Mike's Inventory Management Blog

Whether you run a dealership or a service shop, your automotive parts inventory is one of the most valuable assets your business owns. It is imperative to the smooth operation, and profitability, of your business.

Your parts inventory is one of the most significant tangible assets a dealership has. When buying or selling a dealership, inventory is usually included in the purchase. Making sure that it is properly valued is critical for both the buyer and seller. 

There are many different ways for your dealership to deliver an excellent customer experience. In your parts department, your order management process can be improved by optimizing order fulfillment and accuracy.

When an item is on backorder, it means that the vendor is out of a certain item but expects to have it back in stock and delivered by a certain date. Backorder rate is the percentage of orders that cannot be delivered by the original date.

There’s an automotive tool that you’ve possibly heard a lot about in recent months. You may already have it installed at your dealership. That tool is a dealership management system (DMS).

For many parts departments inventory is a one and done task every year. They do their annual physical inventory count near year end to update the records and then call it quits until the next year end rolls around.

Are you looking to enhance your annual parts inventory and improve the financial health of your automotive parts department? Then understanding ending inventory is key!

Ending inventory is the value of the automotive parts you have available for sale at the end of a given accounting period. It is calculated by adding beginning inventory and purchases, then subtracting cost of goods sold (COGS).

Carrying costs are the cost of holding inventory in stock. They’re also referred to as holding costs and inventory carrying costs, and they can have a significant impact on your dealership’s bottom line.

Obsolete inventory, also called dead inventory, is automotive parts that are at the end of their life cycle. They have not been sold and they are not expected to sell for any substantial value, if anything at all, nor will they be installed in a car. 

Inventory is a line item on your balance sheet and cost of goods sold (COGS) to calculate net income on your income statement. If your inventory records have any errors, they can affect your financial statements and create an inaccurate financial picture.