The High Cost of High Inventory

Your parts department might be full to overflowing with parts. And to some dealers, this is a good thing. After all, you have a great selection for customers, which means you’re their “go to” store when they need a part.

But, how much is all this inventory really costing you? And are you really making your customers happy by stocking everything under the sun?

Let’s take a look at the high cost of high inventory.

Cost #1: Your Reduced Cash Flow

You might have $200,000 in parts sitting in your dealership. But chances are you have at least $20,000-$30,000 in parts that you simply don’t need.

That’s a lot of your money that’s being tied up in parts you might never sell. If you’re having cash flow problems then the first thing you need to do is use your powersport office management software to check your parts department. Returning your slowest-moving parts will allow you to get that cash back and have it start earning you interest (instead of collecting dust in your parts department).

Cost #2: High Inventory is Harder to Track

You know all too well just how maddening taking inventory is. But, it has to be done.

If your parts department is jammed with parts, it’s going to take you an incredibly long time to count them all. How much are you paying your employees to do this? How much money would you save on labor if you reduced your inventory by just 5%?

It’s also important to think about your local government when it comes to your inventory. Many governments have hefty inventory taxes that they’re levying against businesses to enhance their own cash flow in this economy. The more inventory you have in stock, the more you’re going to pay in taxes.

For instance, one dealer in Georgia had to pay an additional $30,000 in inventory taxes that he’s never had to pay before. That’s an enormous amount of cash that he could have saved simply by managing his inventory more effectively.

Cost #3: Confusion

The larger your inventory, the more confusing things can get for your team because it’s just harder to keep track of it all. Parts get misplaced or lost, and boxes get moved. This is more money you’re losing, especially if you have customers walking out the door in frustration when service takes too long.

Smaller inventories are simply easier to manage and they take up less space. You could, in turn, use this extra space to increase the size of your whole goods department.

Last Word…

It’s all too easy to let inventory get out of control. But maintaining a large parts inventory costs your business in several ways. You’re not only tying up your cash flow, but you also run the risk of paying higher taxes and losing customers due to inefficiency.

Using quality powersports office management software can help you make intelligent decisions about your inventory and trim it down to start saving money and time immediately.

Are You Measuring These Key Drivers in Your Inventory?

Photo © by marabuchi

Despite some great advances in the powersport industry, there are still a large number of dealers who aren’t managing their inventory correctly. Why? Well, there are several reasons.

One could be because they don’t have the technology to do
it easily (which is why investing in powersport inventory management software is such a smart idea). Being able to manage inventory, and see real-time figures of what you have in stock, can add significant savings to your bottom line. Most dealers find that they pay for the powersport office software within the first year.

Another reason might be because these dealers don’t see the need. But effective inventory management is one of the most vital tasks you need to do regularly to keep your dealership healthy and your costs under control.

So what key measurements should you be looking at?

1. Inventory Turns
You should aim for 5-6 turns per year for your inventory. This may sound like a lot to some dealers, but 6 turns per year truly is the most efficient and profitable for powersport dealers. Anything more than 6 and you’re going to start losing that efficiency because you’re ordering more often. Again, however, without a business management system it’s hard to know where you’re at with this.

2. Parts Sales Reports
Do you know what your fastest moving parts are? Do you know what hasn’t moved at all?Many dealers are unaware of this important information. But this information can help you make important, strategic decisions for your dealership. For example, you want to make sure you don’t ever run out of your fastest moving parts.

You could also make sure that your fastest moving parts are closest to the counter to improve efficiency. Time is often your enemy in the parts department; when a customer comes in looking for a part, you should have closed a sale with them within 4 minutes of them walking through the door. The faster your team can find your most popular parts, the more sales you’re likely to make. At the least, your customers will leave happy because they got in and out quickly.

3. Whole Goods Sales Reports
Most powersports dealers see their peak in early summer. This means you need to be prepared with the right amount of inventory to handle your increased business. But you don’t want too much, because over-ordering means you’re tying up valuable space in cash in your inventory.Monitoring your whole goods sales reports from past seasons can help you make informed decisions about how much inventory you’ll really need for this year’s season.

Last Word…

It’s really easy for dealers to let their inventory get out of control. But investing in quality powersport office software and closely monitoring key reports will help ensure that you’re making informed decisions that will keep your dealership healthy and strong in the years to come.

Ideal Invited as Business Management Software Provider for High-Performance Service Department Pavilion at Upcoming GIE+Expo

Ideal Computer Systems, the leading provider of business management software for Outdoor Power Equipment dealers, has once again been invited by Bob Clements International to be the official software provider for their High-Performance Service Department pavilion at this year’s GIE+Expo. The expo takes place October 28-30, in Louisville, KY.

This year’s High-Performance Service Department will focus on inventory control, teaching dealers how to discover “hidden treasures” in their parts department. Ideal representatives will be on-hand to help educate dealers on ways industry-specific software can help them gain control of their inventory as well as all other areas of their business including service, customer management, sales & invoicing, accounting, purchasing, and reporting.

“I thought the High Performance Service Department was a big success last year and we look forward to tackling inventory control in the High Performance Pavilion this year,” said Dennis Haefner, president of Ideal Computer Systems. “It is an honor to be chosen to participate again as the Business Management Software company in the pavilion.”

Bob Clements International, regarded as one of the top consulting firms for OPE dealers, is once again heading the event. New to this year’s pavilion will be dealer panel discussions led by Clements and featuring pavilion sponsors. Joining Ideal as pavilion sponsors are ARI, Ariens, Briggs & Stratton, Cub Cadet, Heftee, Husqvarna, Hustler Turf Equipment, Kohler, Schriller Grounds Care, Stens, and Stihl.

“We are trying to provide an environment at the GIE+Expo that shows dealers what the possibilities are for their Parts Department,” said Bob Clements, president of Bob Clements International. “Having a good business management system along with the right organization and good processes will catapult their dealership to new heights in profitability.”

In addition to the High-Performance Service pavilion, dealers may also view Ideal’s software and speak with company representatives in booth #5004 at the GIE+Expo.

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About Ideal Computer Systems, Inc.:

Ideal Computer Systems is recognized as the leading provider of business management software for Outdoor Power Equipment dealers. With 25 years of proven experience, Ideal has helped thousands of OPE dealers manage their business more efficiently while boosting profits. To learn more about Ideal, visit www.idealcomputersystems.com

About Bob Clements International, Inc.:

Bob Clements International is a consulting firm that specializes in the development of high-performance dealerships. The organization works hands on with dealerships throughout North America, helping them attain the personal freedom and financial wealth all owners strive to achieve. You can learn more about Bob Clements International by visiting www.bobclements.com