Obsolescence: Preventing It Before It Begins

In my previous blog, I discussed how obsolescence can erode profits. This post focuses on the importance of preventing obsolescence before it reaches inventory.

Addressing obsolescence after the fact is costly, as parts often cannot be returned to the vendor or OEM. At that stage, dealerships are left with two undesirable options: hold inventory in hopes it will sell or write off the part entirely. The sources of obsolescence are clear: approximately 50% originates from special order parts, 30% from wholesale and shop returns, and 20% from ordering the wrong part. This indicates that the majority—80%—of obsolescence, is within a dealership’s control and can be prevented. By analyzing the remaining 20% and addressing root causes, dealerships can realistically reduce

obsolescence by 85–90% through strong, consistently enforced policies and procedures.

Despite this, many dealerships struggle to implement effective controls. Often, this stems not

from a lack of intent, but from fear: fear t

hat enforcing policies will drive away customers or

cause employees to leave. Managing in this manner jeopardizes the financial health of the

business, as inventory represents cash. Ask yourself this question, would you spend your money on a part or parts that you have never sold before to have them, only to end up sitting on a shelf?

Use that logic when making Inventory decisions and this should be applied from this perspective: would you spend the dealership’s money on a part that has never sold and likely will not sell?

Some level of obsolescence is inevitable. The goal is to minimize its impact by establishing

robust policies, ensuring staff accountability, and preventing non-stock parts from entering

inventory unnecessarily. Effective management of obsolescence safeguards both profitability and operational efficiency.