By Jeff Sheets
“This porridge is too hot. This porridge is too cold. This porridge is just right!” When it comes to inventory, we often feel like Goldilocks. It takes some trial and error to hit it just right.
Why is there soooo much inventory to sell when it’s bad been a bad year? Why did it rain so much? Why didn’t it rain more? Do you think we’ll have a snowy winter? Why? Why? Why? Managing inventory is both science and art.
My dad was a production control manager for 30 of his 40-plus years working at Hallmark Cards. The question that management always asked him when things didn’t go as expected was “Didn’t you foresee?” He always ended his stories of inventory emphatically with, “If I could have foreseen, I would have foresaw!”
Don’t we all feel that way when things don’t go as planned? Forecasting inventory is not an easy job and even seasoned professionals can have problems getting it just right. Here are some tips to help make your inventory management bright again.
Increasing the turns of your inventory requires a very good parts history, so you can understand what you have sold in numbers of every part over the years. This is where a good business management software (BMS) system can make a big difference (see sidebar on pages 16-17). If you have a great BMS system but are behind on updates, please upgrade! The newer, quicker, better way is out there for you. You become aware of old parts that are becoming obsolete, so you can back down on the number of parts that you stock as soon as possible. If you stocked three parts that are becoming obsolete and noticed you only sold one in the past year, it might be time to set your re-order point to zero and hopefully get rid of that part. You might be asking when to stock a part, and here is my advice: When you see three demands in a 90-day period, then stock one and no more until you see the long-term demand. The worst thing you can do is try to have one of everything. You want more depth in your fastest-moving parts (filters, blades, belts) that are sold and turned often. What is the goal for inventory turns (parts sales expense/year-end inventory expense)? My goal for most dealers is to work toward three to four inventory turns per year. I’ve seen dealers with as many as 10 turns in parts inventory, but at probably six turns or more, you would have to be ordering close to every day, and there would be a need to stay on top of this. Stock-outs could pose a serious problem at any point beyond four turns.
Getting rid of old inventory allows you to start fresh. Look at your parts history, and if you have not sold that individual part in the past 12 months, write that part off and take it out of inventory. (The exception might be very expensive parts that you keep to help your customers.) You can sell that part either online or in-store, maintaining a separate obsolete parts spreadsheet for reference sake. Every year, you should look to write off some inventory, so that you can run your parts department as lean as possible. You never want your inventory to be so extensive that you have so many parts that they are hard to find.
Limit the number of equipment lines and add slowly
The goal is to make your business the best and most profitable as possible, and the way to do that is slowly. While you own your business, every equipment line you work with will have specific expectations for you to produce. As you add more and more lines, your inventory continues to grow to meet each line’s demands. While you will be selling much more with additional lines, you won’t experience as much profit because of the additional inventory you are required to carry. If you could sell the same amount of volume without lots of additional lines, would you do it? Of course, you would! I’ve seen OPE dealers reduce their number of lines from four to three, which freed up 25 percent of their time to focus more intently on the remaining three lines — a win-win situation for each of those dealers and lines.
I recommend that you carry two main equipment lines with no sales crossover and one handheld line. That gives you access to customers to build your brand around your community. Then, as you learn about your customer base, you can add or subtract vendors as you like, but I would be reluctant to take on just any equipment line. It should benefit you both. Plus, managing your vendor relationships can become more of a time commitment with less time to actually manage your store.
Inventory does not equal sales
The more equipment, parts and other miscellaneous items that you purchase does not help your bottom line unless they move out of the backroom. Make sure that you are selective in what you are putting into the store. The problem of excess inventory can spiral out of control very quickly.
The race between the tortoise and the hare is a great reminder to us that being fast and speedy does not always ensure victory. Inventory management experience comes over time, and with the history of the past, we can somewhat predict the future. Sometimes in this business, nature intervenes and messes up the model a bit, but you need to take time to make good decisions on how to control inventory. Let me just say it one more time: A great inventory management program that you use (and make sure you use it to 100 percent of its capability) can make you double-check your instincts when it comes to ordering. You can save lots of dollars invested in stagnant inventory (especially in the parts department) when your opportunity to get parts is one to two days if rushed. The manufacturer then becomes the one that holds your parts until you really need them instead of having them sit on your shelves for years. I love the following words from Confucius: “It does not matter how slowly you go, as long as you do not stop.” Never give up on trying to improve your inventory management. Your business will thank you in the end.
Jeff Sheets is the founder and owner of OPE Consulting Services. Whether a business is thriving or struggling to survive, Sheets’ rich experience in both the corporate and not-for-profit sectors allows him to partner with business owners to customize unique strategies for their needs. For the past 11 years, he has worked extensively with hundreds of outdoor power equipment dealers to create best practices in business structure, personnel management and financial profitability. For more information, he may be contacted at firstname.lastname@example.org or (816) 260-5430. You can also follow him on Twitter @opeconsult, connect with him on LinkedIn, and visit his website at www.opeconsultingservices.com.
Inventory Management Technology
Following are some of the companies that currently offer inventory management technological solutions for outdoor power equipment dealers:
Whether searching for local inventory, comparison shopping or finding directions to a local dealership, today’s shoppers are using the web to locate and select a local OPE dealer. ARI understands that an out-of-the-box website solution doesn’t cut it. The Milwaukee, Wis.-based company invests in its platform to consistently help you see the results you need to hit your dealership goals. ARI’s most recent platform enhancements have resulted in a 36-percent conversion rate increase in an ARI test group.
- Shopper-friendly features: Online shoppers want to find parts, services and units quickly. ARI has built features that deliver and keep them coming back for more.
- Built exclusively for OPE dealers: ARI understands the OPE industry, and it understands your business. That’s why every feature the company packs into your website is built exclusively to meet your ever-changing needs.
- Management made easy: Spend less time managing and updating your site and more time focusing on your business.
- Dedicated customer service: ARI’s team of experts is ready to help you update, manage, and leverage your website to drive traffic both online and in-store.
Since 1983, c-Systems Software has continually pursued ways to expand and enhance its dealer management software (DMS) to fulfill the needs of its growing customer base in the outdoor power equipment, agricultural and powersports industries. The Arlington, Texas-based company strives to be at the forefront of new technology in order to help its customers stay competitive.
c-Systems’ DMS supports many unique features such as fully integrated labor rates from major industry vendors, automated electronic warranty claims transmission, enhanced vendor communications, fully integrated website shopping cart, numerous customer relationship management (CRM) features, various third-party integrations, and a comprehensive mobile application. With features similar to c-Systems’ desktop software, Infinity’s MobileAPP supports remote capability for many standard features to include sales and repair order billing, physical inventory count, purchase order receiving, credit card processing, signature capture and bar code scanning.
Scheduled for release in early 2017 is Infinity’s new automated “Estimates Follow Up” panel (see screenshot). This new feature will allow dealership personnel to easily follow up on customer sales and repair estimates via an easy-to-read “sortable” calendar display panel.
ASPEN by Charter Software Inc. provides scalable, integrated, Microsoft-based business management software specifically designed to meet the unique needs of outdoor power equipment dealers. With ASPEN, you gain insight and control over one of the most challenging parts of your business — inventory.
ASPEN’s inventory control tools enable you to do the following:
- Create suggested inventory orders using predictive logic
- Auto-reclassify order codes based on custom rules
- Use ASPEN’s electronic parts catalog integration
- Get real-time access to parts/units information via the ASPEN Integrator API that works with virtually any third-party software package or website
- Generate a parts order submission, check dealer locations, and submit parts inquiries to manufacturers
- Access information via a mobile device: check availability, scan physical inventory, upload pictures, and create picklists
- Integrate with Commercial Web Services and other equipment sites
Charter Software’s many system integrations are the result of close relationships with industry-leading OEMs and suppliers, and they are designed to increase communication and profitability across all departments of OPE dealerships. Charter Software’s commitment to innovation and adherence to technology development best practices enable the Littleton, Colo.-based company to deliver a powerful yet flexible system that adapts to dynamic market changes.
Ideal builds business management software that puts all dealership activities in one place, providing you with an easy way to eliminate inefficiencies and grow your business. With more than 30 years of experience, Ideal incorporates best business practices to ensure that its business management software works like a dealership operates on a day-to-day basis.
- Sales: Sell more, keep deals profitable, and offer exceptional customer service.
- Service: Automate your service department from start to finish, and make it profitable.
- Parts: Gain complete control of your inventory, and keep your stocking levels lean.
- Accounting: Eliminate double entry into additional software, and access all financial and accounting information instantly.
Today, the design of Ideal software is inspired by the feedback of more than 1,100 of North America’s most prominent dealers, all of whom the company is proud to call its clients.
— Compiled by Steve Noe