Probably the top question that I get from Parts Managers day in and day out is, “How does my inventory rate compared to others you have seen?” So today I want to try and develop a clear picture of what exactly the average inventory looks like organized by Dealers. Typically, we look to our 20-Group composites for some of the answers when it comes to evaluating the same franchise dealership performance. Unfortunately, the 20-Group composite shows inventory value and obsolete inventory over 12 months old, but very little more about inventory performance. Not to say that the 20Group composite books don’t have a wealth of great information, especially when it comes to sales and return on investment. But what about the real inventory performance? How is it working? Today I’m going to expand the 20-Group composites and compare inventory performance for 60 dealerships based on the manufacturer.
I will base this study on the 5 Inventory Performance Factors:
1) Productive Inventory Value
2) Watch Inventory Value (Productive parts with excess value)
3) Excess Inventory Value
4) Forced Stock Inventory Value (Parts in stock never meeting phase-in criteria)
5) Obsolete Inventory Value (Meeting 13 MNS and 13 MNR both)
We work with a number of dealerships and manufacturers, however, Chrysler, Ford, General Motors, Honda, Acura, Toyota, and Nissan are the ones that we can evaluate at this time with enough dealerships to give concrete data.
Based on these seven manufacturers, here are the inventory statistics on the five factors listed above ranking each one from 1-7 and stating the percentage of inventory for each “factor”.
Productive Inventory as a % of Total Inventory
1) Chrysler 39.2%
2) Nissan 35.3%
3) Honda 30.1%
4) Acura 27.8%
5) Toyota 25.8%
6) Ford 21.4%
7) General Motors 19.6%
Watch Inventory as a % of Total Inventory
1) Acura 12.7%
2) Honda 12.5
3) Ford 11.8%
4) Toyota 11%
5) Nissan 10.9%
6) General Motors 7.8%
7) Chrysler 7.7%
Excess Inventory Value as a % of Total Inventory
1) Chrysler 13.8%
2) Nissan 18.9%
3) General Motors 19.2%
4) Ford 22.1%
5) Toyota 22.8%
6) Acura 24.1%
7) Honda 26%
Forced Stock Inventory Value as a % of Total Inventory
1) Honda 28.1%
2) Nissan 29.5%
3) Chrysler 30.1%
4) Acura 33%
5) Toyota 35.4%
6) Ford 40.3%
7) General Motors 43.3%
Obsolete 13/13 Inventory Value as a % of Total Inventory
1) Acura 2.4%
2) Honda 3.4%
3) Ford 4.4%
4) Toyota 5%
5) Nissan 5.3%
6) Chrysler 9.2%
7) General Motors 10.1%
The above statistics were based on 60 dealerships with at least 4 dealership statistics from each make, if not many more! The inventory values were from the end of February 2011.
Based on the above information, we can come to some conclusions. Overall, high marks go to Nissan & Chrysler. Honorable mention to Honda, Acura, and Toyota. What this really points out is that manufacturer based programs such as RIM and ARO have some real faults. Chrysler is miles ahead of GM when it comes to productive inventory value, though. Almost 20% more of a Chrysler inventory is productive than a General Motors RIM controlled inventory. Chrysler is also 6% lower in Excess inventory value than GM. But, where they both fall short is that they have almost double the obsolete inventory value of the other manufacturers. Now, in a bit of fairness to General Motors, we did not take into account the 13-15 month parts that are RIM guaranteed that dealers have to hold onto until the 16th month, but I would have to conclude that it is a very small portion of the overall obsolete value.
Unfortunately, this highlights that manufacturer controlled programs are designed to increase inventory width and performance, but they suffer deeply when it comes to giving the dealer avenues on which to purge idle capital- especially obsolete inventory. General Motors’ numbers really show a weakness compared to all other manufacturers when it comes to inventory performance.
The real kudos go to Nissan here! While they were not at the top of any category, they were always right in the park based on strong productivity and overall lack of idle capital in the excess, forced, and obsolete categories. They get my nod as having the best overall balance.
Good luck and good selling!