example, if I have a non-competitive part that costs $10.00 and the "suggested retail" price is $16.70, I would retain a 40% gross profit on that part, BUT if I retailed that same part for $18.30, which is still in the same price range, I would retain 45% gross profit! In some cases, matrix pricing could even achieve higher gross profit margins which allows us to lower gross margins on competitive parts which will increase overall parts sales. 
 
  The first step is to set a realistic goal on your retail parts retained gross profit margin that can be managed by the retail parts matrix on a monthly basis. An increase of just 10% in specific parts cost ranges will increase the overall retail parts retained gross profit by 5%!
 
   ACG "Smart Parts" can help you on your way to a higher retained parts gross percentage with this months FREE "Take-Away". Our "Lost Parts Gross Calculator" will allow you to see just how a little gross percentage can TREMENDOUSLY impact overall parts gross profits annually.
 
 This calculator will also illustrate just how a little increase, most times less than $5.00 in Parts Sales on Repair Orders for example which could multiply into tens of thousands or more in additional dealer gross profits annually!
            
   So!....Get the PROFITS your dealer DESERVES!  with our December FREE "Take-Away"! Our ACG Smart Parts "Lost Parts Gross Calculator" is available by signing up to our SmartPartsEzine today. Already a member?....visit our website at smartpartsmembers for your FREE copy! 
 
 
 
 

"Ask Dave"

   Kevin Rutherford of Steve Marshall Ford in Nanaimo, BC, Canada Asks: 

  "Dave, can you give me an easy definition of Parts Days Supply? It seems that there should be a simple way of defining this function and most importantly, how to manage it."
 
   Actually, there is Kevin and Thanks for your question. The TRUE definition of Parts Days Supply is:
"The number of days it would take to to sell out your current inventory or part over a specific sales period." 
  Now, I know that doesn't really answer your question just yet, but I wanted to get the proper definition out first. Let's get to the real answer which is often confused. The best way to illustrate this is with a few examples over a twelve month sales period as follows on a specific part number;

1.)  6 total sales per year = an average of (1) sale every (60) days = Minimum 
      Days Supply of (60) days.

2.)  12 total sales per year = an average of (1) sale every (30) days = Minimum 
       Days Supply of (30) days.

3.)  24 total sales per year = an average of (1) sale every (15) days = Minimum 
       Days Supply of (15) days.

    "Best Stocking Levels" and "Best Reorder Points" are calculated by the total annual sales divided by the number of sales days and lead times to refill stock. High Days Supply is based on a percentage Low Days Supply, often a percentage of 50% - 150% of Low Days Supply.   

  Fast moving parts are the most suspect to over-stocking AND under-stocking inventory. Let's say you have an oil filter that sells over 2,000 times a year. That's an average of approximately (6) oil filters per sales day. After I calculate my "lead times" to refill stock of  maybe 2 - 3 days, or maybe even more if I'm on a Weekly Stock Order, I may find that I need at least 7 - 14 days supply between Stock Orders, based on High Days Supply calculations. This would mean that I should stock at least (42) of these oil filters, which would be the "Best Stocking Level". The "Best Reorder Point" will be calculated on each Stock Order and filled to the High Days Supply. This is why it is best to utilize "Source Ranking by Piece Sales" in your DMS system.  Parts will have the correct Low and High Days Supply already determined correctly each month by total sales and frequency in each separate Parts Source.

       
 
Thanks for your question, Kevin and Thanks for choosing "Smart Parts"!...Don't forget to send in YOUR question in to: Ask Dave!  at www.smartpartstraining.com  for a chance to win YOUR FREE 60 Minute webinar with Dave!

Got "Service" Absorption? 

 
For more information on ways YOU can increase YOUR "Service Absorption"....visit our website at: www.smartservicetraining.com 
 
and see how ACG can help you make 
 
"This Year Your BEST Year Ever!"