Sept. 7, 2009 – A careful eye on inventory

By Neil Pascale
Editor
MADISON, Wis. — Parts Unlimited founder and CEO Fred Fox is reacting to a decrease in consumer spending by increasing the national distributor’s inventory.
It’s a strategy that may cause some to scratch their heads but one that Fox believes is paramount to combating a challenging retail environment.
Fox, speaking at the company’s Showcase ’09 in front of dozens of vendors, said he informed a senior level employee last year to increase the company’s inventory by $10 million-$20 million over the year-ago amount. “He said, ‘Why in this market?’ Fox said, recalling the employee’s reaction. “And I said, ‘We don’t know exactly what somebody else will run out of.’”
Parts Unlimited and its sister V-twin
distributor, Drag Specialties, are relying on their diverse and deep product offering — some
1,400 lines strong — to hold sales near last year’s levels even as industry reports show decreasing PG&A revenue.
“Some of our competitors have prioritized the top 20 or 50 lines that they take good care of and neglect the other ones because they’re trying to restrict their money, or they let employees go and can’t handle all the orders,” Fox told Powersports Business in reference to the inventory increase. “For us, it doesn’t matter if it’s the 1,300th product line or it’s the 50th, we handle them all alike. We buy roughly a 90-day supply, depending on the company’s ability to deliver.”
That ability to provide products in a timely manner is something the inventory levels allow Parts Unlimited or Drag Specialties to do at a much higher rate than its competitors, Fox believes.
“We say, ‘Yes we have it. We can ship it today. You don’t have to buy a big quantity because we don’t intend to run out. If you need more next week, call us again,’” he said.
Looking forward, Fox believes the company will enter its new fiscal year — on Oct. 1 — at or near the same inventory level as a year ago, even as PG&A sales have largely been down across the country by a double-digit percentage, according to same store sales information provided by ADP Lightspeed to Powersports Business.
That revenue drop has been slight with LeMans Corp., the parent company of Parts Unlimited and Drag Specialties. Fox said through the company’s first 10 months of its present fiscal year, it was “consistency at a level that was very close to last year.”
“But it’s not one size fits everybody,” Fox said of the various brands offered, noting there is quite a difference between how individual suppliers are performing. “Some are up 20 percent – not very many. Some are up 5-10 percent. Some are down 5-10 percent. Some are down
30-40 percent. So there are winners and losers.”
Besides keeping a close eye on inventory levels, LeMans Corp. is continuing its push overseas with Parts Europe. Work continues to be done on the company’s 200,000-square-foot warehouse in Germany, located near the Luxembourg and French borders. The company is working on finishing the facility’s four level-high conveyor system and small parts rack. It already has completed the facility’s tire rack, which alone can stock 120,000 tires. Fox is seeking to become the largest tire distributor in Europe, something he believes LeMans is in the United States with approximately 60 percent of the market share. Fox said the company already has plans in place to distribute a number of high-profile brands in Europe, including Michelin, Metzeler, Pirelli and Bridgestone.
As work continues on the German facility, containers of product continue to arrive there, sometimes two to three a day. “In the meantime we’re getting orders off of temporarily shelving,” Fox said. “We learned you can have temporary shelves as long as you have inspectors in there on a regular basis.”
Parts Europe also continues to work on the sales side.
“Right now we’re a German company and we’re in Germany and a big portion of our sales go there,” Fox said. “We have customers in
Russia, England, France and everywhere and we’re taking them one at a time.
“Part of my instructions to our employees is prioritize. What do the dealers want us to stock the most? If somebody says, ‘I’m from Poland and we sure wish you could ship there.’ We say, ‘Tell us what products you need the most and we’ll put them at the top of the list.’ Incidentally, we do have operators who can speak Polish.”
Within 10-12 years, Fox believes Parts Europe can match the volume of business it does in the United States. “This is a ballpark figure,” Fox said, “but at the same time it’s a good goal.
“I plan to do what I did in the United States. Start out as the smallest distributor in the whole area and end up the biggest guy. Because growth to me is fun.”