Overview
Shop Manager's AI Parts Matrix is an industry-first tool designed to automatically optimize and achieve your target parts gross profit. It replaces the traditional, manually configured 'parts matrix' with advanced software, streamlining parts profitability.
Powered by cloud-based computing, the AI Parts Matrix eliminates local server limitations, allowing it to analyze unlimited inventory and sales data—no matter the size of your business. Using advanced statistical models and machine-learning principles, it generates a customized, optimized markup curve based on your shop’s actual parts sales. As your sales mix evolves, the AI Parts Matrix dynamically adjusts to maintain optimal pricing.
Simply set your desired parts GP% and your minimum and maximum multiplier, and the AI Parts Matrix will automatically adjust pricing to meet your target. With no extra effort on your part, it continuously refines its approach to ensure accuracy and profitability.
This article explores the AI Parts Matrix in depth, detailing how it works within Shop Manage. Continue reading to learn more.
Table of Contents:
- How Does the AI Parts Matrix Work?
- How and Why Does the AI Parts Matrix Dynamically Adjust?
- The AI Parts Matrix and Parts Discounts
How Does the AI Parts Matrix Work?
Shops make money on parts on top of what they pay for them (the cost price). How much a part is marked up is a function of its cost: cheap parts get marked up more, and expensive parts less.
Shop Manager’s AI Parts Matrix requires you to enter three simple parameters:
- The most you would markup a part you buy for cheap (“maximum markup”)
- The most you would markup a part you buy for a lot (“minimum markup”)
- Your Target GP %
Let's take a look at this in graph form below:
Assuming sufficient sales data, the AI Parts Matrix will take these three inputs alone and hang a custom, perfectly smooth pricing curve for every part cost, down to the penny. It will not exceed the max markup on the left hand side, and it will never go below the minimum markup on the right hand side:
The shape of the curve is determined by your target GP % and the distribution of parts you’ve sold in the last 30 days by cost price. As the distribution changes, the curve adjusts to keep the total GP % consistent with the target.
Many people focus on the blue line (the AI Parts Matrix sell price) as the thing that’s changing. While that’s true, it changes because of the costs of what you sell, not the sell price of what you sell (more on why it works this way below).
When you think about the AI Parts Matrix, think about the COSTS of the parts you sell, and the distribution of those parts (how many do you sell of cheap, intermediate, and expensive parts, as priced to you). This is what matters and drives gross profit: the individual markups aggregated and optimized to deliver the GP % given all units’ costs.
Again, this is why the stagnant matrix fails: it’s ignorant to the quantity of parts you sell by cost. It simply marks up based on cost and not based on the frequency of those costs (and your profitability goal).
How and Why Does the AI Parts Matrix Dynamically Adjust?
The idea of your parts pricing changing daily may seem unsettling at first, but it’s exactly what’s missing from a traditional “matrix” approach. A traditional matrix is static—it doesn’t adjust. When you fall short of your GP target at the end of the month, you're left guessing which parts were underpriced and what adjustments to make.
Diagnosing these missed price points is time-consuming, requiring manual analysis of your overall GP%, cost distribution, and sales data—not to mention making adjustments across multiple matrices. But even if you make changes, they only affect future pricing, not past sales. And with a new batch of vehicles and services next month, there’s no guarantee you’ll hit your target. This reactive approach leaves you chasing results rather than proactively adapting as your sales mix fluctuates.
The AI Parts Matrix eliminates this guesswork. It continuously analyzes the parts sold over the last 30 days (or longer for smaller shops) and dynamically adjusts pricing as the distribution of parts by cost changes. This ensures your target GP% remains intact, with real-time adjustments reflected in the pricing curve.
Importantly, while past sales data informs pricing, the AI Parts Matrix applies optimized prices across your entire inventory today. You don’t need to sell the same parts as before to maintain your GP target—any part you sell is automatically priced to achieve the desired margin.
As a result, your parts pricing is always based on the most accurate, up-to-date analysis of your sales and GP performance. If you consistently sell parts at the AI Parts Matrix price, your GP% over the last 30 days will naturally align with your target.
Another thing to note about adjustments:
Because the pricing curve is adjusted based on rolling 30-day data, changes happen gradually. Each day, just one new day of sales data is added to the existing 29 days, ensuring smooth, incremental adjustments rather than dramatic price swings.
Even if your shop’s service mix changed overnight—say, from classic restorations to quick oil changes—it would take a full month for the AI Parts Matrix to fully adapt to the new distribution of part costs. This ensures stability while still allowing for continuous optimization.
The AI Parts Matrix and Parts Discounts
Another common concern with this approach is whether discounting some parts will cause others to be inflated. However, the AI Parts Matrix operates solely based on the distribution of parts costs—how many parts you sell at various price points. This means you can apply discounts freely without affecting the AI Parts Matrix’s calculated prices.
That said, achieving your target GP% is only possible if parts are sold at AI Parts Matrix prices. If you consistently discount below these prices, your GP% will fall short. To compensate, you’d need to offset discounts by selling other parts above AI Parts Matrix prices.
In this way, the AI Parts Matrix is a truth teller—it ensures transparency in achieving your profit goals. Some may wish it worked differently, but if it adjusted to compensate for frequent discounting, prices would spiral upward beyond reason, ultimately defeating the entire purpose of the tool.