Operating in Today's Market (2 of 3): 9 Things Dealers Can Do to Address Inventory Challenges

Written by David Whitlock, Trailer Specialist Consultant

Welcome to part two of a three-part series from industry consultant David Whitlock on how trailer dealerships and manufacturers can address the industry constraints caused by supply chain issues. In this installment, Whitlock addresses how dealerships can take control of their inventory.

Throughout my career as both a trailer dealer and manufacturer representative, I have had the opportunity to see my fair share of economic trends and fluctuations in the trailer industry over the last 30 years. I have witnessed dealerships go out of business and others thrive. In today’s market, dealers are lucky because consumers are willing to buy, but the challenge is being able to deliver the products.

Seemingly, gone are the days when a customer would order a trailer, and a dealer would place the order with a manufacturer, and in a matter of weeks, the customer took delivery of the trailer. This instability of stock has led to price fluctuations. Over the past two years, manufacturers can’t even seem to print price books fast enough to keep up with raw material increases.

One dealer explained the situation to me this way: “All the manufacturers we deal with are no longer honoring their purchase orders and are increasing the pricing on us at the time of build, so we are waiting upwards of eight months and then absorbing a massive surcharge at the time of pick up or delivery. Then we either eat or pass on to the customer, which you can imagine what it does to our reputation and overall morale of our staff.”

I will acknowledge that it is not easy being the middleman. The work of a trailer dealership is hard, risky, and often feels unappreciated. Even a firm resolve can burst like a bubble when bumping into long lead times, enormous price increases, and fluctuating fuel surcharges.

So how can dealers maintain a level of control in our market? By controlling the things within the scope of control and correctly communicating throughout the sales, ordering, and delivery process. By understanding the market dealers can shift and take steps to gain control of their success.

9 Things Dealers can Do to Address Inventory Challenges

Take a step back and breathe; we are all in this together. Let’s cut each other a little slack. Be grateful the manufacturers are still in business, that we have a product line(s) to sell, that the economy is still strong, and that we still have customers buying, sometimes faster than we can keep up. We provide a service that keeps their business operating and their hobbies alive. We can be the “greener grass on the other side.” Be better, do better, be the solution.

1. Stock it to sell it. Now is the time to know the trailers that sell in our market and keep them in inventory. A trailer in stock has no lead time; we know costs and fuel costs are fixed, no surprises!
2. Order trailers and obtain production. In this market, planning is essential. Waiting for manufacturers to have trailers only exacerbates lead times and makes delays harder to overcome, moving from months to years.
3. Take control and forecast orders. Manufacturers will allocate production to your orders. Granted, it will initially take longer than usual, but once those with inventory in hand will be ahead of our competitors and thrive in this current market.
4. Don’t fall into the trap, “I’ll order more once this one sells.” At the same time, waiting for the next one (months away) results in missed sales.
5. Don’t be afraid of inventory. Keven Costner heard the voice, “If you build it, they will come.” Similarly, if you have it, they will buy it. It used to be that our markets were for the “local” customer. Yet we would complain that a customer would drive 100 miles to a competitor to save $50. Think, our inventory is now for a broader market with the internet. If you have it in stock, your mile market just expanded. Customers will now drive 200 miles to buy the trailer you HAVE in inventory for $200 more. This is the market we are in!
6. Sell it for as high a margin as possible. Recognize that our dealership may be the only one with inventory or model to sell. We don’t have to match “order” prices at other dealerships. We are now in a powerful position to make a profit. (Be careful of price gouging; we want our customers’ loyalty and to have them return!)
7. Sell for whatever margin you can. Don’t be married to your inventory. EACH trailer needs to sell at least once a quarter. In other words, four turns a year. If trailers are selling faster, stock more of that model. Reduce the price when trailers sit on our lot for longer than 3-4 months. This might be at a steeper discount than is comfortable but sell it now to turn the cash and reduce aged inventory. Then utilize the money to order trailers that are moving quicker.
8. Work with your manufacturer’s Sales Representative; they are your friend. They know the actual lead times so that we can plan (order) accordingly. They have the best visibility of the production schedule and can advise of any open opportunities. The secret is to get your order in early and consume production allocation. You CAN control it. For example, a few years ago in May, I ordered 50 four-place enclosed Snowmobile trailers for delivery on August 1st (the hottest month of the year)! My manufacturer thought I was nuts! In less than two months, they were all sold! Why? I knew my market. Snowmobile customers will preorder snowmobiles in April for an August delivery, so they can get “snowcheck” incentives to spend on equipment. Similarly, it’s critical to understand your historical sales, forecast, order, and keep your pipeline full.
9. Mitigate Inventory risk. If prepared properly, springtime (with larger inventories) can be our only vulnerable time. We can recognize economic dangers early and choose behaviors, like selling for less margin quickly, to reduce inventory. Thus, we can stay current and consistent with market patterns. For example, housing shortages can indicate strong construction trends with high demand for trailers. Rising interest rates can be a sign to be cautious about inventory.

Now that you’ve taken steps to control your inventory, how do you manage your customers’ expectations? In the next installment, I’ll share how to address the constraints of the market during the sales process.