Discover Huge Hidden Profit in Your Parts Department

1. Discover Huge Hidden Profit in Your Parts Department

2. Dealership Parts Industry Statistics • Total parts inventory: $5 billion • Total parts sales: $44 billion • Total inventory turn per year: 9 times • Total gross profit: $13 billion • Average parts gross profit:28.6% Sources: Mike Nicholes Capital Management; NADA Industry Analyst Division: PartsEdge Incorporated

3. Dealership Parts Industry Statistics • Average gross profit per dealership: $730,000 Sources: Mike Nicholes Capital Management; NADA Industry Analyst Division: PartsEdge Incorporated

4. Dealership Parts Industry Statistics • Total obsolescence (10% average): $ ½ billion • Total excess (20% average): $1 billion • Total obsolescence plus excess: $1½ billion Sources: Mike Nicholes Capital Management; NADA Industry Analyst Division;:PartsEdge Incorporated

5. Dealership Parts Industry Statistics • Average inventory: $275,370 • Average total obsolescence: $27,500 • Average total excess: $55,000 • Average total obsolescence plus excess per dealer: $82,611 Sources: Mike Nicholes Capital Management; NADA Industry Analyst Division;:PartsEdge Incorporated

6. AVERAGE PARTS GROSS PROFIT 28.6%

7. Dealership Financial Trends

8. Dealership Financial Trends - Revenue

9. The Real Deal about Your Parts Department Cash cow Consistent growth Recession proof Highly profitable

10. AVERAGE PARTS GROSS PROFIT: 28.6%

11. Total Idle Inventory $1.5 billion

12. Opportunity Cost – Simply Put In terms of parts: “Money is a finite resource so it can NOT be in two places at one time. When your money is tied up in one place, it can’t be invested in another.”

13. The Parts Manager: An Asset Manager

14. High Stakes Opportunity Costs Big Businesses take lost Opportunity Costs very seriously • Wal-Mart: Model for Inventory Management Efficiency • Grocery Stores: Battle for Every Inch of Shelf Space • High End Retailers: Nordstrom and Macy’s • Priceline: You can’t go back in time

15. The model for inventory management efficiency • Uses data infrastructure to increase the supply of best-selling items • Uses computer forecasting to predict the exact quantities of each item to be delivered, based on inventories in each store • Sell its whole inventory roughly 12 times a year (on average)

16. Grocery Stores • What’s more perishable than fruits and vegetables? • Every second that passes by is a lost opportunity

17. Priceline.com • Sells available travel related items for last-minute deals • Any amount is better than an empty room

18. Nordstrom • In-demand items receive prominence in the store • Non-selling items are quickly discounted to make room for hot-sellers • Nordstrom opened Nordstrom Rack stores to move heavily-discounted slow moving fashions

19. Bringing it Home: Opportunity Costs Examples in the dealership: Used Cars and Service Department

20. Opportunity Costs in the Parts Department

21. Lost Service Department Opportunities • You don’t have the part a customer needs? Customer goes elsewhere 2) Your hours aren’t convenient for the customer? Customer goes elsewhere

22. Identifying Opportunity Costs • How you can calculate your own profits by eliminating Opportunity Costs in your parts department: • What’s the cost of having the wrong parts on the shelf?

23. Opportunity Cost of ‘Wrong’ Parts What are ‘wrong’ parts? • Obsolete/IdleParts Inventory • ExcessInventory

24. Obsolescence Definitions • 9 Months Idle = 85% Chance of NEVERSelling* • 12 Months Idle = 95% Chance of NEVER Selling.* Holding costs become more than the profit on a part IF you sell it. • * Taken from Mike Nicholes “Professional Inventory Management” (2005)

25. ‘Excess’ Defined . . . Too much of a good thing

26. What Does This Mean… Wrong Stock Lost Sales Reduced Profits

27. DON’T FAIL TO PLAN • Look at factory incentives • Review your investment regularly • Consider an advertising budget • Consider aggressive obsolescence reduction methods

28. Dealership Advertising Statistics

29. Dealership Advertising Statistics

30. BLOW ‘EM UP!

31. FLUSH ‘EM

32. MAKE FLOTATION DEVICE

33. Idle Inventory Reduction Methods • Auction services • Donating parts • Throwing parts away • Obsolescence liquidation services

34. RUN THE NUMBERS • Auction Services www.turnyourtrashintotreasure.com • Donating Parts www.turnyourtrashintotreasure.com • Throwing Parts Away www.turnyourtrashintotreasure.com • Obsolescence Liquidation Services www.turnyourtrashintotreasure.com

35. Conclusion: IT DOESN’T PAY

36. TO HOLD IDLE PARTS INVENTORY

37. ESPECIALLY WHEN

38. THERE’S A MARKET FOR IT!

39. Remember Byron!

40. Run The Numbers