If you have a dealership that has limited space, and yet your business is steadily growing as new car models come on the market, you will probably be thinking about how to improve inventory management. 

Not only do you need to warehouse your inventory efficiently, and practically, knowing extra space might not be available, but you will also need to plan ahead on how to accommodate future parts growth and how to organize those fast selling parts, from the rarely used, but higher-margin, older model parts.

Warehouse floor space is expensive and it needs to be optimized to handle growth. Parts Managers need to walk the fine line between having new parts-on-hand for routine service, while keeping a steady cash flow for financial reasons. This balance comes under pressure when inventory levels increase ahead of facility planning, including allocating more space to the size of stock rooms. There might be a tendency to decrease counts to make room for a wider variety of parts for new product lines.

It can be a complex issue, so it’s important to focus on optimization. Here are some tips to help make sure your stock space is delivering the most value for inventory management.

1. Unload Unusable Parts & Optimize Your Stock Room

Before you do anything, make sure you have eliminated unnecessary, or un-usable parts. There is little value in reorganizing parts that will not be required, and you will find you have more space to store saleable inventory. It also helps you reduce the number of unique part numbers in your database.

Go through your inventory and identify obsolete, damaged and unidentifiable items that should be removed from inventory.

While it is tempting to simply toss these non-saleable parts, we recommend taking the time to dispose of them effectively. It is quite possible that some of these parts have maintained a portion of their value, such as a core value, and if handled correctly, could help you recover some of your lost capital.

Have a good look around and make sure that there is nothing being stored in your parts area that should be elsewhere. It isn’t uncommon for other departments to assume the Parts Department “has plenty of secure storage space”.  The Parts Department pays rent on their space, it’s not really fair for other departments to use Parts’ valuable storage space.  Take this opportunity re-focus the space for automotive parts storage only.

2. Complete an Inventory Reconciliation

Now that you have removed unusable parts from the equation, it is time to determine what you still have in your inventory. While you could look at your inventory management software to get this information, we recommend you do a physical inventory.

A physical inventory will give you the most accurate picture of your inventory situation, and will ensure you know exactly what you need to organize. You may be surprised to see just how many parts are over or under the reported amount, as well as the number of parts that are not entered in the system.

Discrepancy in inventory quantities need to be reported, analyzed, and adjustments made to your software system to reflect the actual numbers.

3. Reorganize Your Inventory

Starting with a clean slate of counted active inventory on the shelves, it’s time to re-organize for optimal efficiency.

Many dealers organize their parts by vendor or vendor type – this is not the most efficient way to organize inventory. The way you organize your parts is ultimately your decision, but there are some standard practices that you may want to consider. 

• Group like parts
• Group parts that are commonly used together (i.e. by repair and vehicle)
• Put fast-moving parts in the most accessible locations

Reorganization should make it easier to locate parts and faster to retrieve them.

4. No More “No Bin Location”

When receiving parts, it can sometimes seem like a waste of time to give special ordered parts, or new phase in parts a bin location, but skipping this step can have negative effects on your long-term efficiency.

When added up, a substantial amount of time is spent looking for parts with no bin location and, in some situations parts are unnecessarily special ordered again, because they just can’t be located.

To get your inventory up-to-date, go through each part and ensure the bin location is recorded and current in your management system. Moving forward, make it a mandatory policy to include or update bin locations when parts are received or moved.

5. Hire a Third Party Inventory Consultant

At Pro Count West, we help in all areas of inventory management. We can help you identify unusable parts and can quickly and efficiently separate returnable and non-returnable automotive inventory, allowing you to maximize your cash position.  Also, it’s good to know how much of your parts inventory dollars would be recovered in the event of the sale of a dealership.

If you’re struggling to optimize stock space and want to get a handle on it before you start seeing inventory management issues, give us a call. We have the experience you need to complete an accurate physical inventory count and can help you reorganize your parts department for better efficiency.

Pro Count West is the premier provider of physical inventory services to auto dealerships and auto parts distributors nationwide. As a family business that began in 1981, Pro Count West knows the importance of providing customers with the inventory services they need, when they need them.