MYOB: Taking Stock of Customers’ Inventory – A Blueprint for Investment

If there is one thing that jobbers understand better than most segments of the aftermarket, it’s the impact of inventory on a business.

Jobbers can help their clients more than they may think in ensuring a shop is stocked properly, but the problem that usually occurs is that most shops don’t stock well if at all. There are many benefits to a shop stocking properly today, including:

1. Jobs within the shop are out faster, by eliminating waiting time for parts to arrive which can create shop inefficiencies;

2. Potential for more add-on product sales to help increase the size of the invoice;

3. An increased gross profit per hour, by eliminating local pick-ups;

4. Better customer service, which in turn creates improved satisfaction and confidence within the shop itself;

5. A more professional image, since a well-merchandised shop, with professionally displayed products, looks great.

As a jobber, you can bring much to the table on the topic of inventory. To help you crystallize the issues that are critical to your customers’ inventory needs–and which may be somewhat different from yours in scale if not in type–I put together what I call the Blueprint for Investment. Using this will help you assist a service provider in maximizing the return on his inventory investment.

Need

Does the shop need the item?

In your mind, your client needs everything you carry. This is not so. Review with the shop owner the following criteria for stocking a certain item. Are there other lines that cover the same need for the shop? Does the shop recommend the item to its customer base? Does the shop have enough customers requiring this item to justify keeping it in stock? Will the shop lose any customers if it doesn’t carry the item?

These questions help you focus in on the type of customer the shop is doing business with.

Facility

Does the shop have the room to stock, display and install the item?

This can be a big one, especially if the shop is a gasoline service station. Many of these locations were not designed to carry much inventory, as I am sure you have witnessed firsthand. Consider:

Is display space available, or would it be more profitable to the shop to display a faster-moving item from the same line?

Is adequate back-up storage space available?

Is the shop really in the business of servicing the merchandise, and is the shop willing to assign space to store or install the item? When a shop is too restricted in available space to carry inventory, is it possible for the shop to purchase an old tractor-trailer, put it behind the shop, clean it up, and attach an alarm system to it to provide stocking capacity?

Do the bylaws of the area allow this? Don’t necessarily blame the shop owner for not stocking if his facility is not conducive to doing so.

This Blueprint for Investment helps your customers focus on insuring the right stock is being carried in their shops and also that you are carrying the right stock.

Finance

Does the shop have the finances necessary to stock properly or continue to carry a slow-moving item? This is a major problem in the independent sector. Many shops have huge accounts receivable problems, which even affects your relationship with the shop because they cannot pay their statement in full and on time.

The first order of business would be to see what you could bring to the table to assist them in reducing their receivables. The second item is to measure their inventory turnover by line.

The guideline is that an independent shop should turn over its parts inventory between six and eight times per year. If the turns are below this number, then the shop has money tied up that is not working properly to create the best return on investment from inventory. Clean the lines up and make sure the shop stocks the parts that are turning.

Perhaps this review will also reveal other lines that could be added to the inventory to expand their business.

People

Does the shop have the people to properly sell or counsel its customers? Are all the shop’s staff members properly trained on the items in stock? Do they know when to bring a particular item to the attention of the customer? Is the staff even aware of the items the shop stocks?

This is a problem out there. It is amazing how many times I have seen a technician ordering a part from the jobber, and the item is already in the back room on the shelf. Review what training and education the shop owner has done with the staff to insure that they all know what the shop is stocking.

Do they know how to install the items properly? This is an issue because if they don’t know how to install the item properly, the shop may be too embarrassed to admit it, and end up trying to claim a warranty. This is wrong, as that cost is then funneled right back to the manufacturer. This industry cannot afford that cost.

This Four-Point Blueprint for Investment–Need, Facility, Finance, and People–can help you to help your customers focus on insuring the right stock is being carried in their shops, and that they realize a good return on their investment. It will also assist you in making sure you are carrying the right stock for the shops that you sell to. Many jobbers lose business because they end up stocking what they want and not necessarily what their shop customers want to see. Slow down, and during these slower months open up a discussion with your clients on this very issue.

It may be a key relationship builder if you take the initiative, but this time approach it from the shop owner’s point of view.