Calculating Days Supply
How well your inventory is stocked is probably one of your most important KPIs, and it can help you improve your month-end reconciliation. It is crucial that you are able to calculate the supply needed for 30, 90, and 360 days.
Knowing your days supply and having a deep understanding of your inventory needs, you can get ahead of any issues that would otherwise occur, such as high seasonal demand and keeping ancillary products in stock. Without knowing your days supply, your inventory can be out of balance, leading to inadequate inventory and obsolescence.
Letting your inventory get out of hand can become a problem for your parts department. If your stock levels are too low, customers cannot buy the parts they need, leading to dissatisfied customers who may not return. This can also cause issues with your service department if they cannot provide timely repairs and services.
Knowing Your Annual Stock Turns
Once you know your days supply, you can calculate your annual sock turns or how often your inventory turns over in a given year. This can help you keep track of your inventory costs vs. how much it is being sold for. A low turnover rate may lead to overstocking, while a high turnover rate can impact your ability to meet demands.
Are Your Obsolescence Levels in Check?
Do you have parts that have been taking up space on your shelves just collecting dust? If so, they cost you money every day they sit there. Knowing your obsolescence levels is a key measurement of how well your parts department is doing.
High levels of obsolescence mean your inventory may not be as well regulated as it should be, or perhaps you have custom orders that a customer never picked up. If you don’t know your obsolescence levels, you may not realize there is a problem until your department is over-stocked with obsolete parts.