3 Factors that Influence ‘Dead’ Inventory in Automotive Aftersales

In our experience with over 56 dealerships in the passenger cars segment in India, we realize that about 46% of the dealership’s parts inventory is either termed as ‘Dead’ or ‘Slow Moving’ i.e. not retailed in last 90 days.

Imagine the impact on a dealership’s cash-flow because of such dead stocks, especially when this business runs on very thin margins.

Here are 3 factors that influence this situation –

1. A Dealer Management System (DMS) may NOT provide Forecast for Parts Offtake – While majority of the DMS do a great job in highlighting the Fast-Slow-Dead part items, they do not give any intuitive forecast that allows the parts manager to order the parts based on a scientific approach. As a result, parts offtake is mostly done based on the ‘Gut’ feeling and past experience of parts manager. This is often done without support of any objective, accurate and reliable system or statistical algorithm, resulting in ‘dead’ stocks.

2. Monitoring of Non OEM Parts is Critical, but MISSING – Non OEM parts contributes circa 25-30% of overall inventory and may or may not be updated in DMS. Items such as Wheel balancing weights, AC Gas, Body filler, Anti rust sprays, Paper mats, gloves, Polish etc. are just a few examples.

We have often come across scenarios where the non OEM parts are either not monitored or actioned by the team. In the absence of an objective, accurate and reliable system, the team often does not measure, track, analyse or act on the “inventory turns” of your non-OEM parts

3. Choice of Performance Metrics could be BIASED – Organizations often measure the performance metrics that are either easy to measure or commonly practiced in the industry.

Majority of the auto dealerships may not have a system that allows them to monitor and control the coverage of their inventory stocks across each workshop, audit stocks at click of a button, evaluate ageing of high value inventory and monitor margins at the parts and consumable level.

So what’s important to overcome these factors is a good support system that allows the Aftersales team to forecast part offtake and therefore optimize the cash-flow. Also important is the willingness of the leadership team to sensitize and drive the staff towards the revenue and cost optimization goals. Finally, measure & track the KPIs that matters to your business, instead of KPIs that are ready available in system.

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