How to be more profitable when purchasing OEM parts
Collision repair shops face constant challenges: rising costs, tight margins, and customers who demand quick, reliable service. Since OEM parts make up more than 70 percent of all parts purchased, one of the fastest ways for these businesses to improve profitability is by focusing on original equipment manufacturer (OEM) parts purchasing processes. Profitability is not about working harder—it is about working smarter. By focusing on OEM parts purchasing processes, shops can boost margins, improve cash flow, and deliver a better customer experience.
Why OEM parts purchasing matters
OEM parts, manufactured by original car makers, are trusted for their quality and fit, making them crucial for insurers and customers. However, inefficiencies in ordering, delivery, or returns can quietly erode profits.
- High volume, high impact: With OEM parts making up the majority of purchases, small inefficiencies can add up quickly.
- Returns and errors: Incorrect or duplicate orders create delays and increase administrative work.
- Delivery delays: Late shipments disrupt schedules, extend cycle times, and impact cash flow.
Optimizing OEM parts purchasing is not just about saving money; it is about improving how an entire shop operates.
Using data to optimize the supply chain
The most profitable shops leverage data-driven decision-making to manage OEM parts purchasing. By understanding the metrics that drive efficiency, shops can pinpoint where processes break down and implement solutions.
Key metrics to track:
- Average order response time (minutes): Measures how long it takes from the moment an order is placed until the supplier views the request. A slow response time can delay the entire workflow.
- Average order delivery time (days): Measures the time between when the order is placed and when the parts ship from the supplier. Long delivery times directly increase cycle time and impact cash flow.
- Return rates: Parts returns, whether due to ordering errors, incorrect parts, or customer changes, represent lost time and profitability. Understanding the root causes of returns can uncover opportunities for improvement.
By tracking these metrics, shops can identify bottlenecks, negotiate better terms with suppliers, and create standardized procedures to avoid waste.
Turning OEM parts purchasing into a profit centre
Advantage Parts Solutions delivers exceptional value and has demonstrated success with hundreds of collision repair shops across the country. With extensive experience and established partnerships across Canada, United States, and the United Kingdom, the company leverages international best practices to optimize supply chain strategies. These strategies include:
- Consolidation of all OEM parts volume to agreed upon OEM parts suppliers
- Negotiating improved wholesale parts discounts
- Service level agreements
- Utilizing the in-field sales team and performance data to support discount improvements and maintaining agreed upon service levels with every OE parts supplier Results:
- Reduced average delivery time, improving cycle time and customer satisfaction
- Lowered return rates, leading to fewer delays and less administrative burden
- Improved gross margin on parts sales, directly increasing profitability
The bottom line: Small changes, big impact
Every day, collision repair shops make hundreds of small decisions that affect profitability. By focusing on OEM parts purchasing processes, they can create systems that save time, increase margins, and strengthen their competitive position.
Advantage Parts Solutions helps collision repair shops across Canada unlock hidden profits through smarter OE parts purchasing. With a nationwide network and industry leading technology, the company helps shops turn OEM parts procurement into a true profit centre.
This blog has been created in partnership with Advantage Parts Solutions.