Anderson on the Hidden Cost of Parts Returns: How Shops Can Save Money and Improve Efficiency

About two years ago, I was attending an industry event when it hit me right in the face. Everyone in this business has a voice: OEMs, insurance companies, software companies, and shops. Everyone, that is, but wholesale parts managers.

And that bothered me, because they’re right in the middle of everything we do. They see how parts are ordered, handled, and returned. Yet nobody was really asking them what their experience looked like.

So, I decided to find out.

With support from Subaru and several other OEMs, I started traveling the country and hosting wholesale parts manager workshops. Over the last two years, I’ve done over 40 of them. We brought together wholesale parts managers, OEM representatives, and collision repairers from the same regions and spent a day talking through real issues.

The entire purpose of these workshops came down to one word: perspective.

I wanted shops to understand what wholesalers deal with. I wanted wholesalers to understand the pressures shops are under. And I wanted OEMs to hear what happens after parts leave the warehouse.

Very quickly, one major issue rose to the top.

Parts returns.

At one workshop, I asked a group of wholesale parts managers what an ideal parts return rate looked like. Someone jokingly said, “Zero.” I said, “Ok, let’s be realistic.”

The consensus was this: If a shop keeps returns under 4 percent, excluding cores, that’s best-in-class.

But some shared that some of their shop customers are returning 15 to 20 percent of the parts they order.

That’s alarming — for both sides.

From a shop’s perspective, we don’t charge to order parts; it’s not a billable operation. I’ve never seen an estimate with “Order parts: one hour” on it. Returning parts? Same thing. It’s unpaid labor. Every duplicate order, every incorrect part, every unnecessary part is time your team gives away for free.

And that’s only half the problem.

The Accounting Black Hole

One of the biggest issues I see from shops is outstanding parts credits that are weeks, months, sometimes even a year old.

That money is owed to the business, but it’s not in the bank. It sits on reports. It creates confusion for accounting. It throws off financials.

Across my current client base, I routinely see hundreds of thousands of dollars tied up in outstanding parts credits. And most shop owners have no idea how bad it is until we look at the data together.

That’s why with my clients I use a problem‑solving methodology called DMAIC.

Using DMAIC to Fix Parts Returns

DMAIC stands for Define, Measure, Analyze, Improve, and Control.

First, define the problem. Don’t generalize it. Say something specific, like: “Our parts return rate is 12 percent.”

Next, measure. Pull a report from your management system on all parts returned last month.

Then analyze. Look for patterns. What’s the number‑one reason parts are coming back? Is it unnecessary parts? Duplicate orders because the parts got misplaced? Wrong parts ordered? Aftermarket parts that didn’t fit? Cars that ended up being totals?

Sometimes you’ll find it’s tied to one estimator. Sometimes one vendor. Sometimes one process that’s broken.

Once you understand why, you move to improve.

If unnecessary parts are the issue, enforce 100 percent disassembly before ordering. If pre‑ordered parts are being returned because customers don’t show up, require a deposit.

Finally, control.

This is where most shops fall. You must inspect what you expect. I recommend reviewing outstanding parts credits weekly and reviewing parts return reasons monthly. Set a clear standard for how long credits can remain open; 48 hours is ideal, but pick something realistic for your operation.

If no one owns it, it won’t get fixed.

Order Correctly the First Time

A huge contributor to this is inaccurate parts ordering. Yes, we enter the VIN — but the VIN doesn’t always tell the whole story.

Build data does. It tells you its DNA and accounts for production dates, rolling changes, supplier shifts, and package differences that happen mid‑model year.

Tools available today — like CCC’s Build Sheets and PartsLink24 — can catch those differences before parts ever get ordered.

Why This Matters More Than Ever

Parts return management is still low on most shops’ radar, and it shouldn’t be. This is real money, real labor, and real relationships.

Shops that keep their return rates low are easier to work with. Wholesalers notice that. And when you need help — especially during shortages or back-orders, it matters.

This isn’t about perfection. It’s about process.

If you reduce your parts returns, clean up your credits, and start holding the line operationally, the payoff is real — and it shows up faster than most people expect.

And in my experience, that’s well worth the effort.