By Dean Devore posted February 27, 2025 – Best Practices – Rural Lifestyle Dealer
I like museums. It is fascinating to see history preserved and I appreciate the tireless efforts of the people who do this work. However, in our industry, we are not in the business of protecting history. We are in the business of selling and supporting equipment. What would it look like if your total parts inventory were on display? Would it look like you are supporting a product or running a museum?
When we work with a dealer, we usually create a parts inventory profile. With this tool we can see their parts inventory stratified by velocity. There are no “official” velocity groupings, but I typically use something like this:
- Fast-Moving – The top 40% of the hits and usually around 5% of the parts numbers are inventory;
- Active – Parts that sold in the last 18 months but are not in the Fast-Moving category;
- Dormant – Parts that did not sell in the last 18 months but have sold in the last 36 months;
- Dead – Parts that did not sell in the last 36 months.
With the inventory profile created we can discuss Inventory Health. We start at the top with the fast-moving and active parts. Do they have all the fast-moving and active parts they should have? We measure this with a breadth or compliance metric. Simply put, are they stocking the parts that meet their stocking parameter? We normally set our stocking parameter around 2 or 3 hits in the last 12 months. Occasionally, we will look back 18 months if there has been seasonal variation. This is a critical parameter for your business. It ensures you have the right parts in stock and deliver a good fill rate to your customers.