Deal with Idle Parts Inventory
It’s hard to pin down an exact number from any source, but an estimated 30 percent of every dealer’s parts inventory is comprised of idle parts.
Those are pieces in inventory that are obsolete, special orders that haven’t been paid and picked up, and components that are well-aged, but not like a bottle of fine wine.
Some OEMs offer a parts return allowance in some fashion. It accounts for anywhere from zero to 7 percent of the dealer’s order amount. But when 30 percent of the parts on the shelf are stale, lined up in dusty boxes, and not expected to sell anytime soon, that minimal return allowance doesn’t go very far.
That makes idle parts inventory a growing problem in the industry. The average car dealership has just shy of $300,000 in inventory, of which approximately $88,000 is tied up with no expectation to sell. Large dealerships could be around $1 million in inventory with $300,000 in idle parts!
Make Idle Parts a Priority
This isn’t a parts management problem solely. It needs to be addressed from all angles – the OEM, General Manager, Fixed Operations Director, and the Parts Manager alike. It wouldn’t be permitted to carry two fully-loaded Jeep Grand Cherokees in inventory for 12 months or longer, so why is it alright for the parts department.
Parts managers need to maximize how they use their parts return allowance. It needs to be maxed out every month, alleviating the stress on their inventory. But when the problem is so endemic, return allowances alone won’t be enough to bear the burden.
Find another outlet for your idle and obsolete parts. List them at a deeply discounted rate on eBay or Amazon. Advertise a list of parts on your social media site. Or, swap parts with other dealerships.
North American Dealer Parts Exchange, or NADPE, is one such service for parts trading. Dealers can list their idle parts inventory and swap for parts that their store can move. It’s a peer-to-peer, cloud-based service. It’s one of only a few such services out there.
Whether you list parts online or swap them with NADPE, take a look at your idle parts inventory. There’s an extremely high likelihood it needs your attention.
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