The long held rule of thumb that 20 per cent of your parts stock makes up 80 per cent of sales is likely to be fairly accurate, but keeping tabs on your parts sales so you can be certain that you are indeed stocking enough of the right parts and selling them quickly enough to maximise your profits, is imperative.
Understanding your parts sales and parts stock turn will help you to run a much more cost effective operation and could enable you to free up more of your capital.
As long as you keep track of your parts sales over a period of time and you analyse your data, it will be relatively straightforward.
If you run your garage with the help of a management system, you will be able to run reports to deliver that information and the more familiar you are with the software, the more in depth your information and you will be able to make more accurate decisions for an improved bottom line and ultimately profits will follow suit.
Alex Knight said: “Anything aged over 12 months should be considered absolutely obsolete and parts which have been on the shelves for between six and 12 months should be viewed as obsolete and careful tabs should be kept on them so similar stocking mistakes are not repeated.
“If more than 30 per cent of your stock is aged six months or more, take a look at your parts purchasing policies.”
For a full picture, Alex advises garage owners to consider current stock age and how it compares to sales trends.
Parts which have been on the shelf for more than a year and for which there has been zero demand are simply a liability for your business.
Things to be aware of would be over ordering parts to meet incentives, order errors, customers who don’t return for repairs and speculative stocking.
Once a part reaches seven months old, it has just a 15 per cent chance of selling and an 85 per cent chance of becoming obsolete.
Alex added: “Bear in mind that Trend Tracker, in its analysis of the service, maintenance and repair (SMR) market, suggests the spare parts market (including oils and paint/materials) has declined by 10.5 per cent to £8.5 billion between 2004 and 2014.
“Managing your parts has never been so important to the overall well-being of your business.”
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