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Customizing Dealer Inventories


11/1/2003
By Gary Goms

It's important for stores to think about more than just-in-time delivery. Different types of dealer inventories should never be ignored.
 

It's sad to say, but many jobbers have gotten away from installing dealer inventories the past five or 10 years, and for some very good reasons.

The first reason is rather obvious: most dealer inventories usually suffer from neglect and, when it comes time to update, the jobber usually ends up taking back a motley collection of grease-stained. The second reason is that on-line cataloging has sped up the process of ordering and delivery so much that many shop operators have built their shop-management systems around the just-in-time delivery concept.

But the third and most important reason is that todays high rate of parts proliferation has caused jobbers to veer away from installing dealer inventories. Whereas a dozen or so spark plug numbers might have covered 70 percent of the market a decade ago, 50 or more numbers may now be required to achieve the same coverage. The same can be said of other expendable parts like batteries, drive belts, brake pads and oil, fuel and air filters.

In addition to proliferation, obsolescence, changing vehicle populations and market saturation issues can cause conventional inventories of belts, hoses, spark plugs and secondary ignition parts to be a prohibitively expensive and high-maintenance undertaking for a small repair shop that doesnt have a dedicated parts department.

THE CASE FOR DEALER INVENTORIES
Of course, all of the above doesnt mean that dealer inventories have become obsolete. In fact, inventories may be needed now more than ever since many shops are now using sophisticated scheduling, management and productivity systems to increase profitability. Because time is money in any automotive service shop, being too tardy on delivery or having an inventory that lacks depth and breadth may cause a jobber to be moved from first-call to second-call status.

Consequently, installing a dealer inventory can alleviate many problems associated with inventory depth and parts delivery. For example, nobody makes money when a hard-pressed jobber sends out a single oil filter on a hotshot delivery. In fact, the jobber has lost money on the part even before the delivery person turns on the key in the ignition of the delivery truck, and the shop owner has lost money on the oil change because now its going to take longer than its allotted 30 minutes. Therefore, there is a case to be made for establishing and maintaining profitable dealer inventories.

CREATIVE INVENTORIES
Call it market stereotyping, but too often we assume our dealer base is a homogenous collection of shops that have similar needs and wants in replacement parts. To the contrary, the dealer market now consists of general repair, nameplate specialty, service specialty, commercial account and fleet operation shops, all of which have specialized inventory needs that require a bit of creative thinking on the part of the jobber to establish and maintain.

Of course, these definitions may be blurred at times, but the dealer market is breaking down into these basic segments because its more cost-effective for a shop to pursue a core business or service specialty in todays complicated technical environment than to try to be a "do-all" repair shop.

To illustrate, most average-sized general repair shops may limit their work to service work that doesnt require specialized equipment, while a nameplate specialty shop, on the other hand, does provide the specialized equipment needed to perform specific repairs on a particular nameplate or vehicle product line. Service specialty shops are similar, but generally equip themselves to serve a core business or service specialty area such as alignment/brake, underhood/diagnostic or engine/drive train rebuilding services for a broad range of vehicle lines. Commercial account shops usually specialize in servicing small fleets of vehicles for small businesses like flower shops and medical supply houses. The fleet shop, which is usually an adjunct to a larger organization such as a construction company or police car garage, can be very specialized or very generalized, depending on the structure of the business.

INVENTORY HISTORIES
What are the criteria for establishing a customized dealer inventory for, lets say, an item like an oil filter? First, there should be a frequent demand for the item in the dealers sales history. If a shop is buying, lets say, a half-dozen oil filters per day, its a safe bet that the shop could profitably use a standing inventory of engine oil filters. If the majority of the oil filters are for the same application, its more imperative that the dealer should carry a few days supply on the shelf. Next, the shop should have a clean, secure place for storing the inventory. Stacking oil filters on a shelf where the filter cartons will be exposed to dirt, sunlight and moisture becomes a costly situation, especially if the jobber must reclaim the slow-moving stock when updating the inventory. So, with these issues in mind, lets take a look at the "custom" needs of our five different types of shops.

GENERAL REPAIR SHOPS
Keeping in mind that the average general repair shop may service up to a dozen different vehicle nameplates, its important to focus on installing commodity items like lubricants, chemicals, bolts and hardware. Next, focus on "universal" replacement parts like wiper blade refills, battery cables and fuel, air and oil filters. Since most general repair shops prefer quick service work, its important to keep all of the parts on hand to finish those "15-minute" jobs in 15 minutes or less!

NAMEPLATE SPECIALTY SHOPS
Nameplate specialty shops are built on the principle that its more cost-effective to service a single nameplate or product line. Nameplate shops therefore spend much less on tooling, equipment, information systems and training than do general repair shops. On the other hand, since the nameplate shop usually seeks to provide a complete range of services for one brand of vehicle, it does tend to spend more on inventory than its general repair counterpart.

Unlike the general repair shop, maintenance schedules and pattern-failure issues drive inventory needs for the nameplate shop. For example, replacing the water pump on a timing belt replacement service might be a highly "customized" option for a specific nameplate. Consequently, the nameplate shop may prefer to keep water pumps in their inventory to streamline workflow in the shop. As for pattern failures, we might see a high rate of crankshaft position sensor failures or distributor-shaft bushing failures on some nameplates, which again requires an immediately available replacement part on the shelf.

SERVICE SPECIALTY SHOPS
Although service specialty shops arent new, its clear that most need component items that they use in their daily business. Since demand cant be anticipated, an alignment shop might keep a board full of rear axle and front strut alignment shim or correction kits. A brake shop might stock the most popular lines of brake pads and rotors to satisfy the impulse buyer. The underhood diagnostic shop is always interested in keeping a full selection of fuel line and fuel injector fastening hardware on hand as well as the fuel and air filters needed to complete a repair. Engine and drive train shops, on the other hand, might want to customize a stock of hard parts like bearings and seals in order to expedite heavy-duty repair work.

COMMERCIAL ACCOUNT SHOPS
Commercial account shops are similar to general repair shops, but cater more to the light- and heavy-duty truck market. In most cases, commercial shops will stock heavily on routine-maintenance items like wiper blades, filters, lubricants and common expendable parts like batteries, battery cables, brake actuators, oil train seals, bearings and special-order parts that have exhibited a high failure rate such as glow plug relays and other fuel injection parts.

FLEET SHOPS
A fleet inventory is built solely to accommodate the needs of the vehicle population it serves. Police cars, for example, usually consist of one nameplate spanning only several model years. Similarly, most trucking companies normally operate a single nameplate of various types spanning a slightly longer number of model years. Metropolitan fleet shops, however, may service every type of vehicle application from riding lawn mowers to diesel locomotives.

Since most fleet operations track cost-per-mile of operation, most tend to be very cost and serviceability conscious. Many also buy their parts in large quantities on bid. The key to installing inventories in a fleet shop is to first determine the vehicle inventory and then determine daily needs based upon records of what they are now using and what their projected needs may be. In this case as in those above, the jobber must "customize" an inventory that meets the shops special needs, and, if you havent already guessed, thats what building dealer inventories is all about.













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