Inventory Control Step 3: Organize inventory for profitability

Organize inventoryHow to stock new products

While as important as you think a new product may be, don’t base your purchasing decisions off of a gut feeling. You need to make some concrete decisions before you even consider adding new parts into your inventory and Schreibfeder recommends you look at the following items:

  • Don’t let surplus of new inventory turn into your next batch of dead inventory!
  • Is there any way you can negotiate a return of unsold items with your vendor if it’s a product you’re taking a gamble on?

In addition, Sheets recommends not to make an item a new stocked part of your inventory unless you receive three demands in 70 days. For example, if three people ask for a particular item in 70 days, don’t order three and stock them all on your shelf. If there have been three demands, order one and make it a stocked item. If the demand grows, you can always add more later.

Bottom line, make sure you know what you’re getting yourself into before you decide to stock a new part and up the quantities you order.

Organize inventory in a way that makes sense

Consultant Jeff Sheets has dealt with many dealerships that have had problems with organization. He says too often dealers tend to organize their parts by vendor and vendor type. This can cause huge disruptions because as time goes on and part numbers change, you start to see some of your fastest-moving parts end up at a location as far away from your counter as possible. This kills your efficiency with all the time that’s wasted going back and forth to get parts.

His solution to this problem is to establish bin locations. It takes time to set up initially, but the time that you’ll save down the road easily makes it worthwhile because it allows freedom of movement in your parts department.

The key to setting up bins is to make them as clutter-free as possible. They are space-dependent. Either you use shelves or, an even better choice, a LISTA cabinet. This is something Sheets highly recommends.

LISTA cabinets easily allow you to arrange parts by location. For example, your spark plugs are placed in Unit A, Shelf 1, Position A and so on. This way you’re trying to identify a position rather than a part. This gives you more flexibility.

If you have shelves, don’t overstock them. Carrying 75 parts on a 3-foot shelf is not organization. For a shelf that size, you should have roughly 15 parts. You want to be able to see your parts as easily as possible.

In regards to which parts go where is concerned, Sheets recommends sorting by manufacturer rather than vendor. There is, however, an exception for organizing by manufacturer and that’s your fastest moving parts.

Sheets tells his clients to make a special section dedicated to your fastest-moving parts and keep it the closest to your parts guys. In addition, if there are certain kits that you go through on a steady basis, you can even group those together.

By taking the time to organize your parts in an orderly fashion, you’ve just made your Parts Manager’s job a lot less stressful!

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