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Inventory Management Best Practices

Wednesday, February 27, 2019 - 09:00
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As aftermarket companies expand into ecommerce channels, inventory management has become even more critical. Distributors and retailers alike need to know exactly what they have on hand in order to meet demand from multiple channels.

While the retail supply chain at large has tackled many of the challenges of real-time inventory visibility, the aftermarket has some unique obstacles when it comes to optimizing inventory. 

One issue is the historical overabundance of SKUs, and that isn’t going to change anytime soon. In fact, it will likely get worse. That said, finding a way to address the large number of long-tail SKUs and the complexity of forecasting inventory is an important part of staying competitive moving forward. 

“Keeping up with SKUs puts a real burden on suppliers,” says Roger Moyers, president of Blue Sage Software. “The ability to price things differently for each customer is also another common challenge with aftermarket suppliers.

“How do you manage inventory when it is not at all that consistent?” says Keith Thompson, senior software architect at Epicor Software. “This isn’t just seasonality, but inconsistent sales over long time periods. Not matter what math you use, there is always a potential hole there.”

“Auto parts is a difficult space in a lot of ways, because everything is application-specific,” Thompson adds. “You have to be SKU intensive and cast a wide net. Balancing inventory dollars between width and depth is difficult.”

Ecommerce has exacerbated these issues, because now there are more demand points being served by the same inventory. “It can be difficult to retain the inventory on hand accuracy, because you don’t have any prior sales history to support those inventory decisions,” Thompson says. “It can be difficult to keep up with the pace of sales. If you have to do that manually while business is increasing, that can be a real struggle.”

More companies are applying inventory management software, barcoding, and other technologies to stay on top of these issues.

“We are seeing more and more that technology is playing a larger role in how our customers are keeping up with the amount of new products entering the market,” says John Bunting, chief operating officer at Fuse5 Automotive Software. 

That is an important trend, given that the aftermarket has been a relatively late-adopter of new technology over the past few decades. “The aftermarket has traditionally lagged behind a bit with technology,” Bunting says. “If you’ve been in this industry for a while, you’ve likely gone through a technology deployment that didn’t’ work out well, so there is some resistance. But for those companies willing to take that step, I think think we’re seeing their profits reflect the benefits.”

Technology allows aftermarket companies to automate purchase orders, forecasting, and other operations. “Previously, they may have been evaluating these demand cycles in Excel or they had to do some manual interpretation,” Bunting says. “They can automate that now, and take in tings like seasonality and sales velocity, and pull that into the calculation. Customers don’t have to use a gut feeling; they can use data and analytics to establish what those trends are.”

That has been helped by new forecasting tools within inventory management systems as well as custom tools developed by buying groups and other stakeholders. There are also solutions that can help determine stocking methodologies that can be varied by line, customer, and location. These solutions can also help better predict return rates and reduce buybacks.

Complete inventory visibility can also help with things like stock transfers, an increasingly important capability now that companies are adding e-commerce channels to their businesses. “If you’re in a store and you don’t have the part, but a sister store does have it, you can transfer that and have it delivered directly to the customer or sent to your store,” Thompson says of Epicor’s Vision solution. “We can move overstock from one location to another. Being able to see other inventory Is extremely helpful.”

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