6 methods to improve your inventory management
Steve Jones, Columnist
October 2, 2013
Filed under Columns
Well, here we are again … most of you are coming to the end of another primary unit sales season. Oh, I know there are regions (notably in the South) where the fall season can be the “biggie,” particularly for strong ATV and UTV dealers. In addition, the snowmobile dealers will be ramping up in the next few months trying to drive interest to get those sleds sold before it has a chance to not snow. It was always hard for me to get fired up for sleds when it was 100 degrees, but I had to do it.
Regardless, we will be dealing with controlling our parts, clothing and accessories inventory. If we are slowing down for an extended period, we want to get that inventory down quickly. If not, we may need to reduce spring/summer inventory while building up needed PC&A for the fall/winter season.
During these changes, I find many dealers neglecting the various inventory control programs offered by OEs and aftermarket suppliers. These are tools they offer that can help you maximize your ability to quickly reduce or ramp-up the right inventory.
In our Parts Management Workshops, we ask the students to read the following statements and check boxes by each, indicating whether or not they do these things. If they are not doing them, there are opportunities to improve. How about you? Do you take full advantage of your suppliers’ inventory control offerings?
1. We budget for, and take advantage of, major pre-season purchasing programs.
If you are using an Open-To-Buy program, you will be ahead of this game. Having the cash flow available when needed is critical so you can take advantage of extended terms and special discounts. This is one of the ways the best dealers manage to hold such high margins for PC&A.
2. I stay informed on all PC&A programs from all of our suppliers.
This would seem to be obvious. However, it is not an easy task for a multi-line operation. Nonetheless, failing to do this can result in significant issues down the road. One major OE recently improved their P&A programs significantly. They had some great options, but there were critical dates involved. I visited a number of their dealers and found many of them had no idea the OE had even changed the programs. That’s just sad. This is a requirement for effective parts management.
3. We minimize the number of vendors we use so we can maximize volume-purchasing discounts and benefits.
This is huge. We all have our favorites and want to use supplier “A” for widgets and supplier “B” for geegaws because we save 50 cents on them. But, if we can get a more profitable deal overall by leveraging the volume buy, it is worth spending a bit more for some things and buying from one supplier. It is worth noting that this can be true when looking at purchasing from OEs. You are already obligated to purchase “X” amount of stuff from them, and if you buy deeper rather than using aftermarket suppliers, it can be to your benefit. You need to spend the time to investigate the options and the overall results to your bottom line.
4. We require our suppliers’ reps to provide our staff with feature-and-benefit sales training for their products and assist with displaying and merchandising.
One way to weed out the suppliers is to require they do things to help you move their products. Assuming you have the right people, the better training your sales staff gets, the more they should be able to sell.
5. We utilize our suppliers’ inventory return programs and OE obsolescence programs to reduce our inventory, control obsolescence and open up budgets.
This is where many dealers let their obsolescence get out of control. If it hasn’t turned once in 12 months (or the season), it needs to go away before it becomes a boat anchor. In my book, if it hasn’t turned once in six months (unless it is seasonal), I’m going to start thinking about sending it back. Inventory ties up cash that could be generating profits.
6. We utilize daily parts stocking programs, but never penalize service parts by holding out for minimum quantities.
Service represents the most expensive hourly time with the tightest margins in your dealership. You need to do everything possible to get needed parts to them as quickly as possible. In addition, customer satisfaction with your service department has a major influence on your future unit sales. Do the math.
If you do these six things, you will find improvements in your margins as well as increased turns and reduced cash flow problems. You will be able to improve your ability to stock the right stuff at the right time. This will result in happier customers and less stress for your staff.
Steve Jones is senior projects manager at Gart Sutton & Associates. He has worked in the powersports industry for more than 30 years, for dealerships and manufacturers, and as a consultant and trainer. Contact him at firstname.lastname@example.org.