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Got Idle? Top Techniques for Managing Obsolete OEM Parts

Got Idle? Top Techniques for Managing Obsolete OEM Parts

The world of OEM parts inventory management isn’t what it used to be. Today’s parts managers are increasingly feeling the “big squeeze” as OEMs tighten returns programs and active parts life cycles shorten. All in all, it’s a recipe for increased idle.

Five Must-Do’s for Reducing Idle

It goes without saying that you should utilize factory programs first to receive the maximum benefits.  However, some OEMs have increased their returns period to as high as 18 months. With that said, smart parts managers are implementing multiple strategies for managing idle.

1. Review Every Month

One wholesale parts manager responsible for $6.2M in inventory assigns dedicated staff to review idle monthly. They measure idle on “months no sale” and “months no receipts” for a truer indicator of parts age, and define idle as anything older than 10 months.

While you may not have sufficient staff to dedicate to idle, you can make idle analysis a part of ongoing responsibilities. Making it a top-of-mind focus every month should prevent you from creeping into the 15% – 20%+ profit-draining range.

2. Use Multiple Channels

Part of being proactive is implementing ongoing strategies for managing idle. One of the best ways to market idle is to integrate within your daily locator tools. “One man’s junk is another man’s treasure” couldn’t be truer for automotive parts. Using tiered pricing, you can selectively apply increasing discount percentages as inventory ages. With this method, most dealers prefer to start at a 30%discount.

For more aggressive strategies, turn to parts brokers who can market bulk orders. Parts bundling is especially effective for getting rid of special order parts (SOP) since the buyer must take the entire order.  Standard discounts begin at 50%.

3. Have a Buy-Sell Mentality

As we said before, “One man’s junk is another man’s treasure.” Buy discounted parts to help balance the costs of selling idle. Again, technology is out there that can automatically search for parts you want at discounted prices.

4. Attack the Source of Idle

SOP are a prime contributor to idle. To nip the problem in the bud, many dealers have worked with their Service departments to require a service manager’s signature and a customer appointment before the part can be ordered. You can also require deposits on non-warranty SOP to help offset carrying costs of no pick-up.

Crash parts also add to idle.  Harking back to the aforementioned wholesale manager, he makes judgment calls on SOP that are for vehicles older than 2 – 3 years. If older, he works with shops regarding returns policy and payment. And to help reduce parts returns in the first place, many dealerships rely on e-commerce technology that can scrub and validate collision parts orders ensuring parts accuracy.

5. Set Up Reserve Accounts

Many dealers set up reserve accounts which allow them to write-off losses. They can be funded many ways including using stock order discounts from the factory or a percentage of profits.  Review of idle and writing off losses should be considered a monthly task to avoid huge, one-time profit drains.

Clearly, there is no one-size-fits-all strategy for dealerships when it comes to managing idle. But one thing is certain: you must manage it before it manages you!