Jan. 24, 2005 – Who is in control? You? Or your Inventory?

BillShenkJanuary 24, 2005

As I travel around the country evaluating dealerships I am repeatedly asked questions about parts department inventory. What’s hot and what’s not? How much is enough? How much is too much? Why is it important to have a precise inventory? Is my department efficient? Are my department team members adequately trained? How do I stow it? How do I show? These are questions we all have, especially at inventory time?
Controlling your physical inventory can be like a great motorcycle ride versus the one where everything went wrong, including not having the proper gear for the conditions or not being able to find what you wanted when you needed it.
Soon we will take a “ride” through the parts department. But first let me say that at PowerHouse every time we look at a part of the dealership for ways to make it a Top Gun dealership we ALWAYS look to improve three things:
1. Customer satisfaction. A happy and content customer buys more, comes back more often, tells others about you, and takes much less of your time per transaction because he or she has trust and confidence in you and your dealership
2. Team efficiency (employees). In most dealerships we find that the reason for low productivity is NOT that people are lazy. It’s that they are working hard at the wrong things or simply are not getting the benefits they should from their work. Often, they have missed a few important steps or are doing unnecessary things. At PowerHouse, we look for ways to work SMARTER not HARDER to give you much more of a return on the huge amount of work you are already performing.
3. Profitability. Without profit, nothing continues. You cannot hire and retain quality team members. You cannot offer the kind of assistance to your customers that you must offer to retain them. You cannot offer the selection of products you need to attract not only repeat customers, but new customers as well. You cannot expand the business when opportunity would normally allow it
Taking the Inventory Ride!
Anyone who takes a road trip knows how to be best prepared for it. First, you pack what you NEED. Then you pack what you’d LIKE. Sometimes all you can fit is what you need. And how are you going to pack it? Should you keep your rain gear in the bottom of the bag? Or should you keep it at the top so it is easily accessible and you’re not going to get drenched in an unexpected downpour?
Will you have a map? Will you plan your route on boring roads with potholes or take the scenic ones? Sometimes we take spur of the moment road trips, other times we plan well in advance for a big ride. But one things for sure, if it’s going to be an enjoyable ride you’re going to need to plan it RIGHT!
Inventory is like a ride. A big ride. You need to know where you’re going, what you’re taking, where to put it, and the best way to get there.
First, look at your inventory. What do you have? Where do you have it? Are there parts you have had in stock forever that just don’t move anymore? Where do you keep them?
Your parts department should be set up based on demand. Front to back. What’s hot up front, what’s not in the back.
The more prepared you are for the ride, the better the experience is going to be.
My suggestion is to split your inventory into two sections (parts inventory only, not accessories). Many times when I suggest this, the first response is that we don’t have the room. Believe it or not this will take LESS room than you are using now and give you better access to the parts that are selling if you do it properly!
First, run an aging report on your inventory and identify any parts that have not sold in 12 months or more. Pull and place them sequentially in the back of the department. These items are not going to be accessed very often so we can make the shelves deep, close together, and high. In fact, it’s OK if it takes a ladder to get to the top shelves because you just don’t go there very often.
These parts should be re-bin located or re-categorized to that specific location. Then, when there is a demand for it, your inventory control system will tell you where it is.
Now you have done several things that will make your life better. You have created much more valuable space at the front of the department for those fast moving items, you don’t need to dig through all those slow movers to find what you are looking for, and you can spread them out so they are easier to see. Inventory, yes physical inventory, can now be performed in a fraction of the time.
Think about it. What parts need to be inventoried? Parts with no demand? Those with no movement? Who’s going to steal them? If there are only a few sales of a particular item, what are the chances of making a mistake like selling it under the wrong number, receiving it under the wrong number or installing in service without billing it to the repair order? Save time, money, and aggravation. NEVER inventory those slow movers again, only the fast moving inventory that you’ve placed up front.
As for the fast moving inventory, once a year re-age it and move what has become dead to the inventory you’ve set aside in the back of the department.
Minimize your efforts and MAXIMIZE your returns! Be prepared in ADVANCE! Increase your potential for profits, and customer satisfaction in the process! psb