Inventory Health - Your Untapped Goldmine for More Cash, Higher Margins, and Increased Profits.
Having cash on hand is the lifeblood of any business. In good times, cash allows you to invest in new employees, better technology, or other facility upgrades. In tough times like we’re experiencing right now with COVID-19, cash allows you to weather the storm and keep your business in the black without relying on expensive loans, layoffs, or worse.
What is the Path to All that Extra Cash?
If you are in the parts industry the answer is that it all starts with your inventory.
You are in the business of buying, stocking, and selling parts. But what you do is not simple, and to do it profitably is a constant balancing act between sales volume and margin. We know how hard it is to be profitable.
In fact, we know of one aftermarket parts company that sells about $17 Million a year and in 2019 their EBITDA was ZERO.
Clearly, it is not an easy business to be successful in.
But sifting through your inventory for savings, duplicates, or margin opportunities is way easier said than done.
Even the most experienced parts pro could take days or weeks to comb through cross-references and calculate all the numbers. Most parts departments are struggling to keep up with just answering the phones, processing orders, and restocking the shelves.
This hurdle is only multiplied if you have more than one location.
Technology is also rapidly changing on trucks and trailers so the quantity and types of parts required to stock is expanding which only increases the need for more sophisticated inventory analysis tools and parts departments don’t have an Inventory Management Software that is up to the task.
Our mission here at Diesel Laptops is to help you save money and generate more profit. To do this, we started with a bold idea – a complete, updated truck parts cross-reference database. With over millions of cross-references available, we built this database to be current, complete, and have every part listed only once.
It was a huge undertaking, and now that it’s complete, our database is the most comprehensive of its kind. What started out as a simple cross-reference tool has morphed into a robust inventory solution that can, identify frozen capital in your inventory and identify margin opportunities, which at the end of the day, puts more money back into your business.
One of our clients in the south – a franchised International Truck dealership with about $1.8m in annual sales used our Inventory Analysis tool to identify a $26,000 opportunity in the first 12-months.
Our Inventory Analysis tool showed they could save over $13,000 by simply removing more expensive duplicate inventory from their shelves, and another $12,900+ by raising prices on competitive products that many customers buy.
That’s a 2% margin gain by doing nothing except identifying the opportunity.
Over a 5-year timeline we calculate almost $80,000 of inventory opportunities – and that is for a small dealership. All with no extra labor, manpower, or lengthy inventory audits – our software does all the work for you!
The numbers stay consistent across larger inventories. Another one of our clients, a large Mack/Volvo dealership with over$20 Million in annual parts sales and $2.8 Million in inventory was able to increase their cash position by $600, 000 using our Inventory Analysis tool.
Check out this episode of The Heavy-Duty Parts Report where host Jamie Irvine lays out how it all works for your business.
The Right Parts, Delivered the First Time
Now that you have your inventory and margin opportunities under control, the next step to increase your cash position is to ensure you have the right inventory mix for your heavy-duty parts customers.
If your customer asks for a part and your parts technician says, “we don’t have that” - that opens up opportunity for your competitors to not only get that sale, but to become your customer’s new first choice for parts.
How do you ensure you have parts in stock?
It starts with understanding what equipment your customers operate, and building your inventory around those trucks and trailers. The manufacturers have recommended inventories, but these lists are built around national averages, and are not specific to your region.
This is how you end up with obsolete parts that burn up cash flow.
We have developed a tool called Compare Manufacturer which allows you to compare truck manufacturers and parts manufacturers and identify all the identical parts and unique parts that are manufactured for two makes of truck or two parts suppliers.
Your salespeople can do fleet surveys, and you can use this tool to build a list of inventory that you need to stock that is laser focused on your region, specific to the trucks and trailers that operate in your area. You can also identify who you need to buy those parts from and become the dominant parts store in your area. How? Simply because every time your customers call, your parts technicians will be able to say, “yes, we have that in stock, how many do you need?”
Cash is KING in any business and to maximize the amount of cash in your business you must manage your inventory effectively, maximize margin opportunities where you can, and turn your inventory rapidly.
Buying, stocking, and selling parts is your business. Making that process as simple and profitable as possible is ours.
It’s time for you to use these tools that we have developed, and the first step is scheduling a meeting with Jamie Irvine who is the host of The Heavy-Duty Parts Report and the Sales Manager of our Parts Division.