Parts inventory should be one of the simplest areas to manage, but, like golf, simple doesn’t always mean easy. For starters, most dealers have way too many parts on hand. Years ago, when transportation wasn’t what it is today and manufacturers were not as efficient, it might have taken 30 days to get the parts needed to do repairs.
As a result, dealers had to carry a high inventory level to ensure they had what they needed to fix equipment coming in during season. Back then, many dealers took pride in themselves for having all the parts customers could ever need. While that was a noble cause 10 or 20 years ago, things have changed.
Today, original equipment manufacturers and aftermarket suppliers have an impressive 90-percent fill rate in 24 hours. If I am a parts manager, and can get over 90% of my parts in 24 hours, I don’t want to carry anymore than I absolutely have to. At BCI, our rule of thumb for our dealers is to carry no more than a two-week supply of your fastest-moving parts on hand at any one time.
To find your fastest-moving parts during season, go to your software and run a report of parts sales during season last year. Look at the top 50, 100, or 200 parts, and make sure you have what you need to meet a two-week demand. If you have a specific oil filter that sells 50 cases per year, there’s no need to have 10 cases on hand, taking up valuable room in your parts department. I know you have opportunities to take advantage of early order specials and free shipping, but order only what you need to get the best rates, and then, stay on top of your inventory every day to fill in.
The ultimate goal for your parts inventory is to manage it down to where it is no larger than 40% of your projected parts sales for the season and bleed it down to 30% of your peak season level by the time you finish post season. If, during season last year, you did $400,000 in parts sales, we would like to see you have no more than $160,000 in inventory during the peak of your season, and then bleed it down to $120,000 by the end of the year.