5 Inventory Categories to Track for Success

With so many factors to monitor, it can be difficult to know where to start to improve your inventory health. The good news is by paying close attention to just 5 categories, you can establish a benchmark and begin the journey towards inventory success!

 

Review your management report to find these categories and track them on a monthly basis. Once the data starts to compile, it will become much easier to see the impact of DMS settings and employee effort and adjust your systems accordingly. Dealerships love our performance reports because we break the inventory into these 5 categories and report them all on one page. No more flipping through giant management reports to find out what is going on with your inventory!

 

Here are the five categories you must track to improve your inventory:

 

1. Productive

These are the parts that sell quickly and consistently make you money. Think oil filters, maintenance parts etc.

 

2. Excess

Excess inventory is defined as those parts that have an on-hand quantity that exceeds your calculated Best Stocking Levels.  You could have a year’s supply of multiple parts on hand, dragging down inventory performance by taking up valuable space that could be used for other parts! Read more to see if excess stock is costing your dealership

 

3. Forced

Forced stock comes from various places, here are the top five:

 

1. Over-ordering by technicians to solve customer issues
2. Returns from wholesale customers, especially body shops
3. Customers failing to return for repairs, especially under warranty.
4. Order error, failing to get proper vehicle information, service advisor diagnosis, or improperly trained parts advisors
5. Speculation, stocking a part based on “gut instinct”, technician suggestion, or manufacturer program forces it to stock

 

These parts can account for 30% or more of your on hand, making up half of your obsolescence as it ages past the 12 months no-sale mark. Read more about forced stock to see if it’s causing your obsolescence to grow.

 

4. Technical Obsolescence

These are all your parts that are headed to your obsolescence category. It’s important to pay attention to this calculation because this is how you can stop your obsolescence from growing. Read more about how to calculate your technical obsolescence.

 

5. 13 MNR and 13 MNS Obsolescence

These are all your obsolete parts that have no sale or receipts in more than 12 months. Dealing with reactive retail, as we do in automotive dealerships, obsolescence is a necessary and unavoidable part of the business. It may not be unavoidable, but how much is a truly unmanageable amount? The industry standard seems to be 10%, and we shoot for 10% or lower with our clients. Read more for tips for reducing idle inventory.

 

If you’re interested in providing more tools and education to your parts operation on a monthly basis, get in touch! We’re passionate about creating the successful inventories and providing parts education for all dealerships.