Ask a random sampling of parts people what the nature of our business is and you’d probably get some disparate answers. I’ve heard it described as everything from a sales business and a service business to a people business that revolves around automotive parts. Those are accurate descriptions, but they only describe methods. The real nature of the business is to make money from auto parts, and that means having the proper inventory levels to adequately service your customers with whatever method works best for you. Since inventory is the center point that all our efforts revolve around, we naturally try to tailor it to best suit our needs. Too little and you won’t satisfy customer needs, too much and you tie up money that’s needed elsewhere. The right balance then is critical to your business survival, but achieving that can be difficult. One term I’ve heard used to describe today’s situation is that your coverage needs to be broad rather than deep, meaning that you keep a limited supply of a lot of parts. It’s a good system and works great as long as the supply chain stays full — and nothing happens to interrupt the chain. Sometimes, though, it seems that interruptions are becoming more frequent and lasting longer. The simplest explanation I can think of is that the need to balance on-hand supply with demand stretches all the way back to the manufacturer: Nobody wants to sit on too much inventory. In most cases today that means that the supply lines stretch at least halfway around the globe, and something that starts as a small ripple in China could take on tidal wave proportions by the time it reaches us, the final users. Now couple this with the need to buy in sufficient quantities in order to take advantage of pricing incentives and shipping discounts: You’re faced with either spending money to save money, or paying a higher price per unit, which may not be easy to pass on in a competitive market. It reminds me of a dog chasing its own tail, running around in circles. When it finally gets a good grip on its objective, it can hurt as much as help. Even with the assistance of sales histories, lost sales reports and movement codes, you’re still not going to get it right every time if you expect the new stock to come in the back door as the old stock goes out the front. Being as I’m just a counterman, I tend to take the position that you never have enough inventory on the shelf, and that every customer you send elsewhere for what you don’t have has the potential of not coming back again. Ideally, I’d prefer an inventory that’s broad and deep. Since that’s not economically prudent and we don’t have the room for it anyway, we have to settle for depth only where it’s needed, and determining that need is essential to the nature of this business. If you can figure that out, and employ whatever method of using it that works best for you, you should be OK. Just remember, though, that it takes a long time before that dust-covered box at the back of the shelf turns from dead inventory into “new old stock.” You might still make money, but can you afford to wait that long for a return on investment? |
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