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It is important to note that your gross profit does not determine how much profit your department is making but rather how much profit you are bringing in before payroll, taxes, and overhead. This will tell you how much you are making before your expenses. You should know the gross profit of your parts department and the profit of each type of part being sold. Your gross profit is the difference between the cost of a part and the markup you set to sell it at. Unsurprisingly, your gross profit is a very important KPI. By measuring your sales mix, you can keep a good balance of parts that have high-profit margins and parts that have high-profit volume. If your sales mix changes, your profits can change. Either way, you need to be sure your inventory is stocked with the right balance to meet demand. On the other hand, some parts will sell in more volume than others and result in high profits. Not all auto parts are sold equally, and some will have higher profit margins than others. Your sales mix is a calculation of the different types of parts you sell. 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.
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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. Knowing your obsolescence levels is a key measurement of how well your parts department is doing. Are Your Obsolescence Levels in Check?ĭo 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. A low turnover rate may lead to overstocking, while a high turnover rate can impact your ability to meet demands. This can help you keep track of your inventory costs vs. 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 also cause issues with your service department if they cannot provide timely repairs and services. If your stock levels are too low, customers cannot buy the parts they need, leading to dissatisfied customers who may not return. Letting your inventory get out of hand can become a problem for your parts department. Without knowing your days supply, your inventory can be out of balance, leading to inadequate inventory and obsolescence. 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. It is crucial that you are able to calculate the supply needed for 30, 90, and 360 days. How well your inventory is stocked is probably one of your most important KPIs, and it can help you improve your month-end reconciliation.