Thursday, January 9, 2014

Hey OEM…How About A Hand For The Parts Manager?

It’s not easy being a Parts Manager (PM). Anyone who wants to appreciate this job needs to know what it takes to be one. Just Google “Parts Manager Job Description”. Make sure you’re sitting down when you read it, because a PM needs a skill set like a Swiss Army knife: inventory management, people management, staff training, data analysis, sales, finance, advertising, accounting, knowledge of federal/state/local regulations and, of course, how to operate a forklift. Quite a list, right? Yet, one very important ability needs to be added: strategic thinking.

Aside from being able to improvise like MacGyver, the PM is a critical player who holds the key to the dealership’s success. It’s no secret that parts and service puts the black ink on the dealership’s financial statement. The PM is also key to the OEM’s part sales growth—and some PMs have found a way to do this better than others. In order for OEMs to grow their part sales, they need to help their “man on the inside”, the Parts Manager, learn strategic planning.

The first step toward helping the PM do a better job is to better understand his/her job. Earlier this year, Carlisle conducted a study with nine OEMs to learn more about the PMs in their dealer networks – who they are, what they do, and how they do it. Here’s what we learned:

Who is the typical parts manager?

Typically, a PM is a:
  • Male: Not many women (Only 50 of 1200+ responses)
  • 40 yrs or older: Only 15% were younger than 40
  • Has a high school diploma (~33%) or some college education(~50%)
  • Has over 30 years experience in motor vehicle business and almost half of it at their current dealership
So, what should this mean to an OEM?
  • Most PMs have risen through the ranks, starting as a counterperson, and their comfort zone is likely to be day-to-day operations. Also, as most have been in their line of work for a long time, they probably have a mindset of “I’ve seen it all” and have a set way of doing things.
  • However, all is not lost for an OEM. There are ways they can leverage the wealth of experience that a PM has and encourage them to think about “managing” their parts department operations rather than doing the work themselves.
  • For instance, the OEM’s field force can collaborate with the PM and Dealer Principle to build a simple and actionable annual business plan for the parts department, or the total fixed operations department, that would include:
    • Review of the competition
    • Setting of sales objectives by channel
    • Determining key growth initiatives
    • Determining staffing, inventory and other assets to achieve objectives
    • Quarterly progress reviews
  • For many OEMs, doing this for every dealer may be too intensive, but this can be done for the largest or poorest performing dealers.
What do parts managers do?

Carlisle’s research found that most PMs work over 50 hours per week, with half of that allocated to inventory management and sales. However, PMs at dealerships with higher parts sales spent more time on strategic planning and less time on selling.

So, what should this mean to an OEM?
  • To grow dealer (and OEM) part sales, PMs need to strategize, and think of ways to expand the business. One of the ways OEMs can help is to create incentives or reward parts managers with bonuses when they implement successful selling strategies.
  • In order for PMs to free up more time for strategic activities, they need to ensure that the parts department is staffed with the right set of resources, with the skills to handle their day-to-day responsibilities. OEMs can play a role in this by providing training to the PMs in personnel management, which would include interviewing, training, and developing their parts department personnel.
How do parts managers get compensated?

Most dealers, and typically large dealers, treat the parts department as an independent profit center. As a result, the PMs’ compensation is tied to the profitability of the parts department. Smaller dealerships often consider the combined profits of parts and service departments.

So, what should this mean to an OEM?
  • PMs are less likely to sell the parts that have lower profit margins, such as accessories or wholesale parts.
  • To control costs, PMs may cut down on personnel and man the counter themselves. Instead, they should allocate to others the hands-on jobs and use their time to strategize how to increase business.
  • OEMs can tackle these issues with training programs, by using the OEM’s field force to educate dealers on the benefits of the wholesale business, and by focusing the PMs’ attention on planning.
How do PMs run their parts business and what tools do they mostly use?

  • They typically use ads, promotions, and web presence to market to wholesale customers.
  • Most parts departments are open on Saturdays, except the ones at the smallest dealers.
  • Most parts managers offer multiple deliveries per day to wholesale customers.
However, top performing parts managers do a few other things differently. They:
  • Use web-based ordering tools for both wholesale and retail customers
  • Employ outside part sales reps to grow the business
  • Are more likely to have loyalty programs in place for wholesale customers
So, what should this mean to an OEM?
  • There is wealth of knowledge available amongst the dealer body on how to successfully use a variety of tools to grow the business. The OEMs can help disseminate this knowledge to their dealers through numerous media, such as educational seminars, online programs, newsletters, etc.
  • While the most successful PMs will use all the available tools to grow their sales, PMs at smaller dealers are typically resource constrained. OEMs can assist these dealers by identifying and developing solutions that are simple to use and do not require a significant time investment. For example, an OEM could provide a web platform for their parts department or provide parts marketing assistance.
Bottom Line: Parts Managers have a full plate. They tend to get bogged down with the “doing” of their job instead of spending more of their time thinking of ways to do it better. The OEMs need to step in and come with solutions that will get the PM strategically engaged with what is really important – growing your business.

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