How much of your dealership’s parts inventory is actually productive?

Parts managers are often measured by inventory turns, day supply, obsolescence, sales, and gross profit. But those numbers do not exist in a vacuum. Manufacturer programs, automatic stock replenishment requirements, compliance rules, return allowances, and suggested stocking policies can all influence what ends up sitting on a dealership’s shelves.

Using data from 223 dealerships, 15 manufacturers, and more than $190 million in parts inventory, Chuck Hartle compared OEM inventory performance to uncover where productive inventory ends and idle capital begins. The analysis looked beyond total inventory value to examine productive parts, excess inventory, forced-stock parts, automatic stock replenishment programs, and obsolescence.

The takeaway is simple: your manufacturer may control part of your inventory, but the dealership still has to manage everything around it.

How Much of Your Parts Inventory Is Actually Productive?

Productive inventory is ultimately the inventory that is selling and generating a return for the dealership.

For the purposes of Chuck’s analysis, a productive part needed to be active and have three or more sales during the previous 12 months. Parts with two or fewer sales were considered forced stock or marginal inventory.

That distinction becomes important when evaluating automatic stock replenishment, or ASR, programs.

Manufacturer programs can help protect dealerships by guaranteeing certain inventory and maintaining availability of high-velocity parts. However, the amount of protected inventory—and how much of that inventory is actually productive—can vary significantly between manufacturers.

Some manufacturers concentrate their programs heavily on fast-moving inventory. Others control a much larger percentage of the dealership’s total inventory, including parts with relatively low sales.

A protected part is not necessarily a productive part.

That means parts managers should understand not only how much inventory their manufacturer controls, but also how that inventory is performing.

Where Does Idle Inventory Come From?

Chuck identified three major categories of idle inventory: excess inventory, forced-stock or unfulfilled-demand inventory, and 13 months no sale AND 13 months no receipt obsolete inventory.

Excess inventory can sometimes be misleading because it is heavily influenced by day-supply settings inside the DMS.

Bulk fluids are a good example. A dealership may physically need thousands of quarts of oil, but if the source is configured with an unrealistic one-day supply, the DMS can classify much of that inventory as excess.

Tires can create a similar problem. A system may calculate a best stocking level of one tire even though dealerships commonly stock and sell tires in sets.

Accurate inventory reporting starts with realistic DMS settings.

Chuck recommended reviewing day supply and stocking levels so management reports reflect how inventory actually operates inside the dealership.

Why Are Forced-Stock Parts Such a Major Problem?

One of the biggest findings in the data involved forced-stock inventory.

Across the dealerships analyzed, approximately 27.8% of inventory consisted of parts with two or fewer sales during the previous 12 months. In other words, roughly one out of every four parts had marginal demand.

Chuck identified several common reasons these parts end up on dealership shelves:

1. Technicians over-ordering parts while diagnosing customer concerns

2. Returns from wholesale customers and body shops

3. Manufacturer or ASR stocking recommendations

4. Customers failing to return for repairs

5. Ordering mistakes by parts advisors

6. Speculative stocking based on instinct rather than proven demand

These parts may seem harmless when they first enter inventory, but they can eventually become a much larger problem.

Chuck explained that approximately 95% of parts reaching technical obsolescence in the data originated from these low-selling parts.

Today’s one-hit wonders can become tomorrow’s obsolete inventory.

That makes managing unfulfilled demand and forced-stock inventory one of the most important opportunities for preventing obsolescence before it happens.

Conclusion

Manufacturer auto stock replenishment programs serve an important purpose, but they do not necessarily optimize the dealership’s entire parts investment.

Auto Stock Replenishment (ASR) Programs can protect fast-moving inventory and help manufacturers maintain availability throughout their distribution networks. At the same time, low-volume recommendations, compliance requirements, reduced return allowances, special-order problems, and unfulfilled demand can leave dealerships carrying significant amounts of idle capital.

The answer is not simply accepting that the manufacturer controls inventory.

Parts managers can strengthen special-order processes, review stocking recommendations, configure realistic DMS settings, strategically manage compliance, use available return programs, and establish a plan for removing obsolete inventory.

Most importantly, dealerships should measure their performance against relevant manufacturer data rather than looking at inventory numbers in isolation.

When parts managers understand what is productive, what is protected vs. not-protected, and what is simply taking up space, they can make better decisions about the inventory investment they actually control.

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