8/29/08

Old Inventory Is Like Bleeding To Death

In today's market, I see quite a number of commercial truck dealers who have old inventory. I don't mean 120 days old, I mean more than 350 days old, some more than 500 days old. Most manufactures only compensate flooring expenses for up to 100-120 days. After that, the entire monthly cost is on the dealer. Ouch. What's that? About $300 per month per truck times 30 or more trucks? Double ouch. That's a hemorrhage. As that continues, the department bleeds to death.

How does it get this way and how can we avoid it? It gets this way in my opinion by not paying attention, number one and number two, by not doing anything significant about it. Not enough focus and not enough of the right kind of actions. Just because the waves are not 15' high like the last five years, they are still 5' high and they are still coming onshore. It's time to develop a better plan and hang 10 just as if it were a 15' wave! Get focused. This is how we avoid this problem in the future. Have a better plan and get focused.

So, you have old inventory. Let me ask you a few questions. One, I want to see how many upfitted commercial trucks you were selling each month by month for the last five years. Can you provide that information? Two, I want it broken down by what kind of bodies were sold month by month for the last five years. Can you provide this information? Three, I want to see what you have been spending month by month in the last five years on advertising and marketing and what those expenses purchased and what the results were. Can you provide that information? Fourth, I want to know who sold the commercial trucks, month by month and body type by body type for each salesperson. Can you provide that information? Fifth, how have your marketing efforts, expenditures and mix changed in the last five years with particular attention to the last year and a half. Can you provide that information?

If you cannot provide the information on one through five above, you do not know what you are doing. That is a problem. A big problem. You have to know what you are doing and what is working and what is not and how your are advertising and what the results are and how you have changed and why. You have to know this. In a 15' wave market, you can ignore all of this as so many have, but when the waves are down to five footers, if you haven't been keeping track of this, you have a lot of old inventory and are bleeding to death in flooring.

This market did not change overnight. I assure you of that. It changed more slowly, but you may not have noticed it. When gas went from $2.40 to $3.10 and then back down to $2.55, I knew it was not long before it would be $5.00. The changes have been happening. There is a huge difference in the immediate market of trucks when gas is $4.50 vs $2.50. Were you watching what was happening with diesel fuel? Even today, it is $5.50 at many places. You are hard pressed to drive enough miles during ownership to pay for the diesel motor any more. There was a time that was under 60,000 miles. Did you change your mix to more gas rigs? Still stuck on the diesel? Maybe the competition did.

If you could answer one through five above, I can be of great specific help to you on moving your old inventory. Of course, with that knowledge, you may not need me. You are on top of things! I congratulate you! Excellent job. Keep up the good work and please let me know about all your successes.

For the rest, here are some suggestions besides getting a plan in place to be able to answer one through five in the future.
  • Expand your market area. The best thing about commercial trucks to me is that it is not a local market. It is a regional market. Truck Trader type magazines are good, but right now you would be buried in a deluge of ads of dealers trying to off inventory. If you want to dive in there, do so with these two thoughts: Unique and Used. Those are the two best items to put in those publications. Putting in standard stuff is a waste of money in my opinion. Spend that money somewhere else. If all you have is standard stuff, don't go into the traders.
  • Clean up your old stuff. Bodies start looking dingy over time. Get all your trucks spit polished in detail and items repaired, re-stained or whatever is necessary to make them look like they just came off the assembly line.
  • Create attractive, eye-drawing attention displays with white space. Get a portion of the front line and create some great displays with dumps in the air and other eye grabbing things. Forget the parking lot for a while. Let retail keep their spiffy perfect lined up vehicles, but you need to park them at all different angles and have a lot of space between trucks so the 'white space' takes the attention to the vehicle. This will make a difference. And, one last thing. Change it once a week minimum. Keep it fresh! Open up the doors on service bodies, make it like a display at a trade show only on your lot instead.
  • Trade some of your old plain pieces for someone else's old unique pieces. Get with your trading partners and swap out some of your pieces for some of theirs. Get the most unique and different things to can. Shoot for five units. I want you to want it especially if you would never order that piece. You need some change and some new ideas. You're kind of stuck in your ways. Let's get loose and flexible. The stranger the better as far as I'm concerned. If you can find colored units, even better. Become a wild and crazy kind of guy or gal. You will grow from it and you will sell more units. Trust me. I have proven this tactic over and over again at a lot of different dealerships. Get away from the mainstream a bit.
  • Get Really Bold and Order Two or Three New Units. This will help you greatly. Talk to me or my partner, or talk to your body company and find some really, truly unique things that you can get on to your lot fast. Make sure they are things you probably would have never stocked. You know, the same old Contractor Bodies, Service Bodies, Flatbeds, Van Bodies are pretty boring. Everybody has them in quantity. You could find a hundred Contractor Bodies within a 100 mile radius of your store. If all you're selling is the same old stuff everyone has, you only have price and local service to sell. That really limits you in a regional market product, don't you think? Get off that wave and onto a new one. Order up a Desert Landscaper Body from Harbor Truck or body company in your area that has a similar type of body and put it on a tilt cab first choice or a crew cab second choice. Order up a Chipper body from Marathon Industries or a body company in your area with a similar body and put that on a medium duty chassis, tilt cab or regular cab. Order a crane body from Royal Truck Body or a body company in your area that has similar trucks. Put that on a super cab 350 or 450. Get a plumber body or a ProTech aluminum flatbed. The list could go on and on. Get some exciting, different and unique things that you can actually sell. You will make home run grosses on these and you will most likely turn them quickly. When you do, reorder immediately, don't delay. Keep your successes growing.

I will have some more ideas tomorrow, but this will get you going for now. There is absolutely no need to sit on old inventory ever again!

1 comment:

Inventory POS System said...

I appreciate your post, thanks for sharing the post, i would like to hear more about this in future