Your Inventory Management System Is a Tool — Not Your Inventory Manager

In today’s dealership world, inventory management systems are incredibly powerful tools.

They can calculate stocking levels, recommend orders, analyze sales history, track inventory movement, identify trends and even communicate with OEMs and suppliers. Modern systems can do things that would have taken a parts manager hours—or even days—to accomplish manually.

But there is one important distinction that every dealership needs to understand:

Your inventory management system does not control your inventory.

You do.

The system is a tool designed to help you make better decisions. It should never replace the policies, processes, knowledge and accountability of the dealership.

The System Doesn’t Know Your Entire Business

One of the biggest mistakes we see is treating the inventory management system as if it has complete visibility into everything happening in the dealership.

It doesn’t.

The system knows what is entered into it.

It knows the transactions it has been given.

It knows the history it has available.

But it doesn’t necessarily know about every customer opportunity, every local market condition, every technician preference, every competitive situation or every product line your dealership is carrying.

And more importantly, the system isn’t standing behind your parts counter talking to your customers.

A parts manager is.

Your OEM Inventory Strategy Is Not Your Entire Inventory Strategy

This is especially important in the heavy-duty dealership world.

OEM inventory management systems are generally designed around the OEM’s products, part numbers, stocking philosophy and supply chain.

That’s exactly what they should do.

But a dealership’s inventory is much bigger than one OEM’s perspective.

The dealer may carry:

·         OEM parts

·         Multiple OEM product lines

·         Aftermarket parts

·         Private-label products

·         Specialty parts

·         Truck and trailer components

·         Shop supplies

·         Accessories

·         Fast-moving maintenance items

·         Parts purchased from local and regional suppliers

·         Competitive replacement parts

Your inventory management system may do a great job recommending what the OEM believes you should stock.

But that doesn’t mean it is telling you what your dealership should stock.

Those are two very different things.

The OEM’s Goal and the Dealer’s Goal Aren’t Always the Same

This is where parts managers need to think critically.

The OEM wants to support its distribution network, protect its parts sales, maintain service levels and move its products through the channel.

The dealer has a different responsibility.

The dealer has to make money.

The dealer has to manage working capital.

The dealer has to satisfy local customers.

The dealer has to support its service department.

The dealer has to compete with other dealers, independent parts stores, aftermarket suppliers and online sources.

And the dealer has to manage the entire inventory investment, not just the inventory associated with one manufacturer.

That doesn’t mean the OEM’s recommendations are wrong.

It means they are one piece of the puzzle.

Your System Doesn’t Dictate Your Stocking Policies

Another common misconception is that because the system recommends a stocking level, that stocking level automatically becomes the correct stocking level.

It doesn’t.

A system can recommend a minimum.

It can recommend a maximum.

It can calculate days’ supply.

It can look at historical demand.

But management still has to determine:

What are we willing to stock?

What are we not willing to stock?

How much inventory do we want to invest?

Which products deserve shelf space?

Which products should be special order?

Which products should be sourced locally?

Which products should be eliminated?

Those are management decisions.

The system can provide information.

Management has to provide direction.

Not Every Part Number Deserves the Same Treatment

This is another area where dealerships can get into trouble.

Inventory management is not simply about keeping the computer happy.

It is about managing dollars.

A dealership can have thousands—or tens of thousands—of part numbers.

They aren’t all equal.

Some parts turn every day.

Some turn once a month.

Some sell twice a year.

Some are critical emergency parts that customers expect you to have.

Some are commodities that can be purchased from multiple suppliers.

Some are obsolete.

Some are profitable.

Some aren’t.

Some generate service department revenue because having the part on the shelf keeps a truck in the bay.

Others simply take up space and consume working capital.

One stocking strategy cannot effectively manage every part number in your dealership.

That’s why a good inventory strategy requires segmentation, policies and human judgment.

Your Inventory System Doesn’t Manage Product Lines It Doesn’t Control

Think about a typical heavy-duty dealership.

You may have OEM parts sitting next to aftermarket brake components, filters, belts, lighting, suspension components, trailer parts, electrical products and hundreds of other items.

Who is deciding how those products are stocked?

It can’t simply be the OEM inventory system.

The dealership has to establish its own rules.

You need to know:

·         Which vendors are strategic?

·         Which product lines are profitable?

·         Which lines have acceptable fill rates?

·         Which vendors can support emergency needs?

·         Which parts should be stocked versus ordered?

·         Which products are generating lost sales?

·         Which products are becoming obsolete?

·         Which products are tying up too much cash?

That is inventory management.

The software is simply one of the tools that helps you accomplish it.

The Computer Doesn’t Know What Happens on Your Parts Counter

Here’s the biggest reason you can’t completely turn inventory management over to a system.

The computer doesn’t talk to your customers.

Your parts people do.

They know that the customer who asked for a particular brake component last week will probably need it again.

They know the fleet in your market that constantly buys a certain brand.

They know the local road conditions.

They know which products technicians ask for.

They know which parts customers are willing to wait for—and which parts they absolutely aren’t.

They know which competitor always seems to have something you don’t.

That information matters.

And much of it never makes it into the inventory management system.

Inventory Is Still a Management Responsibility

The system can tell you that you have 12 on hand.

It can’t necessarily tell you whether you should have 12.

It can tell you that you’ve sold three in the last six months.

It can’t necessarily tell you whether the next customer will need one tomorrow.

It can recommend an order.

It can’t necessarily tell you whether your dealership has the cash available—or whether that money would be better invested somewhere else.

That’s why inventory management cannot become inventory software management.

There is a difference.

Use the System. Don’t Let the System Use You.

The best dealerships don’t ignore their inventory management systems.

They use them aggressively.

They use the data.

They use the reports.

They use the recommendations.

They use demand history.

They use stocking calculations.

But they also challenge the information.

They ask questions.

Why is this recommended?

Why do we have this much?

Why isn’t this selling?

Why are we constantly stocking out of this part?

Why are we carrying three different versions of the same product?

Why are we buying $150,000 of inventory when we’re only selling $100,000 a month?

The system can help identify the problem.

The dealership has to solve it.

The Bottom Line

Inventory management systems are fantastic tools.

In fact, a modern dealership would have a difficult time efficiently managing a large parts inventory without one.

But let’s keep things in perspective.

The system is not your inventory strategy.

The OEM’s stocking recommendations are not your entire inventory strategy.

The computer doesn’t know your customers better than your parts team does.

And the system certainly doesn’t remove the responsibility from the parts manager.

The dealership still needs clear stocking policies, inventory controls, cycle counts, obsolete inventory procedures, product-line strategies, vendor management and accountability.

The goal isn’t to have a system that tells you what to do.

The goal is to have a system that gives you the information you need to make better decisions.

Because at the end of the day, inventory is still cash.

And whether that cash is working for your dealership—or sitting on a shelf collecting dust—is ultimately a management decision.

Use the system. Trust the data. Challenge the recommendations. And manage your inventory.

Don’t let your inventory management system manage you.