Home
ANNEXURE

PARTS CHECK-UP

Using this paper, the dealer can help the parts manager to become more profitable. Included are ten step checklist and formulas to help you determine your current performance levels.

10-Step Checklist
 
 
Your Score
1.
Ensure that parts and accessories orders are based on your inventory control system, not guess work. Review the parts order.



2.
Check variations in the book inventory with the parts manager every month.



3.
Check inventory turnaround at the end of each month. The turn should be 3.5 to 4.5 times per year. Have the parts manager make a list of nonmoving part numbers.



4.
Check the ratio of parts sales to labour sales per repair order.



5.
Check the bins containing special order parts once a month. Are parts being hold in excess of 30 days? Are customers notified promptly that parts have arrived



6.
Do you regularly send a copy of your Automated Parts Inventory Sheets to major independent body shops, wholesale accounts, and other dealers?



7.
Are you using matrix pricing on repair orders and counter retail?



8.
To provide gross profit sufficient to cover a pro rata share of parts overhead, parts sold to the service department must be recorded on repair orders. All internal parts sales should be marked up to customer retail.



9.
Personnel expenses should not exceed 50 percent of the month's gross profit. (See chart for percentages representative of several different franchises).



10.
Based on the number of parts personnel, each person can be expected to produce Rs. 40,000 to Rs. 50,000 in sales per month, and each should earn Rs. 8-9,000 in gross profit each month.



 
Parts Department Analysis

Performance Levels

The figures below are averages of successful Group 20 dealership performance levels. An additional column has been provided for you to insert your current figures.
 
Performance
Level Averages
Your
Current Level
Order efficiency
80%
  
Stock order
80%
  
Specially priced parts
15%
  
Special order
5%
  
VOR
Unit down-critical
5%
  
Turn Around P.A.
3.5-4.5 turns/year
 
Stock order allowance as a % of sales
4% minimum
 
Inventory turnover (turn)
 
5-6 times year
(2.2-5 months supply)
 
Inventory profile-sales movement range
0-3 months
4-6 months
7-12 months
 
75% of inventory
23% of inventory
2% of inventory
  
Parts sales per parts employee
NP
  
Parts gross per parts employee
NP
  
Parts-to-labour ratio
80% minimum
 
Pricing policy
Handling charges
0-3 months
Parts gross profit percent sales
  		Retail
Wholesale
8%
NP
0-3 months
NP - Not Provided
 
Expenses

The chart below shows expenses as a percentage of parts department gross profit. Percentages are an average of data provided by successful G-20 dealers for four different franchises.
  Personnel
expenses
As a % of gross		 Semi-fixed
expenses
as a % of
gross 		Fixed expenses
As a % of gross 		Total fixed
overhead
as a % of
gross 		Your score
Maruti
35%
-
39%
72%
  
Hyundai
35%
-
31%
75.5%
  
Daewoo
50%
15%
15%
70%
  
Telco
40%
15%
15%
80%
  
Toyota
26%
20%
29%
75%
  
 
 Profitability

Use these formulas to analyze your profitability:


1. Are you running a profitable parts department?
Rs. ______________________
 (-)  
 Rs. _____________________
 (=)  
 Rs. _____________________
      Total parts gross sale      *Total parts expenses      Parts dept. profit or loss
 
* Part expenses must include a portion of any unallocated/overhead expense that may appear on your statement. Many dealers use 8% as a fair overhead expense allocation for the parts department.


2. What is your operating profit as a percent of sales in the parts department?
Rs. ________________________
 (÷)  
 ______________
 (=)  
 Rs. ________________________________
      Parts operating profit YTD No. of months       Operating profit average per month
 
Rs. ___________________
 (÷)  
 ________________
 (=)  
 Rs. _________________________
      Total parts sale YTD No. of months       Sales average per month
 
Rs. _________________________________
 (÷)  
 Rs. ________________________
 (x) 100 =  
 Rs. _______________________
      Operating profit average per month       Sales average per month       Operating profit as a %

 
3. What supply of parts (number of months) do your typically keep on hand?
Rs. ___________________
 (-)  
 Rs. _____________________
 (=)  
 Rs. _________________________
      Total parts sale YTD       Parts gross Profit YTD       Parts cost of sales YTD
 
Rs. ______________________
 (÷)  
 _______________
 (=)  
 Rs. ____________________________________
      Parts cost of sales YTD No. of months       Parts cost of sales/average per month
 
Rs. ____________________
 (÷)  
 Rs. ___________________________________
 (=)  
 _____________________________
      Total parts inventory       Parts cost of sales/average per month Month's supply of parts of parts
 
4. What is your true inventory turn around?

Rs. ________________________________________
 (÷)  
Rs. _____________________
  (=)  
______________________
      Stock order purchases average per month*
      (*minimum-3 month average) 		      Inventory investment
      average per month 		Number of true turns per
month
 
     ______________________________
 (x)  
  12                 
 (=)  
 _______________________
     Number of true turns per month Annual number of turns
 
YTD - YEAR TO DATE

5. What is your parts sales mix?

Total Parts Sales
 (÷)  
 No. of Months
 (=)  
 Average monthly
YTD Parts Sales
 
A. Customer Sales        Rs. ________________        ________________        Rs. ________________
B. Warranty Sales        Rs. ________________        ________________        Rs. ________________
C. Counter Sales        Rs. ________________        ________________        Rs. ________________
D. Wholesale Sales        Rs. ________________        ________________        Rs. ________________
E. Internal Sales        Rs. ________________        ________________        Rs. ________________
                            
   Total Parts Sales, Average per Month:
 
6. Using the figures your arrived at as above page, calculate the percentage of totalsales.

Rs. _____________________
 (÷)  
Rs. _____________________________
  (x) 100=  
____________________%
      (A) Customer Sales/
      average per month 		      Total Sales/average per month Percent of total sales
 

Rs. _____________________
 (÷)  
Rs. _____________________________
  (x) 100=  
____________________%
      (B) Warranty Sales/
      average per month 		      Total Sales/average per month Percent of total sales
 

Rs. _____________________
 (÷)  
Rs. _____________________________
  (x) 100=  
____________________%
      (C) Counter Sales/
      average per month 		      Total Sales/average per month Percent of total sales
 

Rs. _____________________
 (÷)  
Rs. _____________________________
  (x) 100=  
____________________%
      (D) Whole Sales/
      average per month 		      Total Sales/average per month Percent of total sales
 

Rs. _____________________
 (÷)  
Rs. _____________________________
  (x) 100=  
____________________%
      (E) Internal Sales/
      average per month 		      Total Sales/average per month Percent of total sales