 "Smart Parts" |
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Issue
9-March 2011
"Smart Parts" with Dave Piecuch, ACG Inc.
"The Right Service Menu at the Right Price"
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Hello "Smart Parts" Readers!
Rolling right along in 2011, we are now approaching the end of the first quarter of your "Best Year Ever!" Spring is also in the air, which means most vehicle owners are focusing a little more on maintenance than any other time in the year.
In this issue, we will be focusing on the Parts Department's role in pricing our competitive maintenance packages. We will also look how we can "simplify" these packages and still retain a respectable gross profit margin. Today's vehicle owners are far more educated on their maintenance requirements than in the past. With that said, we not only have to be competitive, we need our staff to be well informed, well trained and consistent on their presentation skills.
As always, 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.
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"Smart Parts" Tip Of The Month | |
One of the most basic, but most difficult pricing issues we deal with in our Service and Parts Departments is "Service Menu Pricing". There are so many things to consider in developing the "Right Service Menu at the Right Price". Items such as; manufacturers recommendations, local recommendations, dealer recommendations, numerous makes & models, competition, area demographics, etc. make it a difficult assignment for most Service and Parts Managers. It really isn't so surprising that most dealers don't update their "Service Menus" as often as they should or even have a consistent "Service Menu" pricing policy.
One of the ways to simplify the parts pricing end of the Service Menu dilema is to utilize "Weighted Parts Price Averaging". In other words, our parts pricing on certain competitve parts in the service menu package would be sold at the same price. Many of you already use this process for oil filters, but what about items such as; air filters, cabin filters, brake pads, belts, etc?
Price Averaging is basically taking your top 5 - 10 part numbers in a group, such as air filters. I would then list them in order, most popular on down to least popular. First, I would multiply the number of times sold annually by the unit price which would give me my total sales annually at cost. I would repeat this process with all remaining part nembers on my list. Lastly, I would add up ALL the sales at cost annually and divide that by the total piece sales annually for all the part numbers. This would give me my AVERAGE unit cost, which I would then multiply by my desired "mark up" rate, which would then give me my ONE retail price for ALL air filters. Even though the gross profit on the lesser sold air filters would be less than desired, the increased gross on the most popular air filters would more than make up the difference. This would leave us with the overall "desired" gross profit on these air filters that we would expect.
This month's FREE "Take-Away" will actually take all the work out of it for you with our ACG "Smart Parts" Weighted Price Averaging Calculator! The calculator will allow you to be more consistent in menu pricing as well as maintaining your desired gross profit. In addition, you will able to calculate your best price on a timely basis as prices change from the manufacturer.
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"Ask Dave" | |
Carlos Hageleit of Pan Pacific Nissan in Richmond, BC, Canada Asks:
"How can I reduce my "Out of Stock" situations,even though my "Sales From Stock" Ratio is over 80%?!...
First of all, Carlos...That's a GREAT job on "First Time Off Shelf Fill Rate"! Now, you have to get the quantities, or "Days Supply" corrected, which is not a bad problem to have! Most Parts Managers are trying to MOVE inventory and you can't seem to keep it on the shelf! In your case, Carlos, your Gross and True Turns are probably too high! In dealer terms, it would be like trying to sell (300) cars a month with a vehicle inventory of (150) cars. As with the new and used car inventory, the parts department should also carry approximately (30-45) days supply of parts.
Based on the terminology you used, your DMS system doesn't track low and high days as in other systems. In your DMS system, you have to add "additional days" of stock to carry you through, but before that, you would have to split up your inventory into separate sources by piece sales and then add your "additional days" accordingly. Usually a minumum of 4 - 6 additional sources would be required. You can either build these separate sources and set ups in-house by running a customized report , or you can contact your DMS vendor for set up information.
Thanks for your question, Carlos and Thanks for choosing "Smart Parts"!...Don't forget to send in YOUR question in to: Ask Dave! for a chance to win YOUR FREE 60 Minute webinar with Dave! |
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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!"
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