Turn Your Parts Department
into a Profit Center
Dealers Deserve a Return on Investment
Presented by:
Rod Davis
• Pricing Strategies for Increased
Profit Margins
• Customer Driven Processes for
Increased Sales
• Inventory Controls
Course Objectives
Copyright 2014 RVDealerPRO LLC ©
Mark-Up & Profit Margins
Markup Versus Margin
a) 67% Mark-up is a 40% Gross Profit Margin
• Based on industry standards, the guide for profit
margin is:
40% (Retail)
35% (All Accounts)
Copyright 2014 RVDealerPRO LLC ©
Pricing Strategies
Design Pricing Matrix
a) Manufacturer Margin 50%
b) Supplier Margin 45%
c) Accessory Margin 35%
Identify Opportunities for Profit
Improvement
Copyright 2014 RVDealerPRO LLC ©
Sample Variable Pricing
Matrix (Manufacture)
$0.00 to $0.99 400%
$1.00 to $2.99 350%
$3.00 to $5.99 300%
$6.00 to $9.99 255%
$10.00 to $24.99 210%
$25.00 to $99.99 155%
$100.00 to $199.99 120%
$200.00 to $9,999,999.00 100%
Cost Plus Matrix (Manufacture)
Copyright 2014 RVDealerPRO LLC ©
Sample Variable Pricing
Matrix (Supplier)
$0.00 to $1.99 300%
$2.00 to $4.99 260%
$5.00 to $9.99 200%
$10.00 to $19.99 155%
$20.00 to $24.99 125%
$25.00 to $29.99 110%
$30.00 to $49.99 100%
$50.00 to $99.99 85%
$100.00 to $199.99 72%
$200.00 to $9,999,999.00 67%
Cost Plus Matrix (Supplier)
Copyright 2014 RVDealerPRO LLC ©
Sample Variable Pricing
Matrix (Accessory)
$0.00 to $1.99 200%
$2.00 to $4.99 170%
$5.00 to $9.99 120%
$10.00 to $19.99 100%
$20.00 to $24.99 90%
$25.00 to $29.99 85%
$30.00 to $49.99 80%
$50.00 to $99.99 75%
$100.00 to $199.99 70%
$200.00 to $9,999,999.00 67%
Cost Plus Matrix (Accessory)
Copyright 2014 RVDealerPRO LLC ©
Profit Margins are Important?
• Profit Margins are one of the few things you
should have total control over
• The management teams responsibility is to
reach margins that produce profits
• Install a Parts Pricing Matrix
• Eliminate Unauthorized Discounts
• Offer Choices
Gross Profit is a Matter of Discipline
Copyright 2014 RVDealerPRO LLC ©
Impact of Un-Authorized
Discounts Labor
Sale Amount $100.00
Cost of Sale -$30.00 30%
Gross Profit $70.00 70%
Expenses:
Personnel $31.50 45%
Semi Fixed $13.30 19%
Fixed $11.20 16%
Total Expenses $56.00
NET Profit $14.00 20%
Discount -$15.00 15%
Net after Discount -$1.00
Parts
$100.00
-$70.00 70% of Sales
$30.00 30% of Sales
$15.00 50% of Gross
$4.80 16% of Gross
$4.20 14% of Gross
$24.00
$6.00 20% of Gross
-$15.00 15% of Sales
-$9.00
Copyright 2014 RVDealerPRO LLC ©
Customer Driven Processes for
Increased Sales
• Parts Walk for all New and Used Sales
• Those Dealers that perform a good parts
walk during the delivery and after, see an
additional $400.00 in sales
Copyright 2014 RVDealerPRO LLC ©
Offer Choices (Why)
• Why Offer Choices?
• Customers want it
• It educates the customer
• It increases profit margins
• It increases closing ratio
Copyright 2014 RVDealerPRO LLC ©
Offer Choices
• What to Offer Choices on:
• Sewer hoses
• Power Adaptors
• Awnings
• How to Offer Choices:
• Show them the accessories and the different
options
Copyright 2014 RVDealerPRO LLC ©
Offer Choices
• Offer Choices for Fast Moving Parts
(Good – Better – Best)
• Good – Competitive Profit Margins
• Better – Good Profit Margins
• Best – Very Good Profit Margins
• Offer a minimum of two choices
• Offer no more than three choices
Copyright 2014 RVDealerPRO LLC ©
Customer Driven Processes for
Increased Sales
• Maintenance Menus for Service Advisors • Reliability – Customers want to know about
maintenance
• Increases Sales
• Increases Gross
• Increases Customer Satisfaction
Copyright 2014 RVDealerPRO LLC ©
Customer Driven Processes for
Increased Sales
• Technician Courtesy Inspections for all RVs • Safety – it gives the customer piece of mind
• Increases Sales
• Increases Gross
• Increases Customer Satisfaction
• Parts personnel Have Customers come in
to see products IE: 5th wheel hitch, brake
controller
Copyright 2014 RVDealerPRO LLC ©
1. Inspection of Step Assembly for Operation and Damage
2. Inspection of Wiper Blades
3. Inspection of Awning Hardware
4. Inspection Exterior Lights
5. Inspection of Tires for Proper Wear
6. Inspection of Smoke and LP Detector for Proper Operation
7. Inspection of CO2 Detector for Proper Operation
8. Inspection of Fire Extinguisher for Service
9. Inspect Coach A/C Filters (if accessible) .
10. Inspection of Roof for Sealants and Damage
11. Inspection of Roof Antennas
12. Inspection of Roof Vents
13. Inspection of Engine Air Filter (if accessible)
14. Inspect Radiator and Heater Hoses
15. Inspect Engine Drive Belts
16. Inspect Engine and Transmission for Visible Leaks
17. Inspection of Batteries and Cables for Corrosion and Servicing
18. Inspection of Brake Fluid Condition and Leaks
19. Inspect Generator for Leaks and Servicing
20. Inspection of Leaf Springs and Suspension
21. Inspection of Coach Leveling/Stabilization System for Leaks and Damage
22. Inspection of Slide-Outs for Leaks, Seals and Alignment
23. Inspection of Waste Water and Fresh Water Systems for Visible Leaks
24. Inspection of Shocks for Leakage and Condition
25. Visually Inspect LP Tanks for Damage and Date
26. Inspection of Brake Pads/Shoes (if visible)
27. Inspection of Trailer Coupler
Vin #: (Last 8)
ABC RV 27-Point Coach Inspection
Customer Name: Mileage:
The following visual inspection is performed at NO CHARGE
OK NEEDS ATTENTION
Copyright 2014 RVDealerPRO LLC ©
Inventory Controls
• Special Order Parts (POO Sheet) • All personnel are responsible for ordered parts
• The #1 reason for obsolescence
• Controlled by management
• All personnel are responsible for controlling SOP
• Retail Customer must Pre-pay
• Work In Process Report (WIP) • Meet weekly to cover reasons
• Have a plan for each
Copyright 2014 RVDealerPRO LLC ©
Special Order Parts
(POO Sheet)
Copyright 2014 RVDealerPRO LLC ©
Date
Ordered
RO
NumberOwners Name YR Make Parts Ordered ETA Received
Appt Date &
Time
15-Oct 123456 Bob Smith 2004 22-Oct 22-Oct 10/27/14 8:00 AM
Parts On Order (POO Sheet)
Inventory Controls
Annual versus Continuous (Perpetual)
Inventory
• Annual Inventory – An inventory done once a
year
• Continuous (Perpetual) Inventory – an
inventory that is done perpetually (Daily –
Weekly – Monthly)
• 10% of your inventory per month
Copyright 2014 RVDealerPRO LLC ©
Inventory Controls
• Parts (consumables) under control of the
Parts department, not Service – bill to R.O.
• Plumbing fittings
• Sealers
• Parts billed to a repair order before they
leave the parts department – No Exception!
Copyright 2014 RVDealerPRO LLC ©
Inventory Controls
• Turning Inventory (What)
• Definition: How many times the inventory value is
sold per year
• Guide: The inventory should turn 5 times per year
• Stocking levels for maximum inventory turns
Should be: 3 Months supply
• Parts Inventory in DMS versus the
Accounting Inventory from the General
Ledger
• This is what Inventory is about Copyright 2014 RVDealerPRO LLC ©
Inventory Controls
• Manage the DMS to track Obsolescence
• If history shows no sales in 6 Months
• Who is empowered to order parts?
• Limit the number: Advisors only for Work Orders
• Find your best aftermarket (accessory) vendor
• Focus on accessories
• Incentivize Sales staff
Copyright 2014 RVDealerPRO LLC ©
27
• This is the minimum or maximum
days of supply a manager would
allow for a part in a particular
source.
Low/High Days Supply
28
• When a normal stocking part goes below the minimum days of supply, the system will suggest an order up to the maximum days supply of a particular part number.
• Note: Days supply may vary pending source stock and movement.
Low/High Days Supply