Commercial truck and trailer parts are selling slightly faster than they did last year, according to a Trailer/Body Builders survey of trailer dealers, truck equipment distributors, repair shops, parts specialists, and truck dealers.
Seventy companies, primarily trailer dealers and truck equipment distributors, returned surveys during the last week of August and the first two weeks of September. Survey results indicated the following:
Trailer dealers are on track to sell an average of $1,690,026 in parts during 1999. This represents an average of 20% above the 1998 performance. Trailer dealers reported selling an average of $1,405,158 in parts last year. The 20% increase was the best among the five types of industry companies that participated in the survey.
Truck equipment distributors also are posting double-digit sales growth in 1999, the survey indicates. Based on sales through the first eight months of the year, distributors expect to sell an average of $1,093,706 in parts this year, an increase of 11% from last year's performance. The truck equipment distributors participating in the survey sold an average of $988,172 in parts during 1998.
Repair shops are experiencing relatively flat sales in 1999. When the year is over, sales are expected to average $1,536,864, up 6% from the 1998 total.
Parts specialists expect sales for 1999 to average $2,834,000, according to the survey. Such a performance would top last year's sales by 11%.
Truck dealers are showing the slowest growth in parts sales.
Inventories Edge Up Parts sales are outpacing the increase in inventory levels, indicating more efficient inventory management this year. Trailer dealers reported stocking an average of $325,900 in parts this year. This represents an average of 10% more than the $294,950 that dealers stocked in 1998.
Truck equipment distributors have increased inventories an average of 4% over last year's levels. The average distributor participating in the survey reported current inventories of $399,062, up from $381,937 in 1998.
Inventories at repair shops were virtually the same as last year. Responses from repair shops produced an average of $445,636 kept in inventory, compared with an average inventory level of $444,818 in 1998.
Parts specialists had the highest average stocking levels among the five types of companies. They reported an average of $991,000 in stock currently, up 16% from 1998.
Truck dealers reported inventories averaging $600,000 in 1999. This represents a 14% increase from the 1998 average.
Turning Faster With sales increasing faster than inventories, most of the reporting companies appear to be turning inventories faster than they did in 1998. Based upon the inventory levels and parts sales that the 70 companies reported, it was possible to calculate average inventory turns per year for the five types of companies that participate in the survey. The results were as follows:
Trailer dealers appeared to be getting the most out of their inventories. As a group, they are turning inventory almost five times annually, compared with 4.53 times in 1998.
Truck equipment distributors averaged 2.62 turns in 1998, but that rate has increased to 2.79 times per year in 1999.
Repair shops reported turning inventories an average of 3.45 times per year in 1999, up from 3.25
Parts specialists showed a slight decline of 0.12 turns per year-2.86 turns per year in 1999 compared with 2.98 turns last year.
Truck dealers also experienced a slowdown in inventory turns. The group averaged 4.95 turns in 1998, but the pace appears to be down to 4.56 turns in 1999.
Gross Margins Pinched Parts departments kept gross margins fairly steady-in spite of frequent comments about the competitive nature of the market. Some companies have been able to nudge margins up slightly, while others have trimmed them. The net result is that:
Trailer dealers reported an average gross margin of just over 25% for 1999, up 0.10% from the 1998 average.
Truck equipment distributors reported an average 30.3% markup on parts, a .5% decline from 1998.
Repair shops had one of the lowest average gross margins in 1998-26.7%-but they worked to change that in 1999 by increasing margins by a full percentage point.
Parts specialists had the highest gross margin among the five types of parts departments included in the survey following a two-point increase from 1999 levels. The average gross margin in 1999 was 32.2%, compared with 30.4% average in 1998.
Sales Per Employee Parts departments appeared to be producing more sales per employee, according to the results of the survey. Parts departments generally have kept the number of parts employees the same as last year's levels, yet overall sales are moving higher in 1999.
Trailer dealers reported an average of six employees in the parts department, including one outside salesperson and two inside sales. These six employees were responsible for an average of $278,856 in sales per person. Individual responses ranged from a low of $45,000 each to a maximum of $433,333.
Truck equipment distributors have an average of three employees in the parts department, including two in inside sales. Most do not have an outside parts salesperson. However, those three employees account for an average of $335,508 each-the second-highest average among the five types of parts departments. The highest sales-per-employee figure was $900,000, while one distributor only receives $17,000 per parts department employee.
Repair shops have an average of three employees, including two in sales. They generate an average of $262,333 in sales. Sales per employee ranged from $135,000 to $400,000.
Parts specialists had the highest sales-per-employee average-$397,010. One parts department averaged $1,000,000 per employee, while the lowest was $150,000 per employee. The average staffing was seven employees, including two performing outside sales and three inside salespeople.
Truck dealers reported an average of eight employees in the parts department, including two in outside sales and three inside. They generate an average of $312,825 per person in parts sales.
How Important? The survey also attempted to gauge how much parts sales contribute to the overall revenue stream of trailer dealers, truck equipment distributors, and other types of companies in the industry.
Trailer dealers receive the lowest percentage of revenues from the parts department-14% While parts represent 25% of sales for one trailer dealer, most clustered around the 16% level.
Truck equipment distributors will receive 19% of sales from the parts department. One distributor, a heavy seller of light truck accessories, can trace 71% of sales to its parts department. The lowest percentage came from a distributor that only receives 2% of sales from the parts department.
Repair shops rely on parts for 46% of sales on average. The ratio, however, ranges from 21% to 78%.
Parts specialists may rely on parts sales exclusively, but many of the reporting companies have additional revenue streams. The median figure, 91% of income for these companies, is a result of parts sales.
Truck dealers reported that 37% of their sales come from parts.