The tracks are dark; the cars home in their shops. Sure, it may be drag racing’s “building season” but what can a retailer do to “fine tune” their business to the season? Specifically, what can a retailer do with their inventory this time of year? Like smart racers, smart retailers can use this season to “rebuild” their stock, find out what will help them next year and, most importantly, keep in contact with their customers.
We talked to a number of manufacturers about off-season inventories, and the common thread they all shared was good communications. That includes those communications between shops and manufacturers as well as shops and customers. Pass on the news and knowledge from manufacturers to the customers so they can apply it to their needs. They can’t know what they want if they don’t know what’s available.
Chris Douglas of Comp Cams, Memphis, Tenn., says the key to inventory management is to, “Stock up on service type items. These are the types of projects that racers put off all year long and finally during the winter, they have the time to make upgrades and refurbish their equipment. A couple good examples of these types of products from our companies would be valve springs from Comp Cams and transmission overhaul kits from TCI.”
Predicting which new products to bet on for next year are risky. “You almost have to look into the future and make an educated guess as to which new products are going to be the hot sellers later in the spring,” says Douglas. “If I was a speed shop owner, I would develop a core group of customers that are well connected in the specific niches of the markets you serve and make them a part of this process. I recommend sticking with the brands that have proven year after year to be successful. These proven companies/brands are the most likely to have the product performance, tech support and marketing to make them the preferred choice. The worst case scenario is to load up on the latest, greatest no-name widget only to have it be obsolete a short time later or no marketing/advertising support to make the racers want the product.”
When it comes to keeping old inventory, Douglas says, “I believe the numbers (inventory turns, margins, etc) will lead you to the proper decisions. Take the time to study and manage your inventory-the bottom line of your business will benefit. Try to be proactive and stay ahead of dramatic market shifts that affect your inventory. Rule changes, economic conditions, etc., are all factors that must be considered.”
Staying in contact with customers and tracks during the off-season is big. Douglas agrees and offers some great end-of-the-season philosophy with, “I think the single most cost-effective marketing a small performance business could do is an online e-newsletter. Other good methods of face-to-face, off-season contact include trade show attendance, open houses or bench racing parties at your location, year-end banquet attendance and swap meets. Owning a performance business is a lot like being a racer-those that win later in the year will be determined by the amount of work and effort that is invested over the off-season months.”
Bill McKnight of Mahle Clevite, Fletcher, N.C., goes with the basics for seasonal inventory. He says, “At this time of year, inventory ought to be pretty low. It’s not the time of year to be stocking tons of stuff.” He cites engine parts as hard parts already known for moving slow. Yet, each shop needs to keep them on hand for when their customers need them.
For selecting new products, he suggests shops hit the road. McKnight says, “One of the things I see tons of customers at is trade shows such as PRI. It’s the best avenue we have to see what’s hot and what’s new. We do SEMA too, but PRI is racing nuts and bolts. I feel if you miss that, you’re missing the biggest opportunity of the year.”
And it is there, at PRI, that shops can see what new products they should have. “If I’m a shop, I’m going to the PRI show. What I would recommend is to put all my current suppliers in the PRI computer to map out my trip and plan it from there. One of the good things about it is that all the company principles are there.”
As for what old products need to go, McKnight says, “Obviously the guys who have inventory control know which ones should go. Even a major fundamental question is, ‘Which one should I stock?’ A smart guy takes advantage of what parts are returned. A lot of suppliers, like ourselves, provide our customers matching money. They will get a certain percentage of their purchases back as a credit. We, as suppliers, set that money aside for that.”
For keeping a high profile with customers, he points out a few methods. “Do the race track banquets,” says McKnight. “If you’re selling into that market, what better way to stay in touch? It’s a good chance to do some networking.”
Mahle Clevite is big on meeting clients at the track, too. McKnight continues with, “For our drag programs next year, we’ll have tickets for events and hospitality suites. I’ll have a menu set up with our race teams. I do about 10 or 12 NHRA races and five IHRA races, and I give my customers my cell number to reach me and make sure they are having a good time.” Their customers visit with race teams aligned with Mahle Clevite for an up-close-and-personal inside look.
Tony Kane of Hughes Performance, Phoenix, Ariz., points out how this season is more than just closed tracks. He says, “I guess right now, this time of the year, we jump right into testing and the trade shows such as SEMA and PRI.” He sees the shows as an asset and good tool for shop owners and operators, “For them to be up to speed on the new products and put them ahead of the curve.”
When it comes to selecting new products, Kane says, “They have to look at what is an ‘A’ mover for them or their customer base. They have to build their inventory around that. I would research the motorsports areas around them and see what’s in their advertising budget and launch whatever that market may be.”
As for which ones to drop, Kane keeps it simple with, “Well, if people don’t know you have it, it’s really not the product’s fault it’s not selling. At that point, I would evaluate what products are not selling.” His statement not only includes the cause but also the cure.
Contacting customers in the off-season is simple, according to Kane. “Right now with the computer, there is so much information. You don’t have to leave your company. We obviously have a customer base, and you have to appreciate the customers you have. If you sell them one item, that’s not going to help you grow. One-stop shopping; every thing is convenient now, you can literally build a car from home.” He refers to credit card shopping for cars and parts on a computer or phone.
Bill McGloghlon is the owner and president of PRW Industries, Orange, Calif., and he points out both ends of the spectrum. For inventory management, he suggests, “Start with the basics; take a physical count and inspect on-hand inventories. Also, make certain that the inventory is saleable. Has an employee removed one rocker arm for an emergency repair, and you are left with a set of 15? Was this item ordered for a customer and deemed unacceptable for any reason? Be realistic in your assessments. Has this performance product been there since 2004? Is it shop-worn? Has technology passed this product by? Would you be proud to install it on a customer’s engine?”
He goes on, “In today’s market, profit can be elusive. A proactive inventory management program involves anticipating your customers’ needs and allows you to place larger orders which can save you from paying for freight. Take advantage of your purchasing power with manufacturers programs like dating orders or freight allowances to improve your profit margins.” To that effect, he says, “Anticipate your needs. Work closely with manufacturers, distributors, and other suppliers to assist them in maintaining reasonable stock objectives in support of you needs.”
McGloghlon offers a unique spin on selecting new products. He says serious study is the way to go, “Schedule some ‘quiet time’ in your office at the shop or at home. Close the door, and dedicate your attention to review your current business model. Are you happy with the sales for the last 12 months? Has the business climate changed direction, and has your company responded to industry changes?”
Shop owners should, as McGloghlon says, “Revisit conversations and experiences of the last 12 months. Have your customers made any suggestions that might benefit your business? Have trusted business resources offered opinions or products that had merit? Is there equipment that must be purchased to keep your business up-to-date?”
He continues, “Compose those thoughts and decisions into an organized document. Estimate the costs associated with implementing those changes. Confirm that those costs are realistic. Review the data, decisions, plans and proposed changes to your business model. At this point, it should be a simple process to identify the categories of parts that will be important to the coming year’s business plan. Now identify your customer’s purchasing power. Has it changed? Perhaps there are significant changes within the industry that require attention. Are there new companies that have impacted the market with new brand penetration?”
Don’t forget the obvious, says McGloghlon. “Profit margins are critical to the decision-making process. Are your suppliers offering reasonable margins and value proportionate to the cost of goods? When considering potential profits, take a hard look at inventory turn. Typically, the products with the best inventory turn offer the best opportunity for profit. Budget accordingly by brand and price point when considering new product introductions and new product lines. Select based upon your business focus for the coming year and upon your best instincts with regard to your current customer base. Consider the best alternatives to create excitement about the new offerings that you have identified to meet industry trends and found to be important in the marketplace.”
How should “out with the old” be done? McGloghlon says, “This should be a very pragmatic task, based upon past experience, your future outlook and what your customers demand from you. Look at your inventory from the perspective of your customer. Are the products on your shelf indicative of the image, quality, service, price and ready availability that your customers demand?”
He adds, “Brand recognition is a principal factor. Is the brand still important in the marketplace? Does the brand offer strong in-stock inventory support? Does the brand offer product quality comparable with your business model? Are the branded price points a good fit for the economic region and current business environment? Am I able to maintain reasonable profit margins selling these products from inventory? Is this brand proliferated on auction-based or heavily discounted Internet websites?
Service questions are also important. “Has the service provided by each prospective manufacturer or supplier been acceptable and met your requested delivery dates in recent months? It will not likely take too long to segregate the good, the bad and the ugly! Let your manufacturers’ representatives, distributors or other suppliers know what is expected. Make certain that each is willing to provide what you require before you give them the order. This is what a warehouse distributor’s buyers and retail merchandisers do on a regular basis.”
An added tip is to, “Move ‘tired’ inventory. Your first markdown is the best. Is there a customer that might be interested in this part at a discount (and you gain added benefit; payment for the installation)? Do you have an associate in the business that is interested in buying or trading this part for a better mover? Is it worth keeping, or is this item better sold on eBay or other auction-based website?”
And how about the all important customer contact? McGloghlon says, “The Internet can be an important tool. A great deal of information is available from this media to solve problems and otherwise assist your business. Most quality manufacturers have important installation instructions and technical data available to simplify your job. Trade shows can be a valuable source of first-hand knowledge. Sales representatives and technical staff are usually available to discuss specific needs and present new products. Business associates in attendance may offer additional insight to enlighten you with industry trends. Convention seminars and how-to demonstrations will simplify personal research and save you time.”
Thor Schroeder of Moroso, Guilford, Ct., provides another angle on inventory management, “Racers’ plans during the off season, if there is such a thing these days, can be divided into three major categories. One of them is the racer who is freshening up their car for next season. The retailer should stock up on wear-and-tear items that racers should check on between every race, but which they might put off because of time or money (never put off safety equipment). That could be the full gamut, from simple fasteners to items that effect performance such as diaphragms in carburetors, our inline fuel filters and ignition wires.”
Schroeder continues, “The second and third categories can be grouped together from an inventory standpoint. These categories would be the racer who is doing a major upgrade on their racecar and the racer who is building a new racecar. The retailer should stock up on items for the engine and the chassis. Engine items would be our oil pans, dry sump tanks, pumps, pulleys, vacuum pumps, valve covers and other engine hardware. Chassis wise, we would recommend our battery boxes, switch panels, accumulators, Competition Engineering universal frame rail kits, tubular drive shaft loops, ladder bars, 4-link kits, frame connectors, coil-over kits throttle linkage kits and other items.”
For new inventory items, Schroeder explains, “One thing to consider would be to check with the sanctioning bodies that the local racers are racing in to see if there was a change in rules and regulations. If there was a change, then I would stock up on items that would address these changes. Secondly, they should see what is new from the manufacturers that they carry. They could learn this information from the sales reps that come in the front door to the new catalogs that come out. Use the sales reps, even though they work for the manufacturer, they are a great source of information, or just call the manufacturers themselves.”
Schroeder says keeping in contact during the off season means hitting the road. “They should-at least themselves or someone from their organization-go to the PRI and/or SEMA shows to stay fresh with what the trends are.”
His last sentence speaks volumes, “Go to a couple of races a year and most importantly have an open mind when listening to the customers.”
Evidently, there is no shortage of ideas for improving inventory management. And, armed with these ideas, your shop’s inventory management should improve in its efficiency. They may not all be ideal for your unique circumstances, so be sure to monitor them closely. And remember, it will take time to adjust them to work at their maximum potential for your business.
Have fun fine tuning.