The challenge of customer-supplied parts comes up every time I teach my courses. Many shops allow it, some don’t. But for some reason, it is part of the culture of the aftermarket industry.
You are not allowed to bring your own food to a restaurant to have it cooked. You can’t bring your own hair products to the salon. If you rent a hotel meeting room, you are not allowed to bring in outside food. I could go on and on, but it seems like our industry is the only one that allows it.
I believe the main reason some shops allow customers to bring in their own parts is because those shop owners don’t understand how to make a profit. They might think that allowing a customer to bring in their own parts is good customer service. Or they don’t want their technicians to stand around, so they figure they will make at least some money on service.
Most shop owners agree that this rarely goes well. Many times, the part is of poor quality, and the customer expects a warranty even though you told them there was no warranty. Other times the part is wrong, and you have a bay, hoist, or a technician tied up with a dismantled vehicle while you wait for the customer to bring the correct part. In many cases the shop owner gets involved in locating the correct part and facilitating the exchange with the supplier.
Besides the frustration, the loss of a bay, hoist, or technician, and the liability costs, here is the financial loss for allowing this practice to happen.
Here is an example of a shop with a Service Rate of $100 an hour.
$100 X 90% Productivity X 125% Efficiency = $112.50/hr effective service rate.
1-to-1 service to parts ratio means that we multiply $112.50 X 2 = $225 hourly mechanical revenue. Plus, materials and consumables, the total is $235.
$235.00 X 60% Gross Profit = $141 per hour.
Here is an example of allowing customer-supplied parts.
$100 X 90% Productivity X 125% Efficiency = $112.50 per hour effective service rate.
$112.50 + $10 materials and consumables = $122.50 revenue per hour
$122.50 – $32.50 in costs = $90 gross profit per hour.
More importantly, most shops are not at 60% gross profit on service and 125% efficiency. On average, the industry only bills out 54% of its labour. So, the loss on the transaction with the customer-supplied part is even worse.
The other concern to look into is your liability. Let’s say a customer-supplied part is allowed in a repair. The part fails, the car is in a serious accident that kills or maims someone, and the investigation blames the part. Who do you think is going to get sued? The customer who supplied the part or the shop owner who is the “expert”? Ask your insurance company if you would be covered in this type of circumstance.
Here is a real interaction between a potential customer and a shop owner regarding customer-supplied parts. (Names and vehicles have been changed for privacy.)
Customer: “My uncle is a very satisfied customer of yours and he highly recommended your shop to me. I have some new parts I need to have installed in my car and I need a wheel alignment. Could you please provide me with a quote for the following repairs on my 2011 Tiguan? 1. Wheel alignment. 2. Replace left front lower control arm (part supplied by customer). 3. Replace left front steering knuckle (part supplied by customer). 4. Replace left front tie rod bellow for steering rack (part supplied by customer). I don’t think these repairs are urgent, but could you please let me know how soon you could book me in?”
Shop Owner: “We certainly appreciate your father’s referral; however, we have a policy that we supply all of the parts on any of the work we do. What is the reason you think you need these parts replaced, and is there a reason why you bought the parts yourself? We would also need to inspect your vehicle and verify these components are worn and actually need replacing, as we have no history on your vehicle or who has advised you that these exact parts are needed.”
“Here are the top five reasons why we have this policy on customer-supplied parts:
- Our business is based on profit from parts and service (not just service / installations). Sometimes people will offer to pay a higher service rate to install supplied parts, but this would defeat the purpose of buying the parts.
- We would not be able to provide warranty on a supplied part or on the installation. There is no value to you in this, so it does not make business sense to do these types of repairs. Our shop provides a North America wide warranty for 2 years and 40,000km with many parts carrying a limited lifetime warranty (Steering and suspension parts included as well as many other parts and electrical components)
- We are not willing to take on the liability, the risk of installing supplied parts is on us for providing the installation service. It is not worth losing my business over this should there ever be an incident. And I am not even sure my insurance company would cover me.
- If a supplied part is wrong and the vehicle is tied up in a bay or on a hoist, sorting this out it is very costly to us and you. Would you be willing to pay our hourly service rate while you drove around finding the correct part? In my over 32 years of being in business this has happened more than once in the early years when we did try to accommodate supplied parts – lesson learned.
- A couple of good analogies I often use when faced with this question are as follows. You can buy steak, chicken or fish, but you can’t take these products to a restaurant and ask that they be cooked for you. Parts stores, online purchases and liquor stores are designed for the consumers to purchase and install or consume the products at home. This is why a bottle of wine is 25-50% or more at the restaurant. They provide the facility, service, glass, trained staff, equipment and carry the overhead to provide you with the wine and food.
“I hope you don’t take this statement the wrong way as the intent is to provide you sound reasoning why we have the policy that we do.”
Role play provided by Mark Stevens of Dyneco Automotive.
Murray Voth is president of RPM Training, a company that specializes in automotive shop management training and coaching. Learn more at rpmtraining.net.