Identifying An Idle Parts Inventory Problem – And Solving It
If your parts department staff is worried about trying to fit all your parts on the available shelves – and/or if you’ve got parts with dust on them – you may have an idle parts inventory problem.
Idle inventory steals both shelf space and money from your parts department, reducing your rate of return. The trouble is, it’s easy to create an idle inventory problem if your department isn’t careful.
Here’s what you can do to reduce or eliminate any idle parts inventory you may have, and how you can prevent this problem from reoccurring in the future.
Getting Rid of Idle Parts Inventory – Tips and Tricks
If you establish that more than 10% of parts inventory has remained on the shelf for a year, it’s time to make a plan to get rid of these excess parts. Not only will this help your return on capital, but it will also help you make room for fast-moving inventory, reduce time spent hunting for parts, etc.
It’s true that getting rid of idle parts can feel uncomfortable. No one likes getting rid of inventory for pennies on the dollar. Not to mention that someone might actually buy the parts if you wait long enough, right? (Answer: No. Statistically, parts that don’t sell after 12 months will probably never sell.)
Once everyone wraps their head around the benefits of getting rid of idle parts inventory, here are some ideas for moving parts:
- Contact a broker to take your stagnant inventory away. This is a quick resolution to a parts problem, but it has some downsides. First, some brokers will try to sell your department inventory that you don’t need (and can’t sell). Second, brokers often only offer pennies on the dollar. Still, it never hurts to contact a broker and check options.
- Sell your idle parts on eBay. Listing parts on eBay at a steep discount can be a good strategy to get rid of them. There are two “tricks” to selling idle inventory on eBay. First, the parts must be priced substantially below cost. If not, another seller with a better rating (or a better shipping policy) will sell the part instead. Second, selling parts on eBay requires rapid customer service. When a customer asks a question on eBay, they’re expecting an answer right away. Wait too long, and the customer will move on to another seller.
- Sell parts at a local swap meet. A swap meet isn’t a great place to sell idle inventory, but it’s relatively inexpensive to try. The same can be said for the local flea market.
- Contact local junk or salvage yards. Many used auto part retailers are willing to buy idle parts inventory in bulk. Of course, they often pay only a small fraction of cost.
Once you’ve eliminated idle parts inventory, it’s time to change the way your department manages inventory.
Preventing Future Idle Inventory Problems
Reducing idle parts inventory can be cathartic, but it’s a mistake to unload inventory without having a plan to prevent the problem from reoccurring. Here’s how you can reduce or eliminate idle parts inventory problems:
- Use a more rigorous process for ordering inventory. This might mean ordering less frequently or placing only minimum orders. Can the current ordering process be improved? Are the people ordering parts disciplined, and do they understand the importance of inventory turn rates? Are orders being double-checked for errors? Etc.
- Take a hard look at your current parts return policies. Are there adjustments that could be made so you’re less likely to get “stuck” with returns your department can’t sell? Is it possible to charge a 15% or 25% restocking fee on returns, limit returns to 10 business days, or both? Can return policies be product or customer specific, eg. a different return policy for over the counter sales vs. wholesale? Different return policies for body shops than for local jobbers? Asking your parts department team these questions can often help identify the biggest sources of idle inventory problems.
- Implement a non-refundable deposit policy. Special orders can be a great source of revenue, but they can also directly lead to an idle inventory problem. If your parts department is taking special orders over the counter, what about asking customers to pre-pay? Or asking wholesale buyers to pay 20% up-front? Deposits go a long way towards making sure a customer shows up to get their parts. They also can be used to offset any inventory losses.
- Closely monitor inventory age, and get aggressive early. Automatically marking down part pricing after a certain amount of time has passed – say 30 days – can be a smart idea if your parts department inventory is online. Likewise, listing parts that reach a certain age on eBay at cost can be a smart way to prevent taking bigger inventory losses later.
- Get VIN information with every order. In order to reduce the odds of ordering the wrong item, it’s always a good idea to get a VIN for verification purpose. Many parts departments already ask for this info when taking an order, but some are more diligent about getting VIN info than others.
Improve Inventory Turn And Eliminate Hassles
When idle inventory is eliminated and turn rates are increased, managing a parts department gets a little easier. Faster turning parts are a little easier to “overstock” for customer satisfaction reasons. Annual inventory counts (assuming your department does these annually) go a little faster. Of course, profits improve too.
Idle inventory problems often begin with the best of intentions, but the data shows that adopting rigorous inventory control policies is good business.
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