Managing Inventory in an Auto Repair Shop

Inventory in a car shop is an important part of the business. It affects how capital is managed, the operations, and even the quality of the services a car shop is able to provide.

Good inventory management should show how suited your inventory is to the demand of your customers, the quality of the parts kept in the store, as well as minimizing stagnant inventory. It should also support high-efficiency operations.

In this post, we look at top ways to improve inventory management in an auto repair shop. These steps are easy to follow, will require more effort than money to implement, and it should lead to results for your business. 


Create a System

It can be quite tempting to just let inventory take care of itself. Once supply is delivered, it will eventually be consumed, right? While this may seem reasonable when starting out, this process can also be easily outgrown.

One of your top priorities should be to create a system or guidelines to follow. Don’t forget to include:

  1. Checking all deliveries to make sure they match the delivery receipts. Suppliers can make mistakes so spotting it early on just makes everything easier. Check that the right supplies arrive in the right quantity. 
  2. Create designated storage locations for everything. This keeps re-stocking and the use of existing supply easy. And if customers can see a neat inventory, they’d definitely appreciate it. It’s reassuring to see the car parts they are purchasing appear taken care of, instead of being snatched out of an unkempt pile. In a highly competitive business, these things matter.  
  3. Always record movement. Implement a way of recording the movement of inventory. This can be as simple as a manual logbook but automated systems should be easy to implement even in smaller shops. With a robust recording system, the missing stock will be very easy to trace back and a logbook is great to check how things are moving along. 
  4. Back-up your information, always. Find a way to make sure you preserve a record of your inventory, especially when doing it through a computer. Using cloud-based software (like Google Drive) versus using local files makes sure you get to keep your records even if your computer breaks or go missing. This will save you the headache and there are some free options available out there.
  5. Schedule a periodic check. Once-a-month or whatever is best for you, go through all your inventory and make sure everything is accounted for. Also, check your areas for improvement. Now that you have a system for inventory, it should be possible for you to take a step back and look at the big picture which will help identify weak areas in your strategy and make changes right away. 

Remember, inventory management is a marathon not a sprint so making a process that is sustainable is important. Don’t overcomplicate it but keep the discipline to stick to the process. 

ABC Analysis

For many auto repair shops, having so many different items on stock means being able to service more customer needs on-the-spot. This also means a growing inventory that can be very challenging to manage. This is where ABC analysis can help.

ABC analysis is a tried and tested inventory assessment method and it simplifies how you react to restocking and managing your in-store supply. You can start doing this by separating your inventory into the following categories: 

CATEGORY A: Items that are in very high demand and may be critical to your business (for example: engine oils, filters, etc). This usually makes up to 20% of your entire inventory but up to 70% of sales.

CATEGORY B: Items that are in demand but not as important in group A. These are mid-range items that also add value to your business but not just in the previous category’s level (for example: windshield wipers, headlight replacement bulbs). 

CATEGORY C: Items here are marginally important. These are nice-to-haves but may have minimal demand and impact to your business. 

Once you’ve categorized your entire inventory into the above, it will be easier to create an overall strategy instead of doing it per item.

For example, you can make a rule to have at least two weeks’ worth of stock for items in Category A at all times and just down to a week for items in Category B. 

If you want to improve your buying strategy, you can also focus on Group A to unlock the biggest benefits for your business.

Obviously, there are limits to this system. One: it can oversimplify how your entire inventory works. While ABC Analysis is simple to do, it might not really take into account the complexities of your business and your relationship with your customers. 

Another thing is that it isn’t as reactive. By basing off historical data and being quite simple, it has minimal applications in predicting demand or spotting any changes in demand you might need to respond to (for example, a spike in demand for all-season tires after a regulatory change). 

Use Technology

Here at AI Parts, we are building one platform to help you manage your inventory particularly your process of sourcing auto parts.

TechPro taps into the expertise of mechanics and uses AI to create a system that will help auto repair shops choose the best supplier and the best car parts on the market in terms of quality, reliability, compatibility, and value. By being open to using this kind of technology, your auto repair shop can minimize purchasing headaches from unreliable suppliers. 

So there you have it. Inventory management is one of those necessary business processes where success will be determined by strategy and the discipline to follow-through with the process over a long period of time.

If you have strong inventory management, you don’t only take care of the assets of your business, you are also making it more comfortable and safe to increase your auto repair shop’s working capital. 

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