With the advent of online ordering
and other methods of instantaneous communication, it would appear that
the need for dealer and fleet repair shops to maintain an in-house
inventory would be declining. But the evidence appears otherwise when a
jobber routinely delivers a single-item order like an oil filter to a
dealer or fleet repair shop.
At the jobber end of the distribution
chain, money-losing parts deliveries steadily eat away at the bottom
line until the store might be looking at reducing one major payroll
position to accommodate still more unprofitable part deliveries. At the
other end of the distribution chain, excessive wait times are costing a
jobber’s dealer and fleet shops thousands of dollars each year in lost
Because lost production time in a repair shop
results in lost sales at the parts counter, it’s important for jobbers
to periodically review the status of their dealer and fleet shop
inventories. If a jobber is delivering a multitude of single-item
orders, perhaps it’s time for him to analyze his dealer and fleet
DO THE MATH
If you don’t think wait time
is expensive, consider that hourly labor rates are either approaching
or crossing the three-digit mark at many independent repair shops.
Although local hourly rates vary widely, let’s start with the $90
number because, for our purposes, it works well mathematically. At the
$90 per hourly rate, your local dealer is charging $1.50 for one minute
of a technician’s time. While $1.50 per minute might seem outrageous,
the cost of doing business for independent shops has been soaring in
response to the equipment, training and information costs associated
with modern vehicle technology.
At the rate of $1.50 per minute, a
wait time of 10 minutes for the delivery of an oil filter or hardware
part can add $15 to the cost of a $5 oil filter. A wait time of 10
minutes can boost the cost of a 3/8-inch, grade-five bolt from 50 cents
to $15.50. Wait times can become expensive because many shops find that
they must provide each technician from two to three bays just to keep
that technician working while he’s waiting for replacement part
For this reason, shop inventories are all about saving
money by reducing or eliminating wait time. Depending upon the breadth
and depth of your dealer’s inventory, “we” (meaning you and your repair
or fleet shop) can make money or we can lose it. Once lost, it comes
off both our bottom lines and can never be replaced.
FIRST- AND SECOND-CALL SHOPS
that we have a basic understanding of the math involved, let’s analyze
the needs of each shop in our dealer and fleet base. To begin with,
never classify any shop as a first- or second-call shop. If a shop
calls your jobber store first, then it deserves your full attention as
a profitable and paying customer. If a shop uses your store as a
second-call source, then you need to analyze the reasons for becoming a
While it’s obviously not true in all cases, my
observation is that the first-call jobber also is the store that
correctly maintains efficient in-house inventories throughout their
dealer base. Notice that the operative words in the above sentence are
“maintain” and “efficient.” To illustrate, it’s very easy to sell or
consign an inventory of filters in a shop. It’s quite another challenge
to maintain that inventory of filters so that it serves the jobber
store and its customer in the most efficient manner possible.
jobber store that doesn’t maintain the inventories it has sold or
consigned will, in many cases, become a second-call store simply
because the shop operator reaches for the telephone when the part isn’t
on the shelf. Unfortunately, the call is often made to another store
because the delivery time could be shorter or the price cheaper. To
re-emphasize, when a jobber isn’t correctly maintaining his dealer and
fleet shop inventories, he’s losing his status as a first-call store.
in this dire economic climate, no jobber store can afford to be without
outside sales activity. If nothing else, outside sales allow a
qualified professional to analyze a shop’s unique inventory needs. To
better define the term “unique,” keep in mind that no two shops are
equal in either the clientele they serve, the vehicles they service or
the parts and hardware they need.
Most repair shops fall into one of
the following categories: general service, undercar, service
specialist, nameplate specialist, private fleet or public fleet shop.
Undercar shops generally include wheel alignment, brakes and exhaust as
core services. The shop might also offer under hood, air conditioning
and lubrication as peripheral services.
Although general service shops
service all makes and models, they might not offer in-depth services
such as advanced diagnostics or module reprogramming. Because of the
breadth of their services, inventories in general service shops can be
tough to analyze. Nevertheless, lubricant, fluid, filter, fastener and
chemical inventories are good places to start.
The specialist shop
falls into service and nameplate specialist categories.
specialist might be a radiator, exhaust, transmission or engine rebuild
shop. The nameplate specialist might, for example, specialize in
servicing unique automobiles like Porsche or specialize in specific
manufacturers like Toyota or Honda. While a very few specialize in
domestics, most specialize in European or Asian nameplates. The needs
of all of the above shops are generally obvious. The only deviation in
buying habits would be that nameplate specialists generally buy OE
parts. But keep in mind they still need the traditional range of
fasteners, chemicals and fluids.
Private and public fleet shops are
just that. A private fleet shop is usually operated by a construction
company or trucking firm. Either type of shop generally requires
filter, lubrication and other expendable part inventories. Public fleet
shops are operated by local townships, cities and government agencies.
In most cases, public fleet shops buy the majority of their routine
maintenance parts in case lots on public bid and generally service a
narrow range of models and model years on passenger and light truck
Remember that all shops need inventories of filters,
fasteners, hardware, automotive chemicals, and fluids. When analyzing a
shop’s unique needs, always begin negotiations with a recommended
inventory of these commodity parts in hand. In addition, always be
prepared to offer a cost benefit analysis with each type of inventory.
The easiest to sell is a fastener inventory because the math is simple
when you add expensive wait time into the relatively minor cost of a
nut or bolt.
SERVICING IN-HOUSE INVENTORIES
histories are the shortcut to analyzing and servicing a shop’s
inventory needs. A shop’s sales history should be reviewed quarterly to
provide a long-term analysis of the shop’s sales trends. Oil filter
needs, for example, should be assessed at the beginning of each new
model year. To illustrate, oil filter sales follow a type of bell
curve, with sales starting out slowly as a new filter number is
Sales usually accelerate as the vehicle population
peaks and slow down as that vehicle population declines. Most hard-part
inventories follow a similar bell curve and that is precisely why
jobbers should work hard at analyzing inventory needs and maintaining
that inventory at effective stocking levels.
As a last thought, any shop inventory must be shelved for easy restocks and protected to allow acceptable credit returns.
are always a good way to store, analyze and protect inventories.
Cabinets also allow quick-turn inventories like oil filters to be
stored in a lube bay area.
Slower-moving inventories should be
stored away from shop activity as much as possible. Always remember
that any in-shop inventory is an investment in future business for you
and your jobber store. Keeping it safe and clean is part of maintaining
Gary Goms is a former educator and shop owner
who remains active in the aftermarket service industry. Gary is an
ASE-certified Master Automobile Technician (CMAT) and has earned the L1
advanced engine performance certification. He also is a graduate of
Colorado State University and belongs to the Automotive Service
Association (ASA) and the Society of Automotive Engineers (SAE).