Months-no-receipt and months-no-sales are critical to review when managing your inventory. Today we’ll go over how you can manage them properly to minimize obsolete and aged inventory.
For years we’ve measured our inventories by the months-no-sale-report. It was the first report to come out, and in the early 70’s it was all we looked at or cared about. There are two very different ways of looking at the inventory at the dealership level:
Parts’eze’ is looking at your inventory from a sales perspective, aka the months-no-sale report.
Dealers’eze’ is looking at your inventory from an investment perspective. This is the last time the dealer wrote a check for a part, aka the months-no-receipt report.
When a dealer goes to a 20 group, they often come back excited and full of ideas- the only problem is the language they speak is foreign to most Parts Managers. It’s clear they are measuring the inventory in a different way leading to what feels like a language barrier in your dealership.
We’ll analyze a scenario to better illustrate this problem. Imagine you stock a filter that you sell 12 times per year or once a month. Your current on-hand is zero. Your manufacturer is offering a 10% discount from Dealer Net if you purchase 60 (5 cases). You make the purchase to get the discount hoping demand might increase. Based on your current demand, you’ve just bought a 5 year supply of these filters. Now your demand doesn’t change, so each month that you sell a filter, the remaining balance of the inventory value stays in the ‘0-3 Months No Sale’ value category and the part number does not age. Each month you sell this filter, the remaining balance will continue to age in the ‘Months No Receipt’ or ‘Last Receipt Date’ category.
To put this into perspective, two years down the road you still have 35 filters left and though the months no sale still shows an active part, the months no receipt show that the total inventory balance of the 35 filters are in the “25 and Greater” aging value of months no receipt. This can result in the appearance that you’re inventory is active and performing well, while the parts-no-receipt report can illuminate just how many parts are still sitting on the shelves. This is what the dealers are looking at.
To better identify slow and non-moving inventory, you’ll need to develop a practical yet effective model for merchandise aging. You must be capable of aging items and mapping obsolescence in an objective and timely manner. Use the ‘supplier receipt date of merchandise’ as the basis or its stock aging. This may be simplified as ‘last receipt date’. By comparing your months-no-sale and months-no-receipt, you can accurately assess your inventory.
For help with your specific DMS, feel free to send us a message.