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Operations Insight

 Holiday Dealership Parts Inventory Insights

ADMI’s top 5:

From our ADMI Team – Happy Holidays!   Getting insight on dealership parts inventory  During the holiday season most dealerships experience a slowdown. In order to maximize the advantage from the holiday season, it is the perfect time that a dealership parts inventory can be cleaned up and further organized to launch their new year with a celebrationYou’ll want to keep that business bottom line un-damaged and help your inventory be its best while keeping up a great impression to your customers  Here at ADMI, we pride ourselves in keeping abreast of such insights as taking advantage of the holiday slowdown.   Here are 5 suggestions from a few of our team members here at ADMI: 

  1. ADMI’s Senior Vice President, Terry Miller, suggestedThis is an excellent time to review a few simple processes to keep your inventory levels where they need to be to meet your business needs and maximize service throughput.

For example:   

    1.  Are ‘Open Orders’ being reviewed consistently to verify all the parts are truly on order? 
    2.  Are Negative-On-Hands being investigated and corrected daily/weekly/monthly?  
    3.  Are parts orders received, posted and put-up same day?  
    4.  Are stock orders audited to verify the bin count matches the DMS count and order quantities adjusted when they do not match?  
    5.  Are your Shipping and Receiving processes working the way you want, especially handling shortages, overages, supersessions and binning parts in the correction location with bin labels?

ADMI has proven processes to increase service throughput and stop idle capital growth.”   2. ADMI’s Agriculture Program Manager, Tom King, suggested, “The Holidays can be full of emotions, and while emotions are fine for holidays, they are not a great way to invest in parts. “Emotional ordering” leads to parts being purchased because someone “thinks it will sell.”  Note the “someone” can be anyone, as there are a lot of folks with an opinion as to what should be in the inventory.  At ADMI we would call this “emotional” parts investing,” because it does not necessarily rely on anything other than anecdotal information.    

  • As an alternative to “emotional” inventory management, a scientific philosophy/approach will lead to increased stocking of SKUs that are selling, increased Shop throughput (production), increased customer satisfaction, and decreased Stock status Idle Capital.  Nothing bad on that list! 
  • The question then becomes, how does a dealership Parts Department implement a scientific rather than emotional philosophy?  This is accomplished through correct utilization of the dealership’s DMS.  When set to meet the dealership’s investment goals, the suggested Stock Order is a reliable predictor of future sales, based on past demands (Sales and Lost Sales) …at your address! What are the attributes of stocking status parts? They are; reliable sellers, items your customers want, low risk, slow aging, and high volume. Again, nothing bad on that list!  
  • As with any commodity, profit can be realized twice, once at the time of sale and once at the time of purchase.  Items purchased on a Stock Order have the lowest acquisition cost (LAC).  

So, Parts Investment Manager, get your DMS working for you, invest wisely, don’t buy “turkeys” in November, but unwrap the gift of increased sales in December…and beyond! ADMI wishes you Happy Holidays and a profitable 2021! 

  3. ADMI’s Director of Business DevelopmentJay Graham, suggested, “The end of the year is quickly approaching and for many Dealers that means it’s, “Physical Inventory Time”.  It’s wise to do a full physical inventory on an annual basis. What better way to kick off the New Year than with an accurate DMS on-hand count that matches what is on the shelf!?  You can hire outside companies to handle this or just do it yourself. If you are going to do it, there are tips to help it go well.  

  • Tip 1 – Contact your DMS provider ahead of time and let them know you are preparing for a physical inventory.  They will have reference materials and step by step instructions.  Also, since most inventories are conducted on the weekends when DMS support is closed, they can provide a special phone number in case something comes up and you need assistance.  
  • Tip 2 – If your OEM uses a RIM system, don’t forget to let them know so they can pause re-ordering.   
  • Tip 3 – When all is done and you have variance, it’s important to figure out why that happened.  Is it a parts error, an accounting error, poor database accuracy practices, theft, or something else?   

ADMI teaches fundamental best practices to keep your inventory accurate and balanced.”    4. ADMI’s Director of Data Strategy and Research, Jim Gillespie, suggested, During the holiday season dealerships can see a slowdown in their business. Customers tend to be spending money on Christmas gifts and put off car repairs and maintenance until mid-January. And so, one important suggestion I’d encourage for a positive result on dealership parts inventory, would be to have dealers catch up on parts and technician training when the repair volumes are low. By upgrading their technical competency while also leveling-up the professionalism of your team you can improve how much they can contribute to the overall and long-term growth of parts and labor sales and profits.    5. ADMI’s Ryan Forsyth suggested, At the end of each year many people make ‘resolutions’ for their personal life for the upcoming year.  This year consider including some business resolutions. 

      • Use available technology: Your DMS has many capabilities that you might not be using.  All day your DMS collects data and the ability to access on a timely basis is key to your ability to grow your business and profits.  How many are already using the AI Platform or AIS resources?  
      • Seek third-party assistance:  Does your OEM have programs that offer additional allowances and/or discounts.  Engage the Support Center for each OEM program to find out how you can maximize those allowances and/or discounts. 
      • Update your Metrics:  Measuring the health of an inventory by calculating the Turn Rate was the beginning.  Today, Effective Fill Rate is the most accurate measurement of how your inventory investment supports through-put in your Service Department. 
      • Train your replacement:  Even if you are not thinking about retirement, someone needs to know what you do every day and how to do it to cover when you are on vacation or need to be out-of-the dealership.  If you are a new Parts Manager, new to the job, new to the OEM, consider finding out more about AIS. 

ADMI includes proper understanding and idle inventory mitigation and planning techniques in all its most basic dealer parts training programs. For help with perfecting your dealer parts operation processes, procedures, and inventory investment, contact us today.