The incredible shrinking parts inventory
When it comes to stocking auto parts for service and repairs, tire dealers have a lot of options. Do you use one main supplier or multiple sources? What attributes should you look for in a supplier? Timely delivery is critical. So are price, volume discounts and credit terms.
We talked to three tire dealerships in the Northeast Ohio area to find out how they handle parts-buying. Conrad’s Tire Service Inc. has 34 locations in the Cleveland-Akron area. Parrish-McIntyre Tire Co. runs two retail stores in the Akron area, while Tire Source has five locations in the Akron-Canton area. All 41 stores are located approximately in a 60-mile radius.
Parrish-McIntyre and Tire Source use computers that are tied-in with their primary parts suppliers to order their auto parts. They say fast delivery is the top priority. At Conrad’s, the company has become its own distributor; it stocks its 7,000 square-foot warehouse operation through a major distribution group’s program and sells internally to the 34 retail stores.
Each dealership’s retail store has its own parts inventory. We asked their managers how they stock their parts, how auto parts distribution has changed over the years, and where it is headed.
MTD: What parts do you stock in your retail stores?
Pat Stuhldreher, district manager, Tire Source: We use a national program distribution group as our preferred supplier and they handle all of our stocking levels. Most of our deliveries get here in 30 to 45 minutes. Since there are so many different part numbers today, we have reduced our inventory to filters, bulbs, some belts and batteries. We’ve significantly reduced our parts inventory in the last five to 10 years.
Mike Spitale, manager, Parrish-McIntyre Tire’s east Akron location: All we stock is air filters, oil filters, small bulbs and belts. Everything else we buy on an as-needed basis. When we used to have more commercial accounts, they had fleets with the same cars and we used to stock brake parts and other parts for those specific model-year cars. Now we don’t stock as much because it’s just too difficult to keep an inventory here when in 15 minutes I can have anything I want.
Dan Cochran, a sales manager at Conrad’s Tire Service, Cleveland: Each one of our retail stores carries an inventory so that they can pull as much as they can off of their own shelves for their immediate needs. The retail stores inventory brake pads, brake rotors, chassis parts, belts, filters (oil, air and cabin), and a wide array of chemicals and wiper blades. Those are supplied to our stores from our warehouse.
MTD: How much do you stock?
Stuhldreher, Tire Source: Dollar value, I’d say $7,000 to $10,000 per location. That amount has been pretty steady over the last couple of years, but it will be shrinking in upcoming years. Five to 10 years ago, we carried anywhere from $15,000 to $20,000 in parts inventory per location. Over the years it has been going down. We used to stock multiple part lines, suspensions, alternators, those kind of parts.
Spitale, Parrish-McIntyre: Everybody in this industry has cut their inventories back on everything. Parts suppliers are trying to get from their door to yours in 20 minutes or less to make it convenient. They have main warehouses and small little satellite stores around that help take care of us. As far as parts are concerned, everybody’s back room inventory has shrunk.
Cochran, Conrad’s: The amount we stock in our retail stores is sales-based. There’s a constant flow of items that come on their shelves, and if they buy a part from the warehouse or from a local jobber associated with our program group vendor enough times to generate an order point, they’ll have it on their shelf the next time. On the other hand, if there’s something on their shelf that hasn’t sold in a year, it leaves. Oils and lubrication fluids are on a bulk program that we get through a supplier, all electronically monitored.
MTD: Where do you buy auto parts?
Stuhldreher, Tire Source: The majority of our stuff does come from our primary program group vendor, but we will outsource if they do not have what we need or cannot get it to us in the amount of time we need it. When a part is not available through the aftermarket or a technician recommends we get it from the dealer, we will use dealerships. Those parts are mostly upper-end import parts. We seem to buy a lot of Audi and BMW parts from the dealer.
Spitale, Parrish-McIntyre: Our main supplier is a national program group, but we buy from seven different suppliers. It’s mainly wholesale jobbers; we don’t buy from national retail chains. We do buy parts from car dealerships that are not available on the outside like certain interior components and window regulators that are just specific to the dealer.
MTD: How many suppliers do you regularly use?
Stuhldreher, Tire Source: On a monthly basis, we have between 25 and 50 suppliers that we regularly use.
Spitale, Parrish-McIntyre: We have six direct suppliers we use on a regular basis.
MTD: What attributes do you look for in a supplier?
Stuhldreher, Tire Source: Delivery, price and brand are all very important. We also like to be partners with our suppliers. We want suppliers that do not sell to the retail public. Knowledgeable counter people are a must, even though with the age of the Internet, that has gone away some. We can go online, click on a part, see what it looks like and order it all at the same time. Then we’ve got it in a half hour.
We also look at warranty and return policies. In today’s market, most national program groups all have pretty much the same return policy. If you’re a good customer, they’re going to take care of you. That’s being a partner in the business.
Spitale, Parrish-McIntyre: We look at quality but not price. The brand makes a difference in some instances. Return policies have something to do with it; you want somebody who’s going to work with you when you need help.
Cochran, Conrad’s: Because of our size and the way that we’re able to purchase through the one vendor, our costs are very competitive with the marketplace. The main reason we chose our vendor was consistency of product. Our vendor is probably not known as being a price leader in the marketplace, but they consistently provide a high-quality, high-value product.
MTD: How has your parts-buying changed over the years?
Stuhldreher, Tire Source: We’re buying fewer parts. What we’ve seen as far as parts buying goes is the normal things that used to break down on vehicles really don’t anymore. The longevity of parts on newer cars has increased significantly. We’re not buying the same kind of parts. More of our purchasing has gone toward the brakes, front end, suspension and carrying the more wearable items.
Spitale, Parrish-McIntyre: It’s a totally different marketplace today. Ten years ago, a Chevy Impala five years old and a brand-new Impala would carry the same brake part number. Now, every other year they get a different part number, so it’s literally impossible to keep every number on the shelf. Whatever comes in the door we work on it, and you can’t keep all the parts on the shelf for all those cars.
Cochran, Conrad’s: One thing that has changed is the influx of imported product. A lot of it comes from China. There’s been a large influx of parts retailers that use a lot of that product. It’s forced the emergence of value lines, so instead of carrying one line of chassis parts that is a premium line of ball joints and tie rods that you know are real good quality, you also have to carry a value line. You’ve got to be there at the price point because the consumer expects that. They’re sometimes trying to work within a budget on a needed repair, and it’s hard to get there without using a lower-cost part.
MTD: What trends do you see in parts buying?
Stuhldreher, Tire Source: I have seen national retailers coming to town, that’s new for us and we don’t really do business with them as of yet. It’s a possibility that we’ll work with them, but it would be the third or fourth choice before we’d source a part from them.
Spitale, Parrish-McIntyre: There are more and more companies that are buying up the little guys. The little guys we used to support are pretty much gone. There’s only one of those left that we deal with. Everybody else is a national chain.
MTD: Where do you see your parts buying headed?
Stuhldreher, Tire Source: I see it mostly going to online. At our stores we are directly connected to our main vendor’s inventory, so I can see what they have here locally in Akron, and I can also see what they have in their massive warehouse up in the Cleveland area for quantities on just about anything. Newer cars are lasting longer, so we’re not sourcing some of the older parts that we used to.
Spitale, Parrish-McIntyre: It’s going to progress to the point where the bigger guys are going to keep buying up the smaller guys, so at some point there will just be three different names involved and that’s who you’ll have to deal with.
Cochran, Conrad’s: As long as the economics are favorable to us having our own internal distribution and our own internal parts source that can fund our distribution system, we’ll continue to do that. At such point in time that becomes impossible, then we’ll look at other options. ■
To read the entire June 2014 issue of Modern Tire Dealer, see our digital version by clicking here.