Inventory Management Best Practices for Auto Repair Shops

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May 22, 2023

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Read time: 3 min

The answer to that question depends on a number of factors, and getting the right categorization for each part is crucial for maintaining healthy profit margins while minimizing the risk of rush orders and frustrated customers.

Inventory and Stock Management to Minimize Complexity

When you and your team are replacing parts during repairs, it’s important to consider what parts you have on hand versus what parts you’ll need to order.

If you don’t, you risk overstocking and sinking money into too many units of a particular type of part, or understocking and making a customer wait while you hope that the expedited shipping for a part pulls through.

By having the right inventory and stock management processes in place, you can make it easier for your service advisors and technicians to avoid frustrations.

Here are some best practices for inventory and stock management at your auto repair shop.

What Counts as Inventory? What Counts as Stock?

First, a quick refresher on the difference between inventory and stock.

“Inventory” includes the parts you sell to customers and the parts that your shop uses to make repairs (such as wrenches, alignment machines, and engine hoists).

On the other hand, “stock” only includes the parts you sell to customers during the usual course of repair work.

Regardless of whether a part falls under inventory or stock, it’s crucial to label every single parts transaction to reduce your risk of accounting gaps, billing inconsistencies, and more.

You can avoid these pitfalls by creating a streamlined parts management and reconciliation process.

Make Any Necessary Adjustments to Your Parts Sorting System

It might seem natural to label all your parts, even the ones you purchase multiple times per month, as inventory. However, while this process seems efficient, it introduces two problems.

First, you won’t be able to get the clearest view of your shop’s metrics. Say you buy spark plugs and sell them to your customers over 30 times a month.

If you count them as inventory, you won’t have a clear picture of just how many spark plugs you’re purchasing a month.

Second, you’ll be adding another layer of complexity to your inventory list. If you buy spark plugs, log them as inventory, then sell them to customers and put them in their vehicles, you’ll have to log all of those steps.

This can quickly lead to confusion.

If you count the spark plugs as part of stock, you’ll have a much clearer view of the metrics and will be better able to track whether or not you have enough of this oft-used, essential part.

The best way to determine when you should count a part as stock as opposed to inventory is to ask yourself these basic questions:

  • What is the business function of this part?
  • How often does my shop order this part?
  • Is this part sold to customers?
  • How often does my shop sell it?  

The answers to each of these questions will get you to your answer. For example, a tire’s business function is to be used in a customer’s vehicle (meaning, you sell it to the customer). If your shop orders a particular brand and size of tires an average of 40 times per month and sells it an average of 38 times per month, you should categorize that as stock.

Accurately Maintain and Track Stock levels

Ordering too much of a stock part can cut into your shop’s profit margin, but ordering too little of it could keep customer vehicles at your shop longer.

How much of a part to order, and how often to place those orders, depends on your shop’s unique circumstances.

For instance, let’s say you determine that your shop needs to sell customers a part only an average of ten times per month, and a few nearby auto parts stores tend to keep that part in stock.

In that case, you could adopt a “just-in-time” approach toward that part, buying it as close as possible to the time you’ll need it.

Tekmetric: A Shop Management System That Makes Managing Parts Easy

Metrics are the key to accurately maintaining and tracking your stock levels, however, tallying these numbers by hand can be time-consuming. By using a shop management system like Tekmetric, you can simplify and speed up the parts management process.

With Tekmetric, you can log parts as on-hand, in-use, ordered, and above stock or below stock.

You can also filter parts by brand, part name, part number, retail price, and primary vendor and see exactly how many units of each part you have available at your shop—and how much each unit costs to buy.

Additionally, you can directly order parts and create parts markup matrices from Tekmetric.

This article was written with the guidance of automotive repair industry CPA
Hunt Demarest of
Paar, Melis, & Associates, P.C.

👉 Ready to grow your automotive business? [Book a personalized Tekmetric Demo Here]

FAQ

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Safeguarding the physical and digital confidential assets of your business is of utmost importance for any repair shop owner. However, figuring out the right steps to initiate this process can be challenging.

The Importance of Security

Shop owners must always know who is coming in and out of their shops, this can be monitored by alarms and security camera systems throughout and around the building to insure the physical protection of the digital systems within the shop.

For those who are working in the shop, they should be trained on the protection of proprietary data within the shop by implementing password management, data integrity, and regular system backups.

Finding the Right Tools for the Job

Choosing a shop management system such as Tekmetric can help you manage your shop more efficiently, automate your processes and improve your overall customer communications while keeping your data secure and protected.

Shop management systems have proven to be beneficial for protecting data in the case of natural disasters or fires. When you are looking for a shop management system to protect your data be sure to choose the system that is transparent regarding their systems data backup process and insurance in the event of a breach. ‍

Switching to the Cloud

Deciding to make the switch to cloud-based systems for data storage and accessibility such as Tekmetric can give shop employees and owners peace of mind knowing that their digital confidential assets are safe and secure.

Training and empowering employees on how to protect digital information is equally as important as physically protecting your shop with security alarms, cameras and locks.

By implementing the right processes and tools, shop owners and their employees can be confident that their shop's data is secure, accessible and protected from unexpected crises. 

For more information, view our data security checklist here. 

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Who’s this for?: Tekmetric Payments Customers. Interested in adding this to your subscription? Contact us. 

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We’ve eliminated the complexity of the traditional multi-step integration processes when connecting Tekmetric with PartsTech. Say goodbye to hunting down API keys or navigating complex vendor setups – now you can connect to PartsTech's extensive parts network directly within Tekmetric Integrations with just a few clicks. This enhancement was built to help make your parts setup experience effortless, allowing you to order them quickly on the estimate. This allows you to focus on what truly matters: getting vehicles back on the road faster.

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Who’s this for?: All customers - Primarily those without PartsTech enabled

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Get Professional-grade Accountability With PO# on Estimates 

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Simplify Inventory Management at the Shop Level 

Take control of your inventory management with our new shop-level inventory feed located on the shop dashboard which puts vital inventory edits at your fingertips. This view helps how you monitor inventory changes across your shop, making it easier than ever to spot trends, prevent shrinkage, and ensure you have the parts you need when you need them. 

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The customer experience begins from the time vehicle owners bring in their car all the way to the final touchpoint: the payments portion. Integrated payments meet customers where they are in today’s digital market whether that means they can pay from their home, pick up their vehicle after hours or pay from states away for college students to pick up their car. Beyond approving an estimate and two-way texting, customers can pay wherever they are, whenever it is most convenient for them. Integrated payments facilitate shop efficiency, improve the customer experience and meet customers where they need to be.‍

1. Facilitate shop efficiency

Integrated payments help the shop run more efficiently with a visible, centralized location. Service advisors maximize the shop’s workflow and drive the bottom line because they can complete more repairs due to efficiency. Integrated payments allow customers to pay without being at the shop or needing a physical credit card. Forgot your credit card at home? Not a problem!

Tekmetric’s text- to-pay feature allows your customers to pay anytime, from anywhere - whether they’re a busy professional who needs to pick up after hours or a parent paying for repairs for their college student. Text-to-Pay allows you to get the repair done and be able to pay for it without a major disruption to your daily routine or needing a physical credit card to make a payment.

2. Improve the customer experience 

Along with facilitating shop efficiency, integrated payments streamline the automotive customer experience with a unique opportunity to drive revenue to the shop while also providing a value-added experience to the customer. Customers will remember how convenient (or inconvenient) it was to pay during the final touchpoint of the auto repair process.

In addition to text-to-pay, integrated payments offer flexible, forward-thinking solutions that allow shops to save time and effort when managing funds and customer payments. Shop owners can share invoices and accept payments via text and email, enabling the customer to pay directly from their smartphone and pick up the vehicle when it is convenient for them. 

3. Meet customers where they want to be

Most auto repair purchases are surprise purchases that not even the best budgeter can anticipate. With integrated payments, Tekmetric caters to the customer’s budget and needs. Not the other way around. Repairs can be a stressful experience so why not make the customer’s life easier by allowing them to pay from home, from states away or in installments?

Offering Buy Now, Pay Later options, allows you to meet the customer where they are financially by providing installment payment options. When your customers need to get the repair done but do not have the budget to be able to pay for it in full in one sitting, BNPL meets your customer where they are financially while also ensuring the safety of the vehicle owner by getting the repair done. 

Digital payments are necessary for auto repair shops in the modern digital market. By implementing customer-centric digital solutions, you can significantly improve your shop’s customer experience by meeting customers where they are, reaching new ones and increasing your shop’s workflow efficiency. Making the last touchpoint of the experience more convenient creates a positive, lasting impression on the vehicle owner and creates trust with your repair shop – encouraging them to become a loyal customer and generate repeat business or referrals.