Inventory planning is one of the keystones for dealer wholesale parts sales growth. Shops need parts quickly to maintain their workflow and it’s difficult for dealerships to provide parts to customers quickly without the right parts inventory management plan.
Shops consistently rate speed of service as the #1 reason they buy parts from a wholesale supplier and there are 3 keys to fast service – fast response, fast delivery, and maintaining the right inventory levels. And without all 3 in place, an auto parts supplier cannot effectively provide the speed of service a wholesale shop needs.
Speed is Key to Sales Growth
Fast delivery is consistently rated the most important factor over price, quality, warranty and return policy. Shops need to make a buck, and fast service helps them get the parts they need quickly. Parts Departments can’t receive, process and deliver the order if they don’t have the auto parts supply available.
Optimizing Inventory Planning
In the 1980s, prevailing thought in the United States was to move inventory out to the end of the channel to maximize sales. So, dealers and the aftermarket distributors would consign inventory to larger shops and offer large bulk discounts to encourage their wholesale customers to buy and stock as much product as possible.
Inventory planning has changed in the past 40 years. Today, auto manufacturers and aftermarket distributors have taken a different approach to planning inventory. So instead of pushing parts into the shops, supply chains have pulled inventory back up into the distribution centers where they carry safety stock.
This inventory plan has benefitted the supply chain in many ways. First, a well-planned JIT inventory improves cash flow. Since parts are carried in one warehouse instead of dozens, less money is tied up in carrying costs. Secondly, it reduces returns and improves ordering transparency and accuracy.
Third, it improves the demand forecasting process which improves the global supply chain. However, this did create some OEM auto parts supply chain
Change the Focus
Two key changes are needed if the OEM Parts Channel is going to capture aftermarket parts sales. First of all, dealer management must recognize that most of the Fixed OPS opportunity is in the Parts Département, not the service department. So, fixed operations growth hinges on dealer management team looking at independent shops as customers and not competitors.
Secondly, Parts Managers will need to adapt their inventory planning process. Specifically, dealers will need to carry more inventory. But the increase in the amount of inventory carries risk and will need to be managed closely and carefully.
A Just in time – JIT inventory planning process tends to focus on restocking sold inventory and does not naturally recommend the addition of speculative inventory. So, dealers and automakers will need to augment their strategic part management process.
Dealers who want to carry the right inventory for independent shops are wise to add parts inventory management software and adding data inputs. And there are many options dealers have for achieving both.
Parts Inventory Management Software
Dealer Management systems offer excellent parts inventory modules. However, they also rely upon good data to work properly. So, an inventory planning system that isn’t tuned to look for lost wholesale sales won’t recommend the addition of those parts. So, parts will never be reordered because there is no reorder point set in the system.
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There are a lot of great data inputs available to dealers. The first is organic traffic. A lot of wholesale parts orders are not recorded as lost in the DMS system because they inquiry is never added. Improving discipline and ensuring countermen add lost part sales will help capture these parts and set a reorder point when the inquiry volume reaches minimum thresholds.
Another great option is to buy local demand data. Companies such as Epicor and Mitchell 1 have data services that provide part level demand data by zip code or dealer PMA. These provide a great list of parts your customers are buying from your competitors. Reviewing this data and setting a strategic stocking plan can help your dealership grow into the business.
One of the best places to start with car parts wholesale is with powertrain parts. So, add some high demand powertrain parts inventory and tell your customers that you are offering powertrain.