A debate that affects Parts Departments across the country: whether automatic stock replenishment or good old-fashioned Parts Manager experience is the better approach for managing inventory.
The Stakes are High
Before we dive into the pros and cons of each approach, let’s take a step back and acknowledge just how critical effective Parts Inventory Management is to the success of a Dealership. Your Parts Department is the lifeblood that keeps your service bays humming and your customers’ vehicles back on the road quickly.
When you have the right parts in stock, in the right quantities, at the right time, you’re positioned to maximize revenue, efficiency, and customer satisfaction. But when your inventory management is off, the costs can be steep. Excess inventory ties up valuable cash and floor space. Stock-outs lead to frustrated customers and lost sales. And obsolete parts can be a major drain on profitability.
With so much riding on getting inventory Management right, it’s no wonder that Parts Managers are always on the lookout for strategies to give them an edge. That’s where the debate between automatic stock replenishment and Parts Manager experience comes in.
The Case for Automatic Stock Replenishment
Taking the pro-automation stance, Coach Cliff has seen firsthand how implementing an automatic stock replenishment (ASR) system can be a game-changer for Parts Departments. Here are a few of the biggest benefits:
- Algorithmic Accuracy. One of the key advantages of ASR is that it takes the guesswork out of Inventory Management. These systems use sophisticated algorithms that analyze sales history, lead times, and other key metrics to generate incredibly precise replenishment recommendations.
By relying on data and statistical models, ASR can often identify patterns and opportunities that even the most experienced Parts Manager might overlook. This is especially true when you consider that most ASR systems are pulling data not just from your Dealership, but from other locations as well, giving you a more holistic view of demand.
- Time and Efficiency Gains. Managing parts inventory manually is an incredibly time-intensive process. Parts Managers can easily spend hours each week pouring over reports, crunching numbers, and placing orders. ASR automates much of this work, freeing up valuable time that can be reinvested into more strategic initiatives.
Instead of getting bogged down in the minutiae of Inventory Management, Parts Managers can focus on activities like strengthening vendor relationships, Training and Developing Staff, and exploring new revenue streams. In an industry where every minute counts, ASR can be a powerful efficiency driver.
- Improved Obsolescence Management. Excess and obsolete parts are the bane of any Parts Manager’s existence. Not only do they tie up cash and valuable shelf space, but they can also be incredibly difficult to move once they’ve aged past a certain point. ASR systems help mitigate this risk by closely monitoring inventory levels and automatically suggesting returns or adjustments when appropriate.
Most ASR systems have built-in safeguards that flag parts that are at risk of becoming obsolete based on factors like sales velocity and manufacturer programs. By staying on top of these parts proactively, you can avoid getting stuck with inventory that you can’t sell.
The Argument for Parts Manager Experience
In case you’re not quite ready to cede complete victory to the machines just yet…. there’s a reason that Parts Manager experience has been the gold standard in Inventory Management for so long, and it’s because there are certain things that algorithms and data just can’t replicate. Here are a few of the key advantages I see to relying on Parts Manager expertise:
- Intimate Market Knowledge. A Parts Manager who has been working at a Dealership for years, if not decades, develops an incredibly deep understanding of the unique needs and nuances of their local market. They know which vehicle makes and models are most popular in the area, which local businesses and fleets they serve, and how seasonal changes and local events impact parts demand.
This kind of on-the-ground intel is difficult for an ASR system to fully capture, no matter how sophisticated its algorithms might be. A Parts Manager can combine their market knowledge with the ASR data to make inventory decisions that are perfectly calibrated to their Dealership’s needs.
- Skin in the Game. When a Parts Manager is the one ultimately responsible for the Department’s Inventory Management, they tend to be more invested in the outcomes. They know that every dollar tied up in inventory is a dollar that’s not available for other initiatives, so they’re often more cautious and strategic about what they order.
This sense of personal accountability can lead to more thoughtful decision-making. Parts Managers who manually manage their inventory often have a deeper understanding of each part’s profitability, sales history, and strategic importance, because they’re the ones in the trenches doing the analysis and making the tough calls.
- Flexibility and Creative Problem-Solving. One of the potential downsides of an over-reliance on ASR is that it can lead to Parts Managers becoming complacent about seeking out alternative sourcing options. When the system is automatically generating replenishment orders from the OEM, it’s easy to fall into the trap of thinking that’s the only option.
In reality, a savvy Parts Manager knows that having a diverse network of suppliers can be a major competitive advantage, especially when certain parts are constrained or backordered. By cultivating relationships with aftermarket suppliers, other Dealerships, and even local machine shops, a creative Parts Manager can often track down hard-to-find parts faster and at a lower cost than just relying on the OEM.
The Sweet Spot: A Hybrid Approach.
So where does this leave us? Is ASR the way of the future, or is there still a critical role for Parts Manager experience to play? In my view, the answer lies somewhere in the middle. The most successful Parts Departments find ways to leverage the strengths of both approaches, using ASR for its efficiency and data-driven insights, while empowering their Parts Managers to layer on their own market knowledge and outside-the-box thinking.
Ultimately, ASR should be viewed as a tool in the Parts Manager’s arsenal, not a replacement for their expertise. By using the system’s recommendations as a starting point, and then applying their own judgement and creativity to fine-tune inventory levels, Parts Managers can strike the perfect balance between art and science.
Of course, achieving this balance isn’t always easy. It requires a willingness to embrace new technology, while also fostering a culture that values and rewards Parts Manager initiative and problem-solving. But for dealerships that can pull it off, the rewards can be significant: higher fill rates, lower carrying costs, and a Parts Department that’s truly firing on all cylinders.
Conclusion: At the end of the day, there’s no one-size-fits-all approach to Parts Inventory Management. The right strategy will depend on your dealership’s unique needs, resources, and goals. But by understanding the pros and cons of both ASR and Parts Manager experience, and finding ways to leverage the best of both, you’ll be well on your way to optimizing your inventory and driving better results for your business.
If you’re looking for more expert insights on how to take your Parts Department to the next level, we invite you to book a complimentary 15-minute consult session with one of our experienced automotive industry coaches. We’ve helped Dealerships across the country maximize their Parts Profitability and efficiency, and we’d love to learn more about your unique challenges and goals.
