DealersEdge Professional Forums

Is a 45-60 day supply of parts too low; too high; or on target in todays business?

Tim Deel

Hi Tim,

That is a very broad statement. Overall, anywhere in the range is optimal, in my opinion. It is really a width versus depth issue. Since the name of the game is width today with the incredible amount of part number proliferation that we are faced with, as long as you can keep your off-the-shelf level of performance in the high 80's or low 90's and have a days supply of 45 days, more power to you.

With inventories that we see running at 50 days supply and lower, they tend to have really good gross turns and good true turns, but they reach a point of diminishing returns and work themselves into a position that it takes twice as much effort and work to maintain these high levels for the sake of a great return on investment level. Usually, however, the off-the-shelf level of performance peaks or stabilizes at some point and you end up walking a fine line between optimal performance and disaster.

I certainly see the better inventories with a good inventory performance level running at about 55 to 60 days overall. We have done some studies on about 150 inventories and we find that the average dealer has approximately 90% of their active part number population in captive parts and 8% in fast moving promotional population. But, when it comes to the investment, 60% of the dollar value is captve while 40% is promotional. After all, who wants to run out of an oil filter or spark plugs! This is where, if you wanted to concentrate on width rather than depth, you could try and reduce the promotional inventory to about 25% of the investment and get some width in captive parts up to about 75% of the investment.

This can be done by shrinking the variance between your low days supply (ROP) and high days supply (BSL). If you up your low days and lower your high days you will trigger new ROP / BSL levels that are closer together and start to cut out some of the 'high' depth in your inventory.

Any other suggestions?????

Chuck Hartle'