Planning and managing your inventory doesn’t have to be a guessing game. Knowing your customers and the products they desire will help you to anticipate demand. Add to that valuable knowledge gained through relationships with your distribution channel, and you are on your way to having a better handle on inventory and expectations. Your careful monitoring of inventory throughout the selling season will help you to meet demand while staying out of the overstock danger zone.
Caution and the customer
With the recent recession and stranger-than-usual weather patterns, dealers have become even more cautious about how they plan inventory. They are being careful about how much inventory they are willing to take on simply to please manufacturers and gain discounts.
"Dealers are way more responsible in their inventory management as far as not letting certain manufacturers and distributors take advantage of them by loading them up with inventory. Excess inventory at the dealer level is not good for anybody," says Todd Winstead, president of distributor Tidewater Power Equipment Company in Virginia Beach, VA, and recently appointed president of the Outdoor Power Equipment and Engine Service Association (OPEESA).
Dealers are choosing to plan for increased turns of inventory so as not to carry too much for too long, which can increase liability and risk. Evaluating the sales of equipment as well as parts, and how to proceed with ordering, is important.
"It is a must that you look at turns and shorten your timeframe for booking orders in order to keep you from overstocking inventory," says Lynn Pesson Jr., president of Southland Engine Co. Inc. with three Louisiana dealership locations. "We also shorten our booking orders because of the droughts."
Pesson has also changed the way he evaluates parts. Those that do not sell in one year are reconsidered for stocking. This timeframe used to be three years. Regional weather also plays a role. If you are on the East Coast and have seen healthy sales, your parts inventories may be where they were in previous high-sales years. If you are in the Midwest and dealing with drought, you might be carrying a heavier parts inventory and less wholegoods.
"I think dealers are more cautious than in years past," says Wade Freeman, senior sales manager for distributor Dixie Sales. "Dealers are carrying more parts inventory than in past years, however. Parts houses do well in periods like this with the recession."
While you can't predict the weather, you can stay on top of the purchasing behavior of your customers. Remain cautious when it comes to weather, but strive to be educated on the customer and their buying intentions.
"Stay close to your customer and look at the way the customer purchases as buyer behavior," advises Pesson. "We are asking our customer to help us have the parts when they need them. We have parts purchase boxes and give them to our customer so we can check their levels before they run out."
Valuing channel partnerships
Customer relationships are not the only ones you need to spend time cultivating to help you become better at managing inventory. Building close relationships with your suppliers benefits you greatly. These connections can be informative and helpful in many ways.
"We host update schools and provide a consistent message about Dixie Sales to our dealers," says Freeman. "We help dealers to be in-the-know about news with a particular manufacturer and general industry knowledge."
Distributors have more access to manufacturers and can share the inside scoop with their dealer partners. Winstead says his distributorship also works to educate their territory managers and dealers on market intelligence gained from manufacturers, tradeshows and organizations like OPEESA.
"Distributors and suppliers have comprehensive research data which is very valuable to dealers—provided they take the time and effort to both request and study these materials," suggests Ed Kovalchick of Net Profit Inc., a consulting firm. "Be aggressive about capturing all of the available research."
For Pesson, choosing to deal in only a few lines for a product category shows his dedication to the brand. As a high-dollar dealer, this also increases the manufacturers' interest in his success.
"We have only three ride-on lines and the relationships starts there," Pesson says. "We believe healthy market share only comes from a commitment to the line. The nice thing about being a volume dealer for a manufacturer is that you mean something to their bottom line."
A relationship of good communication with your suppliers can also help you to remedy an equipment overstock situation. Being proactive in moving your inventory to another dealer is better than waiting for a long-shot sale to walk through the door. Territory managers can help you find a place in the market for inventory that is not selling at your location.
"Stay in constant contact with your supplier," advises Winstead. "There are always areas of drought and areas that are booming. Communicate that you are heavy and need help moving equipment, and a lot of the time it can be moved to where the sales are. Dealers have always done it, but with the internet and communication now, it's easier to do. The key is communication."
Inventory monitoring and manufacturer turnarounds
Once you have made a sales prediction for the year and have received equipment and parts shipments, it's time to slip into inventory-monitoring mode. The frequency of monitoring will depend on the season you are in, but should always be consistent.
"When in season, inventory monitoring can be an hourly practice," says Winstead. "The dealers who aggressively manage their inventory are going to do better than those who do not. If you sell all of your mowers on Wednesday, you need to order more on that same day to get them in on Friday to have more inventory to sell for the weekend."
Inventory from each manufacturer should be monitored individually to account for the different rates and times when orders are filled. A business management system (BMS) is an indispensable tool for inventory management.
"Each supplier has a unique fill rate and fill-time," says Kovalchick. "Consequently, each supplier’s inventory has to be managed individually. If the inventory is being controlled with software, items have to be divided up into unique sections with their own set of inventory controls based on the ability of the supplier to provide the inventory."
After the recession, manufacturer fill time was a concern for many. Several manufacturers slowed their production to meet lowered market demands. As the market picked back up, manufacturing needed to follow.
"As we came out of the recession, the whole channel was a bit dry as far as components, and a lot of manufacturers struggled to keep up with demand," explains Winstead. "Healthy manufacturers and suppliers reduced their inventory to safely stay in business. As we came out of it, it was hard to ramp that system back up. A hold-up on components and parts can shut down an entire assembly line or manufacturing plant. I wouldn’t say it is a good or bad thing. It's a healthy thing. I'm just happy we are on the other side of it."