Days Supply Part II: Maximizing Profit
by Mark De Lucia, founder of DealerMine
In the last eNewsletter I talked about the basics of Days Supply. Even in a "normal" sales year--and what wouldn't we give for one of those--it takes a savvy Parts Manager to make sure stocking levels don't get too out of whack.
Normally, inventory levels are determined by making projections based on sales history and then calculating your days supply from that. Your customers don't wait for parts and your parts department doesn't overflow.
But the past 18 months have been anything but normal. Nationwide, new car sales are down by a third, though Cash For Clunkers provided a temporary uptick. Your usual customers are putting off repairs while whole new groups of used car buyers (saving money by not buying new) are bringing their vehicles in for service. On top of this, dealerships are leaning more heavily on their Parts & Service Departments than ever before. All this throws in a few more variables when you're calculating days supply.
As we've worked with Parts Managers across the country, we've seen these changes affect the way they do their jobs. Most of them have thought of themselves as sellers. But we're seeing more Parts Managers who are taking on the role of buying as well—buying fast moving parts from other dealerships at 50 cents on the dollar and increasing profits dramatically as a result.
Within any parts department's inventory are items that move consistently, no matter what auto sales are doing. These vary from dealership to dealership and from market to market. If you can identify these dependable sellers and purchase them for half price, you can dramatically increase profitability. And when you have an opportunity to buy them, you can ignore your normal days supply calculations or at least "loosen" up your parameters.
"That sounds, great," you say. "But where am I going to get the time to sift through thousands of stock lines to find these fast movers?"
That's where we come in. Our expert parts inventory analysts are available to run the numbers on your inventory and quickly identify where the untapped profit lies. Also, we can tell you which "slow movers" you’d be wise to get rid of to make room for more profitable parts.
According to parts management guru Mike Nicholes, 40-50% of your stock will be items you sell 3-9 pieces per year. These are the ones it's easy to run out of. Once you register with us you can use our new Inventory Analysis software tools to immediately identify parts that are available for 50 cents on the dollar. Contact us to to find out more.
Remember, thinking like a buyer will create additional profit opportunities.
The founder of DealerMine, Mark De Lucia, also was one of the founders of PartsVoice nearly 25 years ago. He pioneered the idle stock relocation industry in 1997 and also helped develop the Mopar national parts locator. His extensive sales and marketing background has formed thousands of industry contacts over the past 22 years. Contact Mark at (866) 936-9908 or use the Contact Page.