Truck Parts Premium recently concluded an Inventory Analysis for a small client in the south – a franchised International Truck dealership with about $1.8m in annual sales.
Below we’ll discuss the analysis and the conclusions we drew from it, but if you’d like to download the entire PDF, you can do so here – just fill out the form and we’ll get you over to the download page.
Quite often we find that heavy truck parts retailers carry the same physical part by several different manufacturers. Sometimes this is on purpose, since you have specific clients that prefer one brand over another.
However, we often find that retailers aren’t aware they have overlapping parts. In this case, we found 72 “groups” of parts are identical, but stocked under two or more manufacturers. We have compiled this list of similar parts in the table below (Please download the entire report above for details).
Using this data, if the company was to remove the more expensive items from shelves, it would free up $13,832.21 in frozen capital.
Lost Margin Opportunity
The other opportunity is selling parts for the correct price and increasing gross margin. In traditional retail, retailers will calculate margin on each individual item. The more advanced retailers will even go further and fine- tune their margin opportunity based on time of year, day of the week, weather conditions, Holidays, where the item is located on the shelf, the weight of the item, and much more.
The very basic retailers will often mark up all items they sell at a certain percentage, regardless of the manufacturer or item.
We often find that heavy truck part retailers fall between those two. The most common method is that retailers in this industry will set gross margin calculations based on the “Source”, or where they purchase the items from. Sometimes this is with a larger distributor, other times it is when they are purchasing direct from a singular manufacturer.
An example is that a parts retailer purchases from Manufacturer ABC. The parts retailer will mark up all items from Manufacturer ABC the same, regardless of the conditions. This is where lost margin opportunity exists.
Regardless of the margin mark-up method your company utilizes, you must always be aware of opportunities to make more margin whenever possible. In your particular case, we know customers will pay more for certain parts, based on the brand name. However, the brand name is often irrelevant when both brands are of equal value.
For example, your company is stocking the same wheel seal under Meritor part number R803049 and Stemco part number MK42100S. Both are high quality brands, both have the same warranty, and both are considered “OEM” level. Your company is currently paying $5.50 less for the Stemco. Your customers have been paying more for the Meritor brand, so why not charge more money for the Stemco to create more margin for yourself?
If you apply this logic to your overlapping parts, our calculations show you can generate an additional $12,954 in gross margin, which is a 2% improvement.
Your company can generate an additional $12,954 to your bottom line without sell more parts. You just need to sell those parts for the correct price.
In summary, your inventory analysis calculations over 5-years. Year 1 Includes both the Gross Margin opportunity and the Frozen Capital number.
Remember, our Inventory Analysis is just one of the powerful tools inside Truck Parts Premium. To find out more, schedule a demo here and we’ll walk you through all the tools and features that are designed to save you time, money, and stress inside your business.