While the last few years were good for service and parts departments due to consumers maintaining and keeping their vehicles, a recovering economy means new cars will soon be all the rage again. Here’s a plan to maximize parts profits in any economic environment.

First, review current inventory and ask these questions:

·         What are your consistent sellers and which parts sit idle?

·         How many times do you turn your inventory per year? Parts over 12 months old without a sale have traditionally been considered obsolete. At six months, parts only have about 35 percent chance of ever selling.

·         How many parts in your system are over six months old?

·         Which parts in your system have never sold? This usually accounts for order errors, unused special orders.

·         What is your yearly parts sales revenue and how much do you stock order from the factory per month?

After you’re reviewed your inventory, get rid of the parts sitting idle so you can refill them with fast-moving stock. There are a number of ways to do this:

·         Manufacturer return programs are an option, though they only address a small portion of inventory and the policies change frequently. Some programs require a holding period of up to 12 months.

·         Auction services are a way to quickly get rid of inventory, though historically they have a very low cash value. This route works if the parts department is selling all inventory at once or is in need of getting parts of the books fast.

·         Donate the parts. This is an option if you’re looking to get rid of parts quickly, but obviously there is little to no cash value to pump back into new parts purchases.

·         Obsolescence liquidation services are perhaps one of the best options. You’re able to sell obsolete parts, however, they usually market these parts at 50 cents on the dollar. While you do have to take a 50 percent loss on these items, they usually sell your parts very quickly and typically move 20-50 percent or more of your obsolete parts inventory.

Once you’ve reviewed the pros and cons of each option, select the best one for your parts surplus based on the speed with which you need to rid yourself of the parts and the price you’re willing to take and move forward. The idea is to get rid of the parts that will bring nothing sitting on your shelf and move them for something, anything—even a tax break—so you can restock with parts that will sell quickly.

Parts over six months old are headed toward on a dead end road. It’s in your best interest to review your current inventory and move those parts headed for obsolescence.

Mark De Lucia is founder and president of DealerMine Corporation. DealerMine provides a web-based service to help dealerships reduce their investment in slow-moving idle parts inventory. For more information visit www.dealermine.com.

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