When Nate Rutter, General Manager for Parts & Tech Services, joined Power Motive Corporation in 2010, he began working with CDK to increase utilization of IntelliDealer. “We wanted to take our dealership to the next level, and through those interactions, we began working on our Parts inventory and management processes as well,” says Rutter.
Previously, Rutter notes that parts needed to be ordered manually, a labor intensive process that required an Inventory Manager to look at Power Motive’s expansive list of parts individually. “Every single part needed to be analyzed so we could determine whether or not to restock it and, if so, how many we needed to order. We approached CDK and said, ‘There has to be a better way.’
And there was. CDK and Power Motive worked together to implement the OFC, or order formula code. With CDK’s OFC up and running, the system would compute the best order quantity for a part, based on demand data. Rutter admits that it took some effort to roll out this process but that the results would be worth it. At the same time, CDK was introducing an enhancement to the ordering formulas, a new OFC-M, which would automatically calculate and track parts ordering lead time, using minimum and maximum values for parts reordering.
“It’s a revolutionary ordering mechanism,” says Rutter. “It takes the manual calculations completely out of the process.”
Rutter appreciates how the parts inventory and management processes are based on the dealership’s sales data, so he feels confident in reordering quantities and timing with OFC-M in place. “CDK analyzes our parts sales data and determines whether each individual part is a high-quantity fast seller, a slow seller, and so on. Now, rather than focusing on the minutiae of parts ordering, our objective is to optimize the solution to make it even more effective,” Rutter states.
Parts inventory profitability can be driven by how often inventory turns over the course of a year, and Rutter is more than satisfied with the impact OFC-M has had on Power Motive Corporation. He says, “Carrying inventory ties up capital; it costs money to keep the parts on the shelf, and that’s why turning inventory is important to us.”
Power Motive has discovered that, not only is the parts ordering and reordering process become much more efficient, it’s much more effective, too. According to Rutter, since implementing OFC-M, Power Motive has increased its inventory turns from less than 2 per year to more than 3 per year. Additionally, “for our major parts vendor, which makes up 70% of our business, we have improved inventory turns from approximately 2 to more than 4 per year. That’s a huge metric and testament to what we’re now able to accomplish. We are freeing up that capital to spend it more strategically,” says Rutter.
For our major parts vendor, which makes up 70% of our business, we have improved inventory turns from approximately 2 to more than 4 per year. That’s a huge metric and testament to what we’re now able to accomplish. We are freeing up that capital to spend it more strategically.” - Nate Rutter
Since 1959, Power Motive Corporation has been a distributor of small industrial construction equipment. Through the years, the company has expanded its product offerings and industries served which today consists of: construction, utility, energy, agricultural, forestry, infrastructure, manufacturing, mining, quarry, recycling, transport, paving, governmental, and several others.