Pub. 5 Issue 1

18 LET THE RIVER FLOW… NAVIGATING USED VEHICLE INVENTORY MANAGEMENT! BY MIKE EDWARDS, PRESIDENT/CEO FIRST GROUP FAMILY OF COMPANIES W ith the Used Vehicle department continu- ing to contribute a larger share of the dealership’s overall profits, it is becoming essential that you have a good used vehicle inventory management system in place. Proper used vehicle inventory management is also an essen- tial ingredient to ensuring you maximize your new vehicle department volume and gross. In today’s industry, there is no shortage of quality used vehicle inventory management software systems available. They all perform with various levels of data and success. However, it is still very important that the dealership personnel (Used Vehicle Manager) have a complete understanding of the functionality of the software (are they maximizing its capabilities), the end purpose of the software (what is the mission), and a deep understanding and commitment to what the software is trying to accomplish (do they follow it). It still takes PEOPLE to execute the processes and philosophies of inventory management, and to do that they must be trained, motivated, and compensated to achieve those inventory management goals and objectives. In this article, we will look at the overall inventory manage- ment concept. There is much more to proper inventory manage- ment than can be presented in this article, however, this is an excellent place to begin. Proper acquisition and disposal of inventory will help guar- antee you do not miss sales or gross profits. A poorly managed mix and turn of your used vehicle inventory will have a ripple ef- fect that can erode profits and volume under the surface without you even knowing it. A well-managed inventory that is mixed correctly, stocked appropriately, priced right, not over aged and turned every 45 days will ensure you achieve maximum profit- ability in both front end and F&I gross. To begin establishing an effective inventory management system, you first need to step back and look at the BIG picture. Think of your used vehicle inventory as a Flowing River. The goal is to keep the river flowing at a steady and desired pace. If water flows into the river faster than it can flow out, you have a flood and damage is done (excessive aging inventory). If water flows out of the river faster than it flows in, the river dries up and can no longer sustain life around it (missed sales opportunities).