Whether buying a car online or at a dealership in person, many customers know the disappointment of finding their favorite car unavailable due to low inventory. While this situation might suggest that certain models are selling well, it actually poses serious challenges for dealerships.
Out-of-stock items in the automotive industry can breed more frustrated customers, potential loss of sales, and damage to dealer reputation. Likewise, overstocking less popular vehicles ties up capital and can quickly degrade profits through increased holding costs and depreciation. That is why every good dealership has a tried, tested, and true automotive inventory management system. It empowers dealerships to strike the right balance by accurately forecasting demand.
Find out how vehicle inventory optimization is a long-term investment, a real profit and customer satisfaction booster, and most definitely strengthens customer loyalty over time.
The Dangers of Low VIN Inventory and Overstocks
Low VIN inventory and overstock scenarios occur due to imbalances in supply and demand; something dealerships have been grappling with since early 2024. When a dealership holds back-to-back months with more vehicles than the traditional industry guideline of 60 selling days’ worth, as noted in Kelley Blue Book reports, it faces overstock challenges.
For example, dealerships ended February 2024 with an average of 76 selling days’ worth of cars. The excess means they must offer discounts, which have risen to 5.9% of the average deal, lowering profits. On the other hand, understocked dealers like Toyota and Honda find themselves with fewer cars, allowing them to stick closer to the MSRP, using their scarcity to demand higher prices and lessen revenue loss.
Despite this, the growing national inventory—like the 52% increase from March 2023—compounds the urgency for effective inventory management systems. These systems help dealerships accurately forecast demand, averting the dual threat of disappointing product unavailability and the financial strain of maintaining overflowing lots.
Read a past Vincensus report for more regularly syndicated data across major OEMs.
3 Ways Inventory Management Systems Solve Low Inventory and Overstocks
1. Real-Time Inventory Tracking and Automation
Inventory management systems prevent low inventory and overstock through real-time tracking and automation. AI-driven dealership inventory solutions like Lotlinx Sentinel ensure optimal stock levels are continuously updated across all sales channels the moment a transaction occurs.
These immediate updates prevent overselling and underselling by giving businesses a true picture of their inventory at any given time. Automation features enable retailers to set up processes for reorder thresholds for quick replenishment and a lower risk of out-of-stock products. Getting rid of manual tracking and adjustments helps dealerships save time, reduce human error, and maintain ideal stock.
2. Multi-Channel Integration and Centralized Management
Inventory management systems integrate across multiple sales channels and combine all data into a centralized platform. Lotlinx, for example, tracks over 8,000+ dealer websites and follows every shopping action down to the VIN.
This comprehensive integration allows for seamless management across various touchpoints, ensuring accurate, real-time data is available for decision-making. With a consolidated view of inventory, dealerships can optimize their sales strategies, adjust inventory levels, and take advantage of omnichannel marketing opportunities to improve VIN visibility and customer engagement.
3. Predictive Analytics and Demand Forecasting
A profitable dealership inventory management system uses predictive analytics to accurately forecast future product demand. This feature is crucial for avoiding low inventory levels and overstock situations.
Lotlinx’s vehicle inventory optimization allows businesses to analyze past sales trends and predict future demand patterns. This forecasting capability helps dealerships plan better and align their inventory levels with anticipated customer needs. By embracing predictive analytics, retailers can proactively adjust their optimal stock levels, so they have just the right amount of inventory to meet demand without tying up excess capital in unsold stock.
Learn more about how you can improve your inventory management with Lotlinx. Request a demo.