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Parts: It Pays to Shop Around

Repair shops don’t operate in isolation. Most of us depend on a legion of other businesses to supply us with the products and services we need to keep our shops running. Getting the best deal possible from these vendors is key if you want to maximize profits.  Making the most of your dealings with parts suppliers is particularly important because parts make up such a big chunk of a shop’s monthly expenses. My goal when buying parts is to get the best deal, while maintaining good relationships with supply houses. Here’s a look at how I achieve that goal.

One of my “rules” is to never sign long-term contacts with one vendor. Parts suppliers – like wireless providers and cable companies  - are always promising price incentives to shops willing to sign long-term agreements. These agreements often require shops to call that supply house first. If the part is out of stock, the supplier will offer to buy the part for the shop. That sounds like a nice arrangement in theory, but once a supplier has your business they don’t have any motivation to remain competitive. You don’t know if you’re getting the best price because your contract limits your exposure to other vendors. And while your “exclusive” supplier may have offered you the best price on a particular part the day you signed a long-term contract, there’s no guarantee that the company still has the lowest price on that part today.

Instead, I believe in the free market and I view parts as commodities. At my stores, we check with a minimum of three suppliers before making a purchase. If all three vendors have the part in stock, I go with the cheapest price.  It’s also not unusual to see suppliers offer to match prices because they know I’m comparison-shopping. Because I don’t have a long-term agreement, suppliers treat me like a new customer each time I call.

Quality is also important. A vendor might have the lowest prices in town, but if that company doesn’t carry the brand name parts I’m looking for, it’s irrelevant. To make a fair assessment on price, you have to be able to do an apple-to-apple comparison on the same part. 

Of course, price is only part of the equation. I will throw more business at suppliers who offer good service. If a company is willing to deliver a part or is especially friendly, I may pay more to do business with that vendor. Although I don’t sign long-term agreements, I do have a handful of parts vendors who get about 70 percent of my business because they’ve proven their worth on price, service and convenience.  They’ve earned my loyalty through because they’re willing to compete for my business.  

Keep in mind that this approach doesn’t work unless you pay your bills on time. No supplier is going to be willing to compete on price if takes a long time to get paid. If that’s an issue, then signing a long-term contract might make more sense for you because your vendor might offer more flexibility in return for your loyalty. Overly demanding shop owners also won’t get much of a second-look from suppliers, who want to deal with shops that are easy to do business with. For example, if a part fails, I typically don’t file a warranty claim because it’s usually not worth the trouble. I figure that the discounts I am receiving will help make up the cost.

Finally, remember that suppliers will do anything to land your business –even stooping to gimmicks. Don’t fall for suppliers who send attractive, scantily-clad women to deliver your parts.  That type of tactic only distracts your technicians (which slows your work flow) and can turn off female customers.  Suppliers who offer a competitive price, good service and a quality product deserve your business.

 

Greg Sands is the CEO and founder of Mudlick Mail in Acworth, GA. The company provides
demographically targeted, direct mail programs for automotive service and repair shops
nationally. An 18-year veteran of the automotive industry, Greg also owns and operates more than 25 repair shops in four states. Follow Mudlick on Facebook: /www.facebook.commudlickmail or Twitter: http://twitter.com/#!/mudlickmail

Comments




  • It always amazes me the comments that are placed on these boards.   I hope that people take some of these comments with a grain of salt because to many negative people who have had limited success in business just do not believe there is a better way to do things if they do not do it themselves.


    There are hundreds shops around the country that uses this successful strategy and they would all be happy to share their success.   It is not the only way to do it, but it is one method that is a proven successful way to manage your parts costs.    This is a person who currently owns 28 shops across four states and he is growing a dozen more shops over the next 12-18 months.  He has sold over a half of billion dollars in auto repair in 20 years and is likely one of the most successful independent shop owner in the country.


    Most people in his position would not consider helping other independent shop owners, but he is providing great information to those who want to understand and learn some of strategies he uses to grow this $40MM+ company.


    Differing opinions are great when they are fact based.   Everyone wants quality parts at good prices, that us how he offers a 3 year / 36k mile transferable warranty on every repair.


     

    tjross10, 2 years ago | Flag
  •  


    I would like to give the article some credit and here is why:


    


     


    1. Major parts retailers give preferential treatment to the big shops and make it very hard for smaller shops to compete.


     


    2. Customers price check everything and we should too.


     


    3. I can make up to 250% on apples for apples parts buying from distribution warehouses such as light bulbs, hose clamps, Freon etc. and still be at or under the retailers walk in price. I still prefer to use franchise retailers on starters, alternators, water pumps etc because of the convenience of parts availability in the case of warranty issue. That being said many of the specialty warehouse guys are offering lifetime warranties on radiators and fuel pumps as well as three year warranties on A/C compressors. Nearly all major retailers are one year or less on those items. I make at least double the margin on those parts and can still be within 10% of walk in price of the retailer. There was a time when 40% was the standard on jobber discounts now you do well to get 10-15%; sometimes 0% on aftermarket parts especially the above mentioned small parts.


     


    4. I use all data manage and can easily see the margin difference: if you aren’t watching your overall margin you are setting your self up for failure. Dollars do pay bills but if you’re doing mechanical for less that 60% GPM you have an issue with parts mark up.


     


    I prefer my mechanical repairs to be in the 70+% GPM range. The only way to fix that is to shop around and lower the cost while increasing the markup. There are some exceptions such as engine or transmission replacement or tires and batteries but you have to watch it. I love my customers but I’m not going to pay them to use my services.


     


     


     

    hiwayautoservice@yahoo.com, 2 years ago | Flag
  • that is the most boggis advice i have ever heard, we use computers in out shop very seldom call anyone for prices, i want qaulity parts and great service for that i am willing to pay, my customers want the same.

    mrenn1040@hotmail.com, 2 years ago | Flag
  • I think this article creates more problems than it solves ....


    1) what is your time worth ..time yourslef while you try to save $1 on a part .... what is your break even point


    2) ever play battleship ?  Just one price ( or even a handful ) doesn't mean that all prices are that low (or hi )..it takes a bunch ..learn excel and ...well ...if you have time .  We also see issues with suppliers were we speardsheet comparisons ... OMG ...no pattern what so ever ... if you catch one of these extreme price differences ... but inthe long time frame ..it tends to 'average out'


    3) leave enough profit for your auto parts supplier to survive on ... if you grind him down . you get poorer paid staff and eventually a dead jobber ... Jobbers are no ticket to riches and fame ...especially these days.


    4) trust is a two way street ... what is you defect ratio ?  How many times do you need a 'favor' ... allthis should be balanced ... Price is part of the formula to find a few suppliers you wnat to build a relationship with


    5) try this -- give 70% to one and 30% to #2  and .... see what happens ... we had shops who would buy everywhere - and on warranty issues ...what a mess ....  look and re-think your suppliers every 6 months .. not every 6 minutes ... 


    Greg


    a Auto Parts Jobber ....in Canada

    GregGH, 2 years ago | Flag

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