During a discussion on inventory at the 2015 Dealership Minds Summit in Cincinnati, Birkey’s Farm Store President/CEO Mike Hedge explained the balance that dealerships must find between parts turnover and customer satisfaction.
“While in my 23 years I’ve never felt that our new wholegoods turn has been too high, parts is a different animal. Part turns can be too high. By stocking fewer parts and ordering everything only when it’s needed, a dealership could raise its turnover in parts to a 5-6 level but it would also be the last time that the customer placing a great demand on parts availability will do business with you. Plus, the dealer risks loss of productivity through the shops when the stocking parts aren’t on the shelves.
“There’s a balance that’s needed. My experience is that overall parts turnover is rarely too high. We see in our stores, and those that we’ve acquired, is that we can have too many dollars invested in parts that aren’t selling. So at certain times, this limits the dollars available for those stocking parts that you do need on hand.
“A dealership can raise its turnover by throwing slow-moving and obsolete parts away, but that’s not exactly the message you want to give your parts managers. It’s the balance and stocking the right type of parts.”
How Leverage & Inventory Turnover Keep the Balance Sheet in Order
This executive shares his approach to teaching employees throughout the dealership the importance of leverage and turnover, the guard rails for keeping the balance sheet — and dealership — on track.