Making a small parts department into a giant

When Sam Pack purchased Lee Jarmon Ford in 1980, having one of the nation's most successful parts departments wasn't foremost on his mind. It wasn't long, however, before he spotted an opportunity in parts.

“I just saw a niche years ago and began to develop it,” the Carrollton, TX dealer explains.

His was a modest parts department in the dealership back then. Now it's located off-site. It's the largest Ford parts warehouse in Texas. It carries a $3-$4 million inventory, depending on the season.

According to this year's Ward's Dealer 500, Lee Jarmon's parts department was in the top 20 in the country bringing in $21 million in gross revenue. Compare those numbers with the average dealership's parts department as reported by NADA — $236,400 in inventory and $3.3 million in revenue in parts and service combined.

“We have 52 employees who provide a high level of service for the customer — that's what drives our success,” he says. “It's not always about price because we can't always provide the lowest price — but we can provide great service.”

Mr. Pack chuckles when he considers his parts department has been so successful in a town that has a Ford Parts Depot.

“It's easier to do business with my people,” he says. “You can have a personal relationship with us that you can't have with the OEM. If you need parts tomorrow — we'll get them to you.”

The dealership dispatches 10 parts trucks delivering daily in the vast metro Dallas area.

“But we're not just limited to the Dallas area,” Mr. Pack notes. “We have relationships all over the country. We ship everywhere in the country.”

Much of the business is in the wholesale area selling to other dealers — and not just Ford dealers either. “If you're a GM dealer, especially in our area, I'm who you come to for parts,” Mr. Pack says.

A dedicated wholesale operation is within the parts department. The wholesale department staffers are seasoned, experienced employees. They've established strong relationships with their customers.

“It all comes back to the relationships,” Mr. Pack explains.

That ability to provide great service, though, depends on parts availability. Gary Naples, a dealership training consultant and former parts manager, says this involves three critical areas:

Successfully managing those three areas requires a talented manager. All too often, says Mr. Naples, the parts manager is the person who has been able to memorize the parts numbers and cite them off the top of his head. But it requires more than that.

“The parts manager has to know standard business practices. It's a complicated business that involves managing true turns, gross turns, obsolescence levels and level of service,” he says.

Mr. Pack says “I'm fortunate to have had Jerry Lowey as Lee Jarmon Ford's parts manager for 16 years. Jerry is unusually talented. He's very respectful of standard business practices.”

He doesn't focus so much on the customer relationships — those duties are left to the two assistant managers. Mr. Lowey's time is spent managing the inventory controls — reviewing stocking levels, seasonal adjustments and staying ahead of the market. Making sure the department has the right parts at the right time is critical to providing great service.

The dealership maintains a dedicated parts section on its web site.

Says Mr. Pack, “We focus on the basics. The technology only helps us get there. It helps us manage the 80,000 parts numbers we have in our inventory.”

The parts department is just one aspect of a successful dealership, but sometimes it's cast in a secondary role. Not at Lee Jarmon Ford.

Mr. Pack explains, “We operate on the philosophy that each of our departments is a separate business. We want our department heads to be our business partners.”

Each of the department heads has been with Mr. Pack for an average of 17 years and that has helped create a strong family atmosphere. That doesn't mean every thing is lovey-dovey, however.

Daily department head meetings can be “very candid and open,” says Mr. Pack. “The meetings review internal procedures and relationships with our customers. Each manager is protective of his business but understands the need to work together to maintain a successful operation.”

Make sure your parts manager is top notch

The average dealership puts at least one-third of its working capital in parts inventory.

Because of this, dealership parts management consultant Gary Naples advises dealers to “keep your finger on the pulse of the department and take a more proactive approach.”

Dealers must carefully hire for the parts manager position.

“If the department is not managed properly, it quickly can become an Achilles heel for the dealer,” Mr. Naples warns. “Many dealers don't understand just how complicated the parts business is and often turn that working capital over to someone with minimal business experience.”

Mr. Naples suggests ongoing business training for the parts managers. “It's not just knowing parts numbers — it's knowing what, when and how much.” Also, training on every level helps the department operate more efficiently.

One other piece of advise from Mr. Naples:

“If your parts manager is paid on a commission based on the financial statement, then make sure he sees the financial statement.”

That way, he'll see the whole picture. That includes where expenses can be controlled better. It will result in more money for the manager and added savings for the dealership.
— Cliff Banks