We’re excited to launch Parts Education with Chuck Hartle! This series of free parts education webinars from our resident parts expert Chuck Hartle will help you take your parts department to the next level. This time, Chuck discusses manufacturer replenishment programs and the dangers of leaving your manufacturer replenishment program un-checked.
Things are changing drastically in the parts business. More and more manufacturers are releasing auto-replenishment programs, while ‘traditional’ programs are becoming more and more specific in their requirements. Whether or not these manufacturer programs are producing successful inventories is still up for debate, let’s dive deeper.
By the numbers, non guaranteed inventory on a manufacturer program is running at average obsolescence nearly 15% higher than the obsolescence of manufacturers with no replenishment programs whatsoever. This data tells us manufacturer programs are driven by the needs of manufacturers, not the dealer. Manufacturers have established an understanding amongst themselves that by slowing increasing the average obsolescence across the board together, they can cleverly hide the truth: that they’re using dealerships as inventory storage.
This is impacting reporting and, more importantly, it’s impacting dealer profit margins. Today, you really have two inventories to manage; guaranteed vs non-guaranteed. In order to manage, you must have a great handle on your numbers. Through increased sources and categories, you can better manage the influx of non-selling parts to your inventory. To find out if your manufacturer is matrixing you, run a counter pad on them.
- Make sure to include the part number, cost, list, and 12-month demand
- Import it into an Excel spreadsheet
- Create a column to subtract ‘List from Cost’ for your profit margin
- Create another column to divide the ‘profit margin’ column into the ‘list’ column to get a gross profit percentage. In Excel, the formula for profit would be ‘=round(d3/b3*100,2)”.
- Sort the spreadsheet by descending gross profit percentage to see how your inventory rates!
Wishing you success! As always, if you have any questions feel free to send us a message.