Fixed Ops Journal - October 2017 - 14

FIXED OPS JOURNAL

PARTS

continued from Page 12

After he put the Lewis group's parts inventories on a diet, Johnson notes, the Hinesville
dealership has reduced its share of obsolete
parts to 7.5 percent of inventory.

Delivering discounts
Other popular programs that help dealerships unload unwanted parts include Cash
Discovery, offered by CDK Global, and DealerMine Corp., which is distinct from DealerMine CRM, a CDK-owned company.
Like D2DLink and Parts Broker Direct, Cash
Discovery and DealerMine sell parts for half
of their original factory prices, without any
markup.
The services' software identifies potential
deals based on buyers' requests and parts
available from dealers. A transaction occurs
when both parties are satisfied.
The platform collects a
commission, typically 5 to
7 percent of the value of
the sale. Vendors help
dealers complete the sales
and ship the parts.
Sellers are often smaller
dealerships seeking to
purge excess inventory,
DeLucia: Buyers but they are not the largest
users of the systems.
aim to resell
"Our biggest customers
are buyers," says DealerMine CEO Mark
DeLucia. These customers, typically large
dealership groups, are looking for parts they
can resell or use quickly. Often parts wholesalers themselves, these buyers enjoy economies of scale that allow them to use or sell
parts quickly that might gather dust at a smaller store.

Walmart model
Max Gill is parts director of Russell & Smith
Ford in Houston, a major buyer that works
with several discounters, primarily PartsBrokerDirect and Cash Discovery.
Gill notes that the dealership buys $600,000
to $650,000 worth of parts every month, and
sells parts on an equally broad scale.
"Kind of like Walmart, you know?" he says.
"Twenty percent of your parts are typically 80
percent of your sales. We buy only what we
think we can sell."
Demand for parts among larger dealerships
and groups can help a smaller dealership reduce its obsolete inventory by as much as 15 to
35 percent in its first year of participation in an

PAGE 14

OCTOBER 2017

exchange such as DealerMine, DeLucia says.
After that, he says, reductions are smaller over
time as a store's overall inventory shrinks.
Representatives of CDK say some dealerships withdraw from the Cash Discovery program once they dispose of unwanted parts,
but rejoin it as obsolete inventories build up
again.

Cash for clunkers
Burdick Dodge-Chrysler-Jeep-Ram-Fiat at
Driver's Village, a large dealership in Syracuse, N.Y., uses Cash Discovery and DealerMine. Since 2008, the dealership has reduced
the value of its obsolete inventory from
$112,000 to about $10,000 today.
Derek Muller, the dealership's parts manager, says he aims to limit the dealership's share
of obsolete parts in stock to 3 to 4 percent of
total inventory.
Muller says the dealership closely tracks
special orders of parts that aren't fulfilled.
Parts counter employees get small bonuses
for selling aging inventory or special order
parts that have gone unused.
The reduced level of obsolete parts, Muller
says, makes it easier for the dealership to
comply with Fiat Chrysler's Automatic Replenishment Order parts program.
That program generally offers only a 2 percent return allowance for items outside its
recommended stock (see related story, Page
16). Keeping nonstock inventory lean helps
stretch the return allowance and offset value
lost to discounting, Muller says.
"I get cash bonuses for meeting my requirements" under the FCA program, he says. "I
use that allowance to make up for the 50 cents
on the dollar I'm losing on selling my obsolete
stock through DealerMine and CDK."

Stock swap
Two newer programs, North American
Dealer Parts Exchange and Dealership CSI's
Obsolescence Reduction by Inventory Transfer, allow dealers to trade, rather than sell, un-

wanted parts for their full value. NADPE also
offers a discounting platform for parts that
don't get traded.
"The advantage is that you don't have to take
a 50 percent haircut" by selling the parts, says
Shawn Larkin, NADPE's CEO. "If you have
$100 in that starter, and the other guy has $100
in that alternator, you get to swap it dollar for
dollar."
Both parties in a NADPE deal pay shipping
costs for the parts they trade, along with a 5.99
percent commission on the value of the trade
and a program fee of $150 a month.
Randy Buyers, the parts manager at Ontario
Chrysler in Mississauga, Ontario, says NADPE
provides "an opportunity to move parts that
you've had for eight, 12, 16 months ... and to
get their full value."
Buyers cites a recent parts exchange with
another local dealer: "I got rid of $800 worth
of stuff I can't use, and now I have $800 worth
of parts that I'm going to move."
Since he began using NADPE in May, Buyers says he has "gotten rid of more than
$40,000 of worthless stock, painlessly."
The ORbIT program is an outgrowth of
DealershipCSI's parts management consulting business, with access mostly limited to the
parent company's clients.
ORbIT Trades are brokered by request rather than automated. Nonclients can try one exchange for free, and sign up for four exchanges a year for a $295 monthly fee.
NADPE has more than 120 participating
dealers in Canada and about 50 in the United
States. ORbIT serves around 250 U.S. dealers.
Driver's Village's Muller warns that even
getting full value for unwanted parts or driving down the share of obsolete parts in a dealership's inventory doesn't allow a parts department to become complacent.
"Even though I'm selling off stock and my
numbers are good, new parts are coming in
every day." he says. "If you turn your back on
[obsolescence], it'll be right back where it
was." 

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