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Reasons to Consider a Layered Approach to Your Inventory Process

Reasons to Consider a Layered Approach to Your Inventory Process

Parts inventory comes and goes on a daily basis in many different ways.  So why would a one-size approach to clean parts inventory be the answer for everyone?  The answer is, it isn’t.

Each parts department runs their business in different ways.  Each parts manager knows what sells versus what doesn’t, what needs to be stocked, what needs to be sold, and what parts move fast versus what parts have been on the shelf too long. No matter what your situation is, there are tools that can help manage parts inventory, by your rules.  Even with the added piece of OEM guidelines, managing inventory doesn’t have to be chaotic. This is where a layered approach comes into play – manage inventory as it goes, don’t wait for an inventory count at the end of the year. This can be a huge undertaking for many, not to mention – time consuming.

The layered approach takes it one month at a time to reduce the total amount of time spent on inventory.  The process is simple:  Pull a weekly report, or better yet, take a quick look each day. The first thing to check is the returnable parts that are close to a non-returnable age (for those OEM parts that have return programs).  Send these back to the OEM, if possible.  This should be done right away instead of being put on a to-do-list.   If you can’t return the parts, start considering selling them at a small discount. For example, a 10% discount on a nine month old part would be a good starting point.

Next, check special-order parts that are still on the shelf. These are commonly the biggest problem in most parts departments. Many technicians assume any parts can be sold – any parts!  Remember that with special-order parts, the nine month rule does not apply.  The life expectancy of a non-stock part should be no more than 60 days on the shelf. At this point, start discounting it – everyone likes a bargain and the parts should be sold while there is still value left.  A special-order part to one parts department may be a fast-moving part to another.

For stock parts, plan on increasing the discount incrementally as they age.  For example:

AgeDiscount
9 months10%
10 months20%
11 months30%
12 months40%+

The general consensus is that if a part is still on the shelf after 12 months, it probably will not be sold, and certainly not at full price. And don’t forget about the carrying costs that are eating away at your profit margin to the point of losing money.  Keep it in check as often as possible and layer discounts to get as much as you can, when you can.  Most systems can accommodate these automatically, so time doesn’t have to be wasted by doing it manually.

A layered approach may not be for everyone. The approach probably works best for those that need to keep inventory moving and don’t have a huge amount of time at the end of every year. Either way, it’s important to keep track of stock inventory, pay special attention to non-stock inventory, and automate as much as possible.