Vehicle Inventory Management: The “Turn’s” The Thing!

Inventory management expert Scott Dreisbach advocates setting up a “stocking guide” for the new and used vehicle inventories to increase turnover.

Having been involved i n the retail automobile business for nearly 35 years, most of that as a dealer, I have come across a myriad of “better mousetraps” and so called “magic pills”. If I had a dollar for every time a vendor told me that “all you have to do is sell one more car to pay for it”, well, let’s just say that we have all heard that before. The truth is, that as it relates to the new and used vehicle sales game, it’s all about the turnover. It always has been and it always will be.

Years ago I attended a business management conference where we spent a week on the subject of marketing. All of these factors are important to consider and when in place in your store, will help lead us to increasing vehicle turnover. Basically it boiled down to what were referred to as the 5 P’s of marketing.
In a nutshell, here there are:

1. People – The right ones, the proper training, all of the tools available for them to do the job, clearly defined responsibility and authority, feedback, accountability, management, communications, and recognition of performance we want repeated, are just a few of the topics i n this category.
2. Place – Everything to do with the physical plant. Is it easy t o find, is it clean, is it easy to park, is it located properly, is it adequately signed, is it properly maintained, are people gathered together out front filling up your ashtrays, is there negative signage (No Parking, Do Not Block Drive, etc) these and a whole host of other objective questions need to be answered, not by you, but by your customers.
3. Price – Are we competitive, does our price show value, can we lower our cost of sales and maintain our
   price, and does our business philosophy place too much importance on price?
4. Promotion – What, where, when and how questions took one whole day in a brainstorming session to think through all of the aspects of this broad subject. In general, dealerships tend to promote the vehicles that have the slowest turn. Are we advertising our over-age units or the ones that are hot and hard to get? Do you spend money to participate in this “distress merchandising”?
5. Product – How many, what color, what equipment, what price, is seasonality involved, and everything relating to supply chain management needs to be thought through. The quickest way to increasing turnover is to pay particular attention to this portion of the business. Inventory management is critical. Can you imagine your parts manager stocking your shelves by “gut feel” or what the manufacturer wants them to stock? He/she uses a stocking guide everyday. Increasing turnover is simply having more of the
   right product on the lot more of the time and less of the wrong product taking up “shelf space”. This sounds easy and with a well thought out system, it can be accomplished.

At the very least, develop and implement a system that will separate your sales, gross and inventory by categories of vehicles (small cars, mid size cars, sporty cars, etc) and by model years within each category (used vehicles) or specific model numbers within each new vehicle sales category. Your stocking guide should include your target supply number for each type of vehicle (45 day supply for used and 60 day supply for new) based on the actual sales rate, not a forecast. This stocking guide number should then be compared to the actual total availability for each category. If you are long or short in any category, develop an action plan with your managers to correct the condition. Daily vigilance in seeing that your action plan is being implemented is vital. In reality, most managers say they are “too busy” to manage, or even look at, such a system. They “don’t want to get bogged down in details.” If that is the case in your store, make a change. Either in the manager, the current process, the managers’ thinking or invest in an inventory management system that will be believed in and used. The benefits of this type of investment will far outweighthe cost. Quicker turnover will be the result.