Kaylee Felio is the Sales and Marketing Manager for PartsEdge, the power tool for helping your parts department generate higher profits. It's no secret that hanging onto aging auto parts inventory can cause many problems for retail auto dealers. The most obvious challenge is that if the parts become obsolete, they are more difficult to sell.
00:00 - Introduction to the episode subject matter
01:57 - It's important to remember that fixed operations is the second highest revenue channel. Although it rarely gets enough talk time throughout the industry, the parts and service department has the genuine ability to provide more predictable revenue than auto sales.
03:56 - The best thing a dealer should focus on in fixed operations is getting a good grasp on the current parts inventory and forecasting obsolescence. OEMs are getting much more strict about returns, which leads dealers in a position where they need to know what to stock and in what quantity to not only fulfill the market demand but ensure that they keep the books in the black.
06:14 - Parts managers should take the time to identify blind spots in their parts inventory to improve at spotting obsolescence before it's too late.
Listen to the full episode for more insights and context from Kaylee Felio!
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[00:00:40] All right, gang. Welcome to this episode of the dealer playbook podcast. So excited that you are here, especially because we're talking subject matter that we. Speak about nearly enough on the show. We're talking about fixed operations. We're talking about parts departments. I am joined by the sales and marketing manager at parts edge, which is a powerful tool to maximize the potential of parts managers throughout techno through technology and a touch of consulting.
[00:01:11] Kaylee PIO. Thanks so much for joining me on the dealer playbook podcast.
[00:01:14] Kaylee Felio: thank you so much for having me. And, um, you know, I hear that all the time. Whenever I come on podcasts, it's like, this is something we don't talk about enough so I appreciate it. It's like what, what's
[00:01:25] Michael: the term? The, the stepchild of the, the, the industry.
[00:01:29] Cause we're always talking about variable. We're always talking about how to move more metal. Yep. Um, But you, I I've listened to you on, on the fixed ops round table. Um, and you know, you bring up a lot of valid points and I think this is where I wanna start. Um, and really introduce this concept. I mean, it goes without saying, or hopefully should that the parts department is, I, I mean, it's a, it's a main profit driver for a store.
[00:01:57] It's the, the second largest. Revenue source for a dealership yet we, we tend to neglect it as far as mainstream discussions. And so my, my question for you is, well, why is that? Why is something that generates can generate much more consistent revenue? Something that we tend to neglect in conversation?
[00:02:18] Kaylee Felio: You know, I think it's because it's one of those, um, things that just kind of works and, um, you don't have to, well, I guess you kind of do have to work really hard to, to make it really productive and, and get, um, but it's one of those things where it just works and a lot of times, um, There's really good parts managers out there that just do a really good job and, and dealers just kind of let them do their thing.
[00:02:40] But right now I think we're running into this, uh, thing where parts managers are retiring or we're having a shortage people aren't sticking with it. And so we're running into this like thing where we don't know what that parts manager did and now we're like left with, you know, to figure it out. So I think
[00:02:59] Michael: that's.
[00:03:00] That's really interesting and really frightening. I think about as a business owner, myself really frightening. I mean, especially in an industry where we cling onto buzz phrases, like got, gotta, gotta inspect what you expect. but probably to your point, because it's something that just functions, we're not necessarily paying attention to.
[00:03:24] To how can we improve this? How can we make it more profitable? So as you work with your clients and, and the industry at large, what are, what are some of the things that you see on a consistent basis that given a few tweaks might just make that department even more profitable and productive?
[00:03:42] Kaylee Felio: Yeah, I think, um, the biggest thing, uh, lately is we've been talking about obsolescence, um, cause it is growing a lot in the departments because there are stricter return, um, guidelines per the manufacturer.
[00:03:56] And there's just a lot to keep up. And if you miss the windows, um, then you're stuck with those parts. And then there's the difference of the guaranteed parts and the not guaranteed parts. So there's just so many different, um, aspects to it. But the biggest thing I've been talking to dealer. About is forecasting obsolescence.
[00:04:14] So how do you do that? Um, you take the parts that are in, um, what, well, this is what we do at parts edge. Um, and it's something you can do too. If you wanna look at, um, a different guideline, but basically the parts that are in the seven to 12 month window, you take all those parts or that total, you divide it by.
[00:04:33] Because they're six months in that and that's how much your obsolescence is gonna grow. So if you don't like, let's say the calculation's $5,000, right. If you don't have $5,000 in return allowance or accruals, your obsolescence is gonna grow by $5,000. So like, that's one of the things that you can look at to really.
[00:04:53] Uh, improve and be more proactive with trying to offset your obsolescence or maintain it at a low amount or, you know, so ,
[00:05:03] Michael: and you, you mentioned so, so you, you've got a quick little formula there, but as you dig into it with your, with your clients, I, I mean, Where are they missing the boat? You think on average, across the board, in, in being able to properly forecast for obsolete, this is gonna be my new favorite word by the way, obsolescence makes sound.
[00:05:28] Kaylee Felio: And then my phone just like knows how to spell it. So it's um, so. The question. So, um, re-ask that question? I'm
[00:05:38] Michael: sorry. sure. Yeah, I know. I, I had to throw in my annoying little jab of, and then I get distracted I have that effect on people. Um, what are the common challenges you see as they, as they seek to forecast obsolescence on their own?
[00:05:55] Is there, I mean, is it as simple as just doing the formula and saying, okay, great. What are maybe some of the blind spots that we we're not thinking about on the regular.
[00:06:05] Kaylee Felio: I, I think the blind spots really is that the DMS is kind of overwhelming and the reports that need to be pulled, um, to do that simple formula.
[00:06:14] Um, it's just one, it's just one of those things where you get to it when you get to it and oftentimes you don't get to it. right. And so, um, I think that's what. What we're discovering with our clients is, um, bringing that consistency of like, these are the numbers that you need to look at. This is how you need to look at them.
[00:06:35] And, um, looking at all those reports and the data so that you can be more proactive. So I think that's where it's falling short is there's, um, the DMS just there's a lot going on there and, um, and looking at the data and that's really kind of where, where they're falling short.
[00:06:53] Michael: right. And it makes sense.
[00:06:54] You know, I, my mind immediately thinks about the, the narrative in the industry of, Hey, yeah, you've got this service department, you've got this parts department, but you're competing against standalone companies out there who that's all they do. They sell auto parts, whether it's a blanking on names, auto zone or, or, you know, whatever in Canada there's Lordco or Napa auto parts or things of that nature.
[00:07:23] you're competing against these, these people, and it's not okay for you to just kind of, to your earlier point. Let this department do its thing. These companies are paying attention to all of this kind of stuff. And constantly to your point asking the question while. What can we do to improve this to mini minimize loss, to, you know, minimize all these sorts of things.
[00:07:48] And so what's your take on that? Is it, is it just forecasting, obsolescence? What are some, maybe things you've learned from these other companies that we're gonna talk about your dog in a minute, but after we don't even worry about it, I love it. I love it. Wait, you mean you're a real person, Kaylee. Yeah.
[00:08:07] I'm a real person. How dare you be a real person in an industry where we're all trying to pretend to be something else. Um, what are some of the things you've your company and you have observed that, that perhaps the auto zones and these others, like what are some things we could learn from and take from them?
[00:08:25] Kaylee Felio: I think that they're, they're looking at their inventories. Um, and man, I'm so sorry. Let me get this.
[00:08:33] Michael: You're gonna have to show pick. You're gonna have to pick this, this B step and, and show everybody now. No, I should shut the door. No, I should pick him
[00:08:41] Kaylee Felio: up. He's
[00:08:42] Michael: like 80 pounds. Would you be mortified if I told you I'm not cutting any of this out because I love
[00:08:47] Kaylee Felio: it.
[00:08:47] No, that that's fine.
[00:08:52] I'm like, and then when you order something, you're like, what did I order?
[00:08:56] Michael: That's awesome. Um, okay, so, so the, yeah, what they're, they're constantly looking at their inventories to your point.
[00:09:05] Kaylee Felio: Yeah, they're looking at the data. And I think that the thing is, um, you know, I, I don't really know how the auto zones or the over I leaves do it, but I know that, um, when dealerships can really, um, organize their, their parts into more categories and really assess the true demand, they're able to.
[00:09:23] um, really see what's going on with their inventories and know what they need to serve their customers. Mm-hmm I think that's what it boils down to is you can't just set it and let it go. You have to constantly be looking at the parts you have to be, um, organizing into the categories to, and the DMS does some of this work for the parts managers.
[00:09:43] It's just, um, it's just knowing what you need to do every day to be more proactive and.
[00:09:49] Michael: Yeah. Makes sense. Um, to that point, call me naive. What, what is the average based on what your observation is? I mean, how much parts business. Is a dealership doing, and then can you gimme an example, maybe average without specifics, obviously just keeping people's privacy in mind, but what are you seeing?
[00:10:11] Like what, what is the average dealership doing in parts sales per month? And is that because they're selling those parts into service? Is that, or, or is that actual straight up customers being like, I need a genuine OEM air filter. Like, what does that look like? Yeah.
[00:10:31] Kaylee Felio: Yeah. I think most, most dealerships their business is from the service department.
[00:10:36] Um, they're all kind of, uh, they all vary cause some, some parts departments are heavy in the wholesale, so they're, they're servicing their, their shops around them. so it just kind of depends. But, um, inventory size that we're dealing with and seeing like average, um, it, it just depends. So like, you could have, you know, the five to 10 million in inventory and then your sales are, you know, in the millions it's, it's just, yeah, they're, they're producing they're high volume producing.
[00:11:06] Um, and it all kind of, it's all connected with the service department and making sure, um, you know, you're pricing everything efficiently to. To, to get the maximum gross that you can without you everyone's head
[00:11:22] off ,
[00:11:23] Michael: but right. Yeah. That makes sense. What are your thoughts on the future? I, I, years ago, like we're talking years ago, may I wanna say over six, seven years ago.
[00:11:33] Okay. I was having a conversation don't even remember with who it was here on the podcast for any of the enthusiasts that have cataloged my episode numbers. We were talking about the future of the business. And one of the, the sentiments that was shared was showrooms might get a little smaller inventories, might get a little bit, bit smaller.
[00:11:57] And then the PR actually the primary of the business, the primary driver would be fixed ops. I'm curious on your take. I'm curious as inventory. We we're seeing now inventory shrinks, we're seeing, uh, OEM executives and other analysts of the industry saying, Hey, I don't think inventory numbers are gonna return to where they were.
[00:12:17] Like, there's a new nor normal that we're establishing here. Could this mean that service departments become the primary driver? It's like few to choose from here. You'll get it shipped to your door, but we're gonna be your primary service
[00:12:30] Kaylee Felio: facility. I do think, I mean, we're already seeing it fixed ops is, is, um, really kind of not taken over, but it's, I think we're focusing more on it.
[00:12:41] And the fact that it is probably going to be more of the main driver, cuz we're, we're always gonna need our cars, um, maintained and serviced. Um, in regards to parts, I do think that, um, dealerships are gonna move to. Hopefully a more online, uh, way to sell parts. Right. And I think that's kind of already happening, but like to a level of like having a marketplace and a, and a, a true like, shop for parts.
[00:13:11] And because there are the, do it yourself, people, and then there's people that just wanna shop online and look at things or plan ahead. Um, so I do think a lot of things are gonna go online for parts.
[00:13:23] Michael: Um Hmm. Which makes sense, like. I feel like if you're gonna try, see maybe this is just the way my brain works, maybe I'm Kaylee.
[00:13:33] You're gonna have to tell me if I'm crazy or not, but instead of starting with parts and saying, Hey, here's this thing that would actually be really easy to sell online. We went directly to the most difficult thing to sell online, which we're like, you know, would be a good idea. Try let's try and transact a vehicle online.
[00:13:52] It's like, What about this air filter that we can just throw in a box and ship? No, no, no. Like, let's try, you know what I mean? Like, yeah. Why aren't we already,
[00:14:05] Kaylee Felio: I think because it's a kind of overwhelming, cause if you think about how many parts there are. Per like the, make the main, like, okay, that's fair.
[00:14:13] There's a lot. So I think, um, I don't think it makes sense, like to sell every single part online. Right. Um, cause I mean, I think you just kind of have to, what, what needs to happen is figuring out the market and like what's gonna sell. Um, what your customers are looking for. And I mean, there's gotta be ways to do this, um right.
[00:14:32] And really track track people. Cause we're every, we're all being tracked all the time. right. So, um, yeah, I mean, I just feel like there's and then what's, um, I was at, um, digital dealer and it was who was it? Um, Sean rains. Mm-hmm he had a visitation on parts and he in service and he touched a little bit on it, but he was talking about how, um, the what's in the parts department physically, like all the, you know, the fun stuff, the t-shirts the water bottle, like just the cool stuff.
[00:15:05] None of that's online for anyone to buy. Right. So why is it
[00:15:09] Michael: not, I don't know. Yeah. You're like, how come nobody's buying this? Uh, cuz nobody knows. It exists. Exactly. yeah. What an interesting concept. And I love Sean by the way, he's one of my favorite people in this industry. Um, but that, that presentation,
[00:15:24] Kaylee Felio: he
[00:15:24] Michael: was funny.
[00:15:25] he's hilarious. Yeah, he, he is, uh, he's a gem. Um, but that makes sense. You're you're right. I can understand your point about how would you even keep track? I mean, that, that's a huge undertaking. I know there are systems out there that try and, and do this, but I mean, To your point? I think really valuable is, well, maybe we start with our most profitable, predictable sellers and we get those online and we test it and maybe the water bottle or the Tumblr and the t-shirt and the key chains and stuff like let's try this.
[00:15:59] Yeah. And it immediately thinks of there's this company I follow on YouTube, um, called Revzilla. It's for motorcycles. I'm I love riding motorcycles, but, but this opens an, an interesting avenue for dealership on the marketing side of this department. Um, because what Revzilla does is they basically just do reviews on the products that they sell good, bad and everything in between.
[00:16:25] And what's interesting about it. Psychologically. Kaylee is you. Hate, like they're not worried about, oh, well I can't trash talk. This product I sell. It's a product I sell. No, they, they give you, Hey, like this helmet, if your head's this shape, you might not like this cuz of the, this. Yeah. But if you're this, they go through it all.
[00:16:43] And guess what happens? They make don't don't fact check me on the number. But if butt load was a number, they sell butt loads of product. Just going through and I could see somebody, you know, from a fixed perspective, simple backdrop green screen table. Hey, today, we're talking about this air intake, yada yada, yada, and why it's gonna help the performance of your yes.
[00:17:11] You know, 20, 20 Toyota, whatever. Yeah. You know, Huge opportunity. What are your thoughts on that? Is that the way of the future you think?
[00:17:20] Kaylee Felio: Oh, I think so. I think that dealerships need to do videos and talk about the, the, the accessories, the enhancements, the things that the dealer. The cars that they're selling.
[00:17:31] Um, cuz I mean, if you think about it, what's after you buy a car, what's the first thing you wanna do you wanna accessorize it? You wanna buy? I mean, if you're buying a truck, the probably the first thing is tires yeah. Right. That's I mean, that's my personal opinion, but right. And wheels, but. But still, those should be offered to be able to sell online too.
[00:17:54] Like, um, I don't know. It's just, there's huge opportunities and I love that idea with, um, what you call it? Um, the cycle. Oh yeah. Revzilla red Zillow. Yeah. Like, um, taking videos and showing them like, what. All the different areas and how it can improve your car or your truck. Um, it just shows people that's the way of selling really, um, talking about it, showing them
[00:18:20] Michael: on a deal.
[00:18:20] Yeah. Yeah. It's um, best known Glen Lundy said this, um, this past week we were in Phoenix together. He said best known is better than best. and here's an opportunity for parts departments to become best known because it, I think to your earlier point they're yeah, sure. Okay. They're the second largest profit center.
[00:18:44] Mm-hmm but that doesn't mean they need to play second fiddle. You know what I mean? To, to the sales side, they can be their own that they're not even playing the same music. They gotta just go be their own band. And, and you know what I mean? And I think there's a huge opportunity for that. I do. Um, we've talked about online, we've talked about obsolescence, we've talked about where we see things going in the future with online part sales.
[00:19:06] Does any of this, in your opinion, translate to the metaverse? Are we gonna like, is there an opportunity for ABC motors, the most popular dealership in the world? ABC motors to have a dedicated parts department in one of these, whatever they call it, dissenter land or whatever.
[00:19:26] Kaylee Felio: Oh, I'm probably the wrong person to talk about the numbers.
[00:19:30] Cause when I learned about it, I was like, oh, I was just like in shock,
[00:19:35] Michael: you were in shock. You're like, why don't you just go to the real parts department?
[00:19:38] Kaylee Felio: Well, I mean, so I see value in it. I see value because, uh, you have to, um, You have to appeal to different audiences. So there are gonna be people that are gonna go more towards that, that style, um, a way of buying or whatnot.
[00:19:56] Um, so yeah, if, um, If ,
[00:20:01] Michael: I don't even know what to say. If an avatar wants to buy real parts in the fake world then. Sure. That's why you're like bits. Yeah.
[00:20:10] Kaylee Felio: That's kinda what that's work on your, in the metaverse virtually. And kind of do that if that's, I don't know. Cause I really kind of don't quite understand it all.
[00:20:21] Like, are you living in the metaverse and doing like virtual things or are you buying the parts there and then they're physically getting delivered and then you work on your real car. Like, that's kind of like what I don't understand of the metaverse
[00:20:34] Michael: right. I think it might be more that I think it might be more like Y you're there and there's the part store and you buy the part.
[00:20:41] And, and then it shows up at your house and there you go, you got the part. I might be getting old and I wish I didn't feel this way, but I'm like, I could probably do it faster on like, just in web, too. Like in, in the internet, that's on the computer in front of me, but I'm always interested. I have to ask everybody.
[00:20:58] And, and it's a mixed bag right now. There's yeah. Half of the people I ask that are like, I don't even get it. So there we are. Okay. Uh, and then there's this other half that go into this big, long. Diatribe of why, you know, the VUS is the, you know, anyways, so that's interesting. Interesting take. Yeah. Um, we're kinda hard.
[00:21:21] You had mentioned, you had mentioned earlier the DMS. So when you work with, uh, dealers, as it pertains to forecasting obsolescence, my new favorite word , um, You said you can kind of do it. It's a little bit convoluted. So are you suggesting that there's a better system, a better way of doing, figuring all
[00:21:46] Kaylee Felio: of this out?
[00:21:47] Yeah, we have. So we we've simplified the, the reporting for parts managers. So the management report has always been, so, um, there's just a lot of different reports to look at and you have to go to different areas and every DMS is different. Um, and we've just taken that and put it on. Paged basically, and showed them their key categories.
[00:22:08] So then they're able to see, okay, my first category, I need to focus more on, or my technical obsolescence. That's your forecasted obsolescence category is, is not, um, doing very well and we need to accrue more dollars type thing. So it's just seeing it all in front of you on one page and being able to make the tweaks within the DMS to, and your process to be more E.
[00:22:32] Michael: Right. And so then that's the back half of parts, edges. You've got the consulting side of like, Hey, change this, maybe work on that sort of a
[00:22:39] Kaylee Felio: Exactly. And I'd like to take it to that next level of like, we all, we, we have those meetings to talk about the, the reports, but then we actually help them execute the, the stuff in the DMX.
[00:22:52] That's where, that's where I don't like to say consultant because consultants kind of tell you what you need to do. And we actually kind of. Help do it.
[00:23:00] Michael: yeah, you, you consultants are like, you know what? You should do change everything about yourself. Okay. That'll be X number and you pay 'em and you're like, I don't know what that means.
[00:23:10] So you're saying, Hey, no, let's look at this together. Let's understand it together. Now. Let's let's execute. Let's let's put it into an action plan.
[00:23:17] Kaylee Felio: Exactly. Cause every parts department isn't the same, every level of parts manager is different. So what we're gonna do is different for each level of parts manager, really.
[00:23:28] And we can see by looking at the numbers, okay, this is where we need to make changes. And then we do that within the
[00:23:33] Michael: DMS. Yeah, it makes sense. I was chatting with my P Scott Simons and I asked him, I said, what's the one problem that you don't believe has been solved? Four yet. And I mean, he's part owner.
[00:23:45] Yeah. I mean, he's at CMA, um, group Lizza Boes, they're incredible CEO. Um, he's a, a co-owner um, I wanna say they're up to 19 stores, so I felt like he might have some really good perspective. What's the one problem that has not been solved sufficiently yet. You know what he said, what you said made me think of it.
[00:24:05] He said, I wish there was just one quick report that I could look at. That was quick. Snappy told me what I needed and a way I go and everything out there currently is I gotta dig through this report and cross reference to that report and this and that. And so I think that's really tremendous, um, that you guys are solving for a very specific problem.
[00:24:25] And particularly in the stepchild. Department of the industry that doesn't get enough, love and attention, love that you guys are solving for that problem. Uh, really enjoyed our conversation. How can those listening get in touch with you to learn more?
[00:24:40] Kaylee Felio: Uh, they can go to our website. So it's just WW dot part, such.com.
[00:24:44] Um, I'm very active on LinkedIn. So connect with me on there. Um, yeah, I mean, just reach out. I'm happy to help anyone that has any questions.
[00:24:54] Michael: Haley, PIO. Thanks so much for joining me on the dealer playbook podcast. Thank you.
[00:25:10] I'm Michael SLO and you've been listening to the dealer playbook podcast. If you haven't yet, please click the subscribe button wherever you're listening. Right now, leave a rating or review and share it with a colleague. Thanks for listening.