If your DMS says you have a large amount of excess inventory, the first question shouldn't necessarily be, “How do we get rid of it?”
It might be:
Are our stocking settings accurate?
During our latest PartsEdge webinar, Chuck Hartle explained that excess inventory percentages can be heavily influenced by the day-supply settings inside the DMS.
Bulk fluids provide a perfect example.
Imagine your bulk oil tank contains 2,500 quarts.
If the source has a one-day supply setting and the DMS calculates a best stocking level of approximately 10, the system can report roughly 2,490 quarts as excess inventory.
But that doesn't necessarily reflect the operational reality of the dealership.
Bulk fluids are continually consumed through oil changes and other services. The issue isn't necessarily having the oil. The issue is the setting being used to calculate how much the dealership should have.
During the webinar, Chuck recommended using a more realistic 30-day supply for bulk oil and running a stock order against the source to establish a more representative stocking level.
Then, if the dealership is carrying 60 days of oil, the excess becomes meaningful.
Bulk oil wasn't the only category highlighted.
PartsEdge frequently sees excess inventory appear in bulk oil and tires because of how those categories are stocked.
A tire's best stocking level may be one, for example, while the dealership actually has a set of four on hand. That difference can appear as excess in DMS reporting even when there is an operational reason for carrying the quantity.
Management reports are only as useful as the information feeding them.
When source settings don't reflect how inventory is actually purchased, stocked and sold, the resulting excess inventory report can tell an incomplete story.
That makes source setup more than a DMS housekeeping task.
It directly affects the Parts Manager's ability to understand what inventory is genuinely excess and what inventory simply appears excessive because the stocking parameters don't reflect reality.
Watch the complete Ultimate OEM Inventory Showdown webinar for more insights into productive, excess, forced-stock and obsolete inventory across the PartsEdge dataset. Register for the next webinar so you don’t miss a single webinar!