Dealership Parts Inventory Management: Expert Insights

A No-Fear Approach to Inventory

For many dealerships, COVID-19 caused major disruptions in supply chains, leading them to stockpile parts out of fear. However, Dahlquist and his team took a different approach.

Instead of panic-buying, they remained strategic and disciplined, focusing on long-term efficiency rather than short-term shortages. Now, five years, post-pandemic, all dealers should take the time to reassess their inventory strategies.

Dahlquist’s philosophy for inventory management was clear:

• Buy to protect inventory, not for discounts.

Rather than chasing bulk deals or promotions, Dahlquist focused on ensuring his department had what it truly needed.

• Stick to manufacturer parts for quality and loyalty benefits.

By exclusively sourcing from Mazda rather than aftermarket suppliers, he maintained a 97% parts loyalty rate. This not only ensured quality but also maximized manufacturer incentives, such as return reserves and bulk purchase discounts.

• Leverage auto-replenishment programs for optimal stock levels.

Dahlquist relied on Mazda’s PartsEye program, which analyzed daily stock levels and generated automatic order recommendations. This allowed him to maintain a lean inventory without overcommitting capital.

The result? A clean and highly efficient inventory valued between $80,000 and $100,000, with an obsolescence rate of less than 2%—a rare achievement in the dealership industry.

Avoiding the Financial Risks of Over-Stocking

One of the biggest mistakes in inventory management is overbuying. Many dealerships are tempted to order in bulk to secure free parts or minor discounts. However, Dahlquist warns against this trap:

“The problem is buying 10 just to get one free—you end up with $40,000–$50,000 in parts you don’t need.”

Instead of stockpiling excess inventory, he took a more measured approach:

• Let demand dictate purchases.

Rather than assuming a part would sell, he closely monitored usage trends and adjusted stock levels accordingly.

• Trust the manufacturer’s supply chain.

With quick replenishment options available, there was no need to hold excessive inventory. Manufacturers now supply parts faster, making it unnecessary to keep large 90-day reserves.

• Prioritize fast-moving items.

Some parts required a 90-day supply due to their high turnover, but others could be ordered on demand. He carefully categorized parts to determine the best stocking strategy.

By avoiding unnecessary purchases, Dahlquist ensured his dealership’s cash flow remained strong while still maintaining a high availability of essential parts.

Optimizing Inventory for Service & Customer Satisfaction

Inventory management directly impacts a dealership’s service department efficiency and customer experience. Dahlquist understood that keeping the right parts in stock meant faster repairs and happier customers.

At Mazda of Roswell, his department maintained an active inventory of $120,000 worth of parts, carefully balanced between in-stock items and quick-turnaround orders. This allowed them to achieve a 95% fill ratio, meaning that 9.5 times out of 10, the needed part was immediately available.

His strategy involved:

• Stocking high-demand items in appropriate quantities to minimize delays in service.
• Keeping replenishment times short (1–2 days out) to avoid unnecessary stockpiling.
• Considering the historical buying patterns of nearby dealerships to ensure his store’s inventory was optimized for its specific customer base.

This meticulous approach allowed the service department to operate smoothly, preventing backlogs and maintaining high levels of customer satisfaction.

Lessons for Other Dealerships: How to Refine Your Inventory Strategy

For parts managers looking to optimize their inventory, Dahlquist offers a few key pieces of advice:

“Take seminars and courses on inventory control, phase-in/phase-out strategies, and day supply calculations.”

Inventory management is constantly evolving, and staying educated is crucial. In addition to ongoing learning, he recommends:

• Avoid overestimating the need for a 90-day supply.

While this was once standard practice, manufacturers now replenish stock quickly, reducing the need for large reserves.

• Follow manufacturer recommendations.

Some dealership managers resist manufacturer policies, but Dahlquist believes manufacturers have the best data and insights to optimize supply chains. “They aren’t there to hurt you,” he says.

• Start early.

As inventory processes become more automated and data-driven, understanding best practices from the beginning of your career will set you up for long-term success.

Dealership Parts Inventory Management

Mastering inventory parts management requires discipline, strategy, and a willingness to adapt. By focusing on demand-driven stocking, avoiding bulk-purchasing traps, and leveraging manufacturer programs, Dahlquist successfully maintained an efficient and profitable inventory for decades.

For dealership parts managers looking to refine their strategies, his approach provides a proven framework for balancing cost efficiency with service excellence. By implementing these best practices, dealerships can ensure smooth operations while keeping customers satisfied and service departments running at peak efficiency.