Idle Inventory Fear: Hidden Cost In Dealership Parts Departments

Idle Fear in Inventory / Parts Training.

If you have ever managed an Automotive Parts Department, you know all about idle inventory. Everyone has it. Some have more. Some have less. It may come as a surprise, but idle inventory is a normal part of doing business. In fact, about 1 to 1.5% of your total stock inventory value will cross the nine months without sale point each month. Models change, manufacturers make corrections to vehicles, and previously popular parts just are not needed as much anymore. I would consider this to be “normal idle.” Most OEM’s pay an allowance or offer returns to help with this. The other side of idle is what comes from unsold special orders, customer returns, parts ordered in error, missed return opportunities, and more. Again, this is a normal part of doing business. Not all customers will return to have their parts installed. Great wholesale customers will need to make returns. Even the best Parts Managers and Counter people make errors from time to time. Appropriate policies, procedures, and a dealership plan of action as part of the standard dealership parts training will reduce this type of idle and supply direction on exactly how to handle it when it does happen. 

Expectations that idle should never occur, not accounting for it, not tracking it, or not having a plan in place to deal with it, will cause unpleasant eye-opening moments. Often, rash decisions and knee- jerk reactions follow.  These can have extremely negative effects on the entire dealership. Bins fill up. Cash quits flowing. It gets worse. The fear of idle creeps in, and now decisions are made based on emotions instead of data.  

A common reaction to idle is: “My Parts Manager must not be doing a decent job.” This is rarely the case. We typically find that the dealership has no established plan of action in place. It is also common to find that Parts Management has never been provided with the necessary training. 

Another quite common reaction to idle is to stop ordering parts for stock. This is very detrimental to business. Some pay-plans punish managers for having aged inventory but supply no mechanism for stopping or reducing it which causes restrictive stocking habits to begin. Having good selling parts on the shelf is the absolute best thing that can happen in a Parts Department. The result is profitable sales and high customer satisfaction. As soon as good stocking parts stop coming in, special orders and emergency purchases rise. These types of purchases decrease gross profit. They also cause an increase in time, effort, and energy to take care of your internal customers.  Customer Satisfaction decreases. Wait times increase. Multiple trips to the dealership may be needed. The customers feeling of “vehicle fixed right the first time” is lost.  There is the added expense of loaner cars and much more. This may also change where they decide to buy their next vehicle. 

Dealerships having the most success do the following: 

1. Have the key players involved and educated on idle inventory – Dealer Principal, General Manager, Comptroller, Service Manager, Parts Manager, Entire Parts Staff
2. Develop an ongoing plan of action to mitigate idle growth and to reduce legacy idle
3. Always keep good selling parts on the shelf. This will promote high fill rates, service-throughput, parts sales, customer & employee satisfaction. It will also keep profits up.
4. Partner with experts to help organize, train, develop plans, and monitor success on a regular basis

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.

By Jay Graham, ADMI