How are dealerships getting inventory wrong?

Strong parts departments do not treat every part the same. They understand that fast-moving oil filters, slow-moving specialty parts, accessories, tires, bulk fluids, special orders, and obsolete inventory all require different strategies. By building a thoughtful source structure inside the DMS, managers can let the system work more effectively while gaining greater control over inventory, pricing, and profitability.

Chuck explained that many dealerships are leaving opportunities on the table because their DMS sources are not configured to reflect how their inventory actually behaves. The right source structure can help departments manage day supply, phase-in and phase-out criteria, pricing, accounting, and stock orders more accurately.

The goal is simple: stop making the DMS do one job for every type of part.

Why Does Source Structure Matter in a Parts Department?

A source is much more than a place to categorize parts. It can control several important aspects of how the DMS manages inventory, including day supply settings, phase-in and phase-out criteria, price codes, matrices, manufacturer pricing tables, accounting, and fee codes.

The problem is that many parts managers are reluctant to create additional sources because the setup can be complicated. Chuck explained that some DMS platforms require numerous settings to be configured correctly, which can make managers hesitant to make changes.

But avoiding the process can create a bigger problem.

Different types of inventory behave differently. Chuck compared the situation to running a grocery store. Milk sells quickly and is perishable, while canned asparagus may sell only a few times a week and has a much longer shelf life. Using the same day supply for both products would create an inventory problem.

The same principle applies to automotive parts. Fast-moving oil filters should not necessarily have the same stocking strategy as slow-moving specialty parts.

How Can Dynamic Sources Improve Inventory Control?

Dynamic source structures allow dealerships to establish different stocking and pricing rules based on how individual parts actually move.

Captive parts, competitive parts, accessories, tires, bulk fluids, special orders, non-stock parts, for-stock parts, obsolete parts, and never-stock parts can each be isolated and managed according to their unique characteristics.

For example, competitive fast-moving parts can be placed into sources that allow managers to establish specific pricing and day supply settings. Chuck explained that some dealerships may even benefit from creating separate sources for high-volume categories such as oil filters, air filters, and brake pads.

This allows the DMS to handle more of the repetitive work instead of requiring parts managers or counter personnel to manually manage every pricing decision.

The more effectively the system is configured, the less time employees have to spend working around the DMS.

How Should Dealerships Manage Pricing Through Their DMS?

Source structure can also play an important role in pricing strategy.

Chuck described dealerships using separate sources to establish different pricing structures for specific categories of parts. Fixed retail prices can be applied to high-volume items, while matrices can be structured around different sources and cost ranges.

This can be particularly valuable for competitive parts that represent a significant portion of customer-pay sales. Instead of relying on employees to remember specific prices or use a manual cheat sheet, the DMS can be configured to calculate the appropriate selling price automatically.

Managers should regularly evaluate whether their pricing structure is producing the desired gross profit.

That means looking at:

• Pricing by individual source
• Matrix performance
• Fixed or menu pricing
• Retail selling prices
• Cost and gross profit
• Pricing differences between wholesale and retail parts
• Override activity

Chuck also discussed a Ford dealership that was creating different sources based on wholesale compensation levels. By separating product codes into different sources, the dealership could apply different price codes and discounts to each group.

Conclusion

The DMS is only as effective as the strategy behind it.

Parts managers who take the time to properly structure their sources can gain significantly more control over how inventory is stocked, priced, reported, and eventually phased out. The objective is not simply to create more sources. It is to create sources that reflect how different categories of inventory actually behave.

From competitive parts and accessories to tires, bulk fluids, special orders, for-stock inventory, and obsolete parts, each category deserves a strategy that matches its movement and purpose.

When the source structure is right, the DMS can do more of the work—and the parts manager can spend less time fighting the system and more time managing the business.

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