The risk of every dealership is in used equipment. So much of a dealership’s profitability is directly tied to its ability to generate cash by selling its used inventory. The faster your dealership turns used backlog, the more available cash there is to move to the next machine or project. Understanding how each inventory segment effects your overall turn greatly increases your ability to achieve your turn goals.

Every inventory has segments that move faster than others. Knowing what those are and how to react to them is paramount for the current economic environment. Dealerships should be trying to turn used inventory as fast as possible. The biggest delay in most segments is seasonality of equipment. For example, combines or planters usually have 2-3 peak selling cycles per year and high horsepower row-crop and utility tractors have a year-round selling cycle. The turn for each is dynamically different and it will need to be in order to reach your overall turn goal.

Let’s assume the overall turn goal for a dealership is 3-4x, but the combine turn currently is at 2x or less. In most cases, combines will be the slowest moving and have the largest inventory dollars associated with them. If you rely on combines alone, it will be very hard to achieve the stated turn goal. Segments like tractors will have to pick up the slack left by combines. If the turn goal is 3-4x times, tractors need to have 6-8x turn. This will create the inventory turnover to influence the overall turn. Fig. 1 shows how segment effects turn.

To overcome three segments with less than 2x turns, four segments had to have a 5x turn or better to achieve 3.34x turn. If any of the high turn segments would have been under 5x turn, the overall turn would have been less than 3x turn (See Fig. 2).

The question you need to ask is which segments are the most important to focus on? If your focus shifts to combines, planters and tillage with a lower sense of urgency on the tractor segments, you run the risk of missing the overall turn goal. On the other hand if you shift your focus to the tractor segments, you have to increase sales to overcome the lack of combine, planter and tillage sales. Every segment needs to be equally important as the next. If you let up on one and focuses on the another, there will be ramifications effecting dealership performance.

Every machine taken in on trade needs to have a plan associated with it. Customer prospecting is the single most important element to inventory turn success. Knowing your customer base and who to call on makes an extraordinary difference in the washout cycle. Washing out a trade cycle faster increases the dealership’s cashflow.

This has to be a focus of any remarketing manager! Not just turn but the marketing of equipment. Work with the dealership’s marketing department and help build campaigns. Use customer prospecting services, like market research provider EDA, to highlight customers with strong equity positions. Last but not least, create a strong online presence to showcase the dealership’s equipment. That means clean, crisp pictures and strong story telling descriptions outlining first-hand accounts of the machine in question. Descriptions need to be strong and detailed so when a buyer in Iowa closes his eyes he can see the machine sitting in Nebraska. Every machine in the used equipment eco-system has its place in achieving your dealership’s used inventory turn goals.

January 2018 Issue Contents