Parts Gross Profit and Inventory Turns: Benchmarks
A healthy dealership parts department grosses about 40% of its sales and turns its inventory about 8 times a year, which is roughly a month and a half of supply on the shelf (Pocket20 benchmarks). Less than 5% of inventory should be obsolete, meaning no demand in 12 months or more.
The four parts numbers that matter
Parts gross % of sales = parts gross ÷ parts sales. Pocket20 benchmark: about 40%.
Inventory turns = annual parts cost of sales ÷ average parts inventory. Pocket20 benchmark: 8 a year.
Months' supply = parts inventory ÷ average monthly cost of sales. Pocket20 benchmark: 1.5 or less.
Obsolescence = inventory with no sale in 12+ months ÷ total inventory. Pocket20 benchmark: under 5%.
How to find them on the statement
Parts sales and gross are on the parts department detail page, usually split by counter, wholesale, service (repair order) and body shop.
Parts inventory is on the balance sheet.
Cost of sales is parts sales minus parts gross.
Annualize year-to-date cost of sales before dividing (for example, divide by the months elapsed and multiply by 12).
Why gross and turns pull against each other
Wholesale parts usually carry thinner margins than repair-order parts, so heavy wholesale volume can grow sales while pulling the gross percent down. Over-stocking does the opposite: it protects fill rate but slows turns and ties up cash. Read the two together.
Example (hypothetical round numbers): annual parts cost of sales of $2.4 million against an average inventory of $400,000 is 6 turns, or 2 months of supply. At 8 turns the same sales would need only about $300,000 on the shelf, freeing about $100,000 of cash.
Related
See it on your own statement
Pocket20 reads your parts department line by line, checks gross by sales channel, turns and months' supply against benchmarks, and ranks the dollars. Get a free read or see a sample read.