For dealership parts operations, effective DMS implementation and maintenance is the key to maintain high profits and high levels of service to their customers. New Parts Managers and those faced with new or changing manufacturer programs often find themselves falling into a reactive zone with inventory, struggling to fully identify the underlying problem causing the mess. By monitoring a few key aspects and creating a plan of support to get there, you can solve the root cause and move your inventory into a new phase of profitability and productivity.
Review the below checklist of inventory issue indicators. Have you experienced one or more of these issues in the last 6 months?
- Low fill rates
- Low gross profit
- Inventory turn rate issues
- Over/Under-stocking due to Manufacturer ASR programs / guideline management
- High obsolescence that keeps coming back
- Special order issues or running out of fast moving parts
- Source accounting issues
- Lack of parts pricing and matrix or one that needs updating
- Over-complicated management reports
If yes, read on!
Fill Rate is the percentage of parts sold from inventory on hand vs all the parts sold including special orders and emergency purchases and is an important indicator of the health of your inventory. Sometimes referred to as off-the-shelf level of performance or job fill, Fill Rate can be reported by the DMS, but beware: how an operation receipts orders into their inventory can affect the calculation dramatically producing fill rate numbers that are not even close to reality. Additionally, the particular mix of wholesale, retail, and warranty work, can cause the same Fill Rate number to look good at one dealership and bad at another. For example, if you are a large wholesale operation and you do a lot in warranty, we can guarantee that you will have a lower fill rate than say, a small dealership that does very little wholesale, very little warranty, and a lot of maintenance work. To learn how to calculate your Fill Rate, get goal rates, and suggestions for improving, download our free eBook.
Inventory turns is the number of times each year a dealership sells its entire parts inventory and is a great place to start identifying issues. Low turns often mean shelves are stocked with unneeded parts preventing fast-selling inventory from getting stocked at needed levels. In creating a lean inventory, the best strategy is to keep turns as high as possible without compromising your ability to meet market demands in a timely manner. If you’re interested in learning more about inventory turns, download our free eBook.
Even the best parts operations can experience significant improvements by streamlining DMS policies and settings. Regular review, adjustments, and follow-up will resolve many of these inventory performance issues resulting in a healthy, efficient and profitable parts operation. PartsEdge takes all the guesswork out of DMS management and utilization. Our clients see, on average, a 20% drop in total inventory, 15% less idle inventory, a 50% increase ROI, and a 20% increase in parts sales. If you’re ready to put our parts power-tool to work, send us a message! We’ve been helping dealerships for over 20 years and our testimonials speak for themselves.