Motorcycle & Powersports News May 2012 : Page 9
CHART 5 Inventory Percent Inventory Obsolete Parts Inventory Turn Garments & Accessories Inventory Turn they get higher margins, they sell $300 to $400 more in gross profit per unit. As a re-sult, they contribute more to the total store gross profit. Chart 4 reveals that the top 5 dealers have larger operations or at least they have more staff in their PG&A departments, on average. Despite this, they have lower per-sonnel expense, and their employees sell more than $4,000 more in gross profit per month than the group average or the na-tional norm dealers. Do the math. This is impressive performance. Finally, in chart 5 it looks like inventory obsolescence is exceptional for the national norm dealers and incredible for the top 5. Alas, it is really not a realistic measurement at this point. Most of these dealers took the write-down for their obsolete inventory at year-end 2011, but many probably still have this stuff in their dealerships. Over time, they will sell it over the web, donate or dumpster it. Of course it will have to be put back into inventory as they do this, or the long arm of the IRS will be looking for them. Obsolescence numbers will increase as the year progresses, unless dealers take smaller write-offs during the year. Reality shows that few dealers can hold 10 percent or less obsolescence, but it is achievable. Regardless, you should strive to get there. Obsolete inventory ties up cash that could be turning over several times a year at a 30 to 40 percent gross profit margin. Speaking of turns, the top 5 show very high turns in hard parts. There is a point of diminishing returns here, so be careful of not stocking sufficient inventory to satisfy the needs of your service operation. That will cost you business in the long run. I hope you will compare this information against the performance of your parts de-partment. After all, the first step in repair-ing something is recognizing that it is broken. If you are off the mark, there are processes you can and should implement to bring about positive changes. t GROUP NATIONAL NORM NORM TOP 5 AVG. 14.0% 5.02 2.46 10.1% 4.88 2.43 0.6% 9.17 3.71 Steve Jones, GSA senior projects manager, outlines dealership best business practices to boost margins, increase profitability and re-tain employees. His monthly column recaps critical measurements used by the leading 20-group dealers. GSA is recognized as the in-dustry’s #1 authority on dealer profitability. Access to the new Voyager 5 data reporting and analysis system is available for any deal-ership for nominal fee. For more information on GSA’s data re-porting system, dealer 20-groups, on-site consulting or training, email steve@gartsut-ton.com or visit www.gartsutton.com. motorcyclepowersportsnews.com May 2012 9
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