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.
But your parts inventory needs a little more attention if you want to improve your inventory management processes, reduce losses and improve your bottom line. With that in mind, here’s what you should inventory on a daily, weekly, monthly and yearly basis.
Daily auto parts inventory counts
Daily inventory counts aren’t done all that often and should be saved for parts that regularly have large discrepancies (less on the shelf than is in the records). Generally, these parts are smaller items that are used on a frequent, sometimes daily basis. This may include oil filters, seals and spark plugs.
You don’t have to count each part every day but do a regular rotation to ensure high risk items are counted at least two days a week. If you find there’s still large discrepancies for certain parts, even within these short intervals, increase the frequency of your counts. If there are no discrepancies, start reducing the frequency of your count to weekly and then monthly.
While this can sound tedious, regularly counting parts that often go missing can help uncover the underlying issue causing the discrepancy. This is because people are more likely to remember what happened to the part a few days ago rather than what happened to it a few months ago with a longer interval.
Some common reasons for discrepancies may be:
Staff are failing to record parts on work orders.
Staff are storing parts at their work benches.
The part pulled was different than what was recorded.
Admin is entering the wrong code for a part.
Staff are stealing parts.
Parts are being put back in the wrong place.
Weekly auto parts inventory counts
Weekly inventory counts can be used to manage and monitor parts that have smaller discrepancies than those counted every day or so. You can also do weekly or bi-weekly counts for parts that have a fast turnover. This will ensure you don’t end up short on stock because your records don’t match your actual stock on hand.
Monthly auto parts inventory counts and reconciliations
You may be starting to see a pattern at this point. If so you’ve probably guessed that monthly inventories are for parts that have even smaller discrepancies. It’s also a good time to count items sold on commission, such as merchandise in the show room, and specialty order parts. This will ensure you are paying vendors in a timely manner, and that high value items aren’t getting misplaced or damaged.
You should also reconcile your inventory records once a month. To do this, you will assume all of your physical counts are correct. Instead, you will compare your ledgers to reconciled parts, such as parts received that have not been invoiced, parts invoiced and not received, pending credits, open repair orders, counter tickets, dirty cores, etc.
That’s because it’s not uncommon for there to be discrepancies between your inventory general ledger (G/L) and sub-ledgers. Human errors happen, and you want to catch and correct them in a timely fashion.
If a discrepancy exists between your G/L and sub-ledgers, you will want to analyze your accounts to determine the sources of the differences. What you’re most often looking for during your monthly reconciliation is errors that occur when inputting data into your system, which include, but are not limited to:
Incorrectly calculating totals
Missing invoices or credits
Entering invoices or credits twice
Transposition of numbers
Choosing the wrong account or source
Bi-annual auto parts inventory counts
This is the first time I have mentioned this timeframe and that is because a mid-year inventory isn’t a requirement but is highly recommended. That’s because mid-year inventories can save you money by highlighting patterns that may be more difficult to spot after a year of transactions.
It will also improve customer satisfaction by reducing the risk of a customer being told a part is in stock only to discover it isn’t, and it will give you an opportunity to sell or offload parts before they become obsolete. Not to mention, a physical count of your inventory will increase profitability, no matter what time of the year you undergo it.
That leads us to the last inventory interval.
Annual auto parts inventory counts
Annual inventories are the bare minimum, and an absolute must that every automotive parts department should do. These inventories confirm your inventory is accurately recorded come year-end and tax-filing season.
If you’re looking for assistance with regular counts and reconciliations, or you need help managing your automotive parts inventory, please contact us today.