Proudly serving the industry for which it was named for more than 50 years, Outdoor Power Equipment provides dealers who sell and service outdoor power equipment with valuable information to succeed in a competitive market.
Issue link: https://read.dmtmag.com/i/775380
14 FEBRUARY 2017 OUTDOOR POWER EQUIPMENT www.outdoorpowerequipment.com COVER STORY | Best Practices ■ 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. Parts department 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 (fi lters, 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 fi nd. Limit the number of equipment lines and add slowly The goal is to make your business the best and most profi table as possible, and the way to do that is slowly. While you own your business, every equipment line you work with will have specifi c 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 profi t 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 benefi t you both. Plus, managing your vendor relationships can become more of a time commitment with less time to actually manage your store. Every year, you should look to write off some inventory, so that you can run your parts department as lean as possible.