When assessing dealership health, metrics are a useful benchmark of current performance, a way to measure success compared to other dealers and provide insight into individual dealership improvement.

“It also gives dealers a tool to communicate with the rest of the dealership — particularly with the rest of the parts team — on what the goal is, how you’re doing and where you’re headed,” says Dean Devore, founder and general manager of Parts Academy.

In the parts industry, it’s easy to get overwhelmed with metrics or distracted from the ones that are key to improving business performance, according to Devore. One of the most important metrics he recommends focusing on when managing inventory is breadth.

To properly assess inventory breadth, dealers must first have an accurate parts inventory. Adjusting inventory or performance to favor the dealership will only hurt dealers and prevent future growth, so Devore encourages conventional and consistent inventory measurement. After inventory is established, dealers should determine which parts to stock and which to place on special order.

“We can’t possibly stock every available part that the manufacturer releases,” Devore says. “Some of them don’t wear out. Sometimes we need stupid mistakes to happen before a part is damaged, but they’re not a wear part. Those are not parts that you want to stock. You want to stock the ones that are wear items or maintenance items, things that have repetitive demand.”

Common parameters for dealers are 2 purchases in 18 months to 3 purchases in 12 months in order to stock the item. Slower than that and it should be a special order part, according to Devore.

To calculate breadth, Devore divides stock parts on hand by the number of parts that the dealer plans to stock. For example, after evaluating demand, a dealer determines they need 1,000 part numbers on hand. At that moment, if the dealer has 920 of those 1,000 in store, that would be a 92% breadth metric. According to Devore, a realistic inventory breadth benchmark is 85-95%.

“Most of the good dealers are hanging in there somewhere between 90-95%,” says Devore. “For most OEMs that have incentive programs built around breadth, those incentives usually kick in around 85%.”

One of the benefits of measuring breadth is its ease of calculation. While some programs will automatically measure breadth, says Devore, all dealers have to do is download and export part numbers, stock codes or time supply values and do a quick calculation. Inventory breadth is also universal regardless of business size, meaning the playing field is level across single-location to 11-location dealerships, according to Devore, whereas it may not be level in regards to employees, equipment or investment power. Another benefit of breadth is it represents dealers’ commitment to supporting their product.

“If dealers sit down to talk to their manufacturer and the discussion comes up about whether they have enough parts or the right parts, breadth will change the discussion from a fact-free conversation to a very factual discussion in a hurry because they’ve agreed on a stocking parameter,” Devore says.

Because inventory breadth is a leading indicator of fill rate, inventory improvements will also be quicker to spot. When using fill rate to analyze and change inventory stocking, dealers have to stock the item and wait for the customer to buy the part before they can tell if it made a difference, according to Devore. However, with breadth, the analysis and preemptive stocking to demand will improve the fill rate. Instead of waiting months to see improvement, he says, dealers can see it within days.

When getting started with measuring breadth, Devore recommends making sure dealers have a way to identify what parts they plan to stock and could be a parameter or a class, whatever makes sense for the dealership. Then set a cadence, he says.

“I usually tell dealers to measure parts metrics monthly. If they try to measure things more frequently than that, sometimes it’s too noisy. If they wait longer than a month, dealers may not know that inventory is poor. If they measure initially and it’s not where they want it to be — less than 90% — I would start to measure weekly until they get it stabilized,” Devore says.

Then track results to show people inside the dealership the trajectory of improvement. Part of the continuous improvement loop, he says, is to measure, make adjustments, try again and work towards something better.

“We’re measuring things not just so we can pat ourselves on the back and feel good, we’re measuring it so we can make ourselves better,” Devore says. “And if we’re already maxed out on one metric, we can go work on something else.”

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