Since inventory is the largest (financially) and most important asset for every dealership, managing it efficiently is critical to remaining profitable and competitive in this lean market. With a host of “inventory management” software solutions available these days, we are often surprised by how many people (retailers, vendors, pundits, et all) group all the different types of inventory management software and services together under the vanilla, inventory management umbrella/label.

Moreover, effective “inventory management” goes beyond what any one software solution can provide. Because any software is only as good as the data that goes into it. You need to implement effective inventory management processes and procedures in order to get the most from your inventory management solution(s) or vendors! Ultimately how does a good retailer know whether or not he/she needs the latest and greatest “inventory management” solution for $900 / mo the 20 Group was buzzing about last week?

There are six areas of inventory management where practices and standardized processes across your software solutions are the keys to success. And remembering these business needs before considering adding more technology has helped our clients rationalize if it is needed today, what the upside will look like at your location(s), and what it will truly cost to implement at your dealership(s).

Getting Control of Your Inventory

Unless you know exactly what vehicles are on premise (i.e. lot & showroom) and in over flow storage (i.e. on-hand, dealership floor-planned inventory, but off the lot nearby), and whether the vehicles are in a usable condition (prepped, serviced, priced accurately, etc.), you can’t properly determine when to reorder products from the factory or when to acquire pre-owned inventory, let alone capitalize on every sale opportunity with customers. You have to control your existing inventory with military precision before you can manage your future inventory processes with any dramatic improvement. And if you don’t do so, new technologies can only help but so much.

And as dealership consolidation continues nationwide, and more organizations operate multiple retail locations (whether it be in a metropolitan area, a State, or across State lines), leveraging inventory assets across retail locations will be a growth opportunity in the years to come. More on this trend later.

Keeping Accurate Stock Metrics

Having accurate, reliable counts of and metrics about your actual inventory on-hand empowers you to keep your customers happy and saves you costs by helping you avoid the need to over-order, depending on the size of your physical location(s). Clearly “stock metrics” today goes far beyond how many Tahoes or Accords are available for sale today vs historically at each location. Point of fact: feature-rich vehicles have been a reality for years, and consumers shop for features, whether they are motivated by safety, performance, reliability, or all of the above! You need to have an understanding of not only what models sell, but what the shopping hot buttons are today that are influencing vehicle “traffic” (both on the lot and online).

Improving Your Forecast Accuracy

Gain the power to do more with fewer resources by accurately forecasting demand for your stock products. Technology leverages data to help you visualize numerous things about your current inventory. But forecasting begins to dabble in the “business intelligence” realm by helping employees visualize trends over time, typically based on historic sales/delivery data cross referenced against current inventory vehicles.

Managing Effective Replenishment Parameters

Blindly trusting your software solution to help you make replenishment decisions without fully understanding the parameters that are set in your software can cause serious problems. By understanding these parameters, and how they are intended to function, you can replenish your recurring stock with improved efficiency. And with consumer tastes as well as manufacturer drive-train and power plant/fuel technology changing, forecasts that rely solely on historical trend analysis will have a margin of error you MUST account for.

Maintaining Stock in Your “Branch” Locations

If you have multiple retail locations, ensure that your “branches” are all appropriately stocked to keep your multi-location distribution organization performing equally well across all areas. I use this terminology on purpose to possibly provide an “out of the box” perspective for this concept of stocking inventory at each store location. And if the locations are named or branded differently, there may be business reasons you won’t be able to leverage “across the organization” processes, stocking policies, pricing, etc. This may become a liability over the long haul as regional dealers will increasing compete with branded regional or national retailers.

The “branch” analogy makes more sense if you know a dealer who operates multiple stores in a single metro area. But the concepts apply to everyone in the 21st century!

Ultimately this point desires to address what inventory is most profitable at each location/branch, and in our business, shipping a vehicle taken on trade a Store A to Store E can’t just be an instinctual one. Obviously success in this area cannot be measured simply by front and back-end gross of the deal itself. You must have analytics to visualize the “bottom line” profitability after shipping costs, advertising costs, floor-plan costs, and possibly even collections costs (depending on your business model) are factored in post delivery. The greater the visibility you have into your unit geographic profitability, the better decision making will be across “branches”.

Achieving Inventory Analysis Efficiencies

With solid inventory analysis, you can ensure that you are investing in the right amount of the right products to remain competitive. By developing and using a comprehensive set of tools to closely monitor the performance of your inventory, you can achieve more of your goals more efficiently. But begin with the end in mind! Document your business goals and success criteria for your organization and then tie use of the many “inventory management” software applications back to these organization goals.