As we continue this series of articles on how to prepare your parts department for slow season, I want to take a moment and have you focus on the importance of adjusting your parts inventory. Outside of you selling off your paid for wholegoods inventory, nothing will produce more instant cash flow for your dealership than reducing your parts inventory down for the season.
When it comes to your parts department there are two almost certain guarantees that will happen as you move into your slower time of year. First, the instant demand for parts from your service department will lessen. With equipment not being used as frequently by customers, the need to have 24-hour turn around by the service department is not as critical, so maintaining a high fill rate out of stocking inventory is not as important as during season. The second guarantee is that most if not all the manufacturers that you have partnered with will be having some sort of parts pre-season or early order program that will offer you incentives such as bigger discounts, free shipping and extended payment terms on parts you were willing to take early. In both cases you can turn those advantages into important cash flow for your dealership during a time that it will be needed.
To make this happen you need to change the minimums and maximums in your software to reflect where you want to be at the peak of slow season. Let’s use outdoor power equipment as an example. If at season you never let your mower blades drop below 18 on hand for a specific model, then your goal would be to have the maximum set for 9 at slow season. 9 blades or 3 complete sets of 3 blades should be enough to get you through to your next weekly stocking order without having a customer or your service department complain. Your parts manager should be looking to reduce inventory levels on any part that you can easily get when you place a stocking order.
So, between the end peak season and the beginning of slow season you would want to get aggressive on selling your inventory down and making both your minimum and maximum the same. Your goal is to burn your parts inventory down to 50 percent of what it was at peak season. For example, if at peak you had $300,000 in inventory, the goal of your parts manager would be to reduce it to $150,000.
Think about the impact of having $150,000 in cash flow coming into your dealership as you move into slow season. The extra perk is you will be able to take complete advantage of any preseason or early order parts programs your manufacturers make available, so you can build your inventory back as you move into season for next year.
Next week we will take a look at simple ways you can take advantage of slow season to improve the profitability of your service department.
