Regardless of who is responsible for the whole goods inventory at your dealership, they all struggle with the same question. How many different lines should I carry?
The question is even more complicated in the current environment of mainline manufacturers driving dealer purity. I can appreciate why mainline manufacturers want to put pressure on their dealers to limit their product offering to only their products, but in most cases, it is not feasible. Manufacturers have gaps in their product lines that dealers need to source elsewhere to meet customer needs. I am not saying we need to be all things to everyone, but we need to ensure we have the products that make sense.
There are many factors to consider when deciding what whole good product lines you are going to carry. Some of them are obvious, while others are more complicated. Quite often, the most important factors are overlooked or ignored, depending on the process you use to evaluate these opportunities. The first step is to HAVE A PROCESS! Here are some things to think about.
The first thing to understand when evaluating a potential product is to determine the market potential. This is a crucial step that should not be overlooked. The number one pitfall is letting the sales team decide on the products we sell. Just because a customer went to a farm show or found a product online that they want to buy does not mean we have to sell it to them. It means we may need to look at the opportunity and see if it makes sense to sell. How many can we sell? Can the sales team identify enough prospects to evaluate the potential further? If the answer is no, simply tell the customer we cannot sell the product because we are not able to adequately support it. If the answer is yes, we roll up our sleeves and take a deeper look.
Once you have determined you have a market, the next step is to take a look at the supplier. Most shortline manufacturers are eager to sign up dealers to sell their products. A large number are becoming increasingly sophisticated and support their products and dealers very well. Some out there still want to sign up for every dealer in town but do not have formalized processes to support their dealers. If the manufacturer falls into the latter category, be very careful. I suggest not getting involved. If they fall into the first category, keep going.
There are many factors to consider when deciding what whole good product lines you are going to carry. Some of them are obvious, while others are more complicated. Quite often, the most important factors are overlooked or ignored, depending on the process you use to evaluate these opportunities. The first step is to HAVE A PROCESS!
The next step is to understand what their whole goods expectations are of you as the dealer. Do they have minimum stocking levels for whole goods? Meaning, how much of my working capital do I have to tie up in inventory? Do their stocking expectations align with my market potential? Does it fit with my inventory strategy? What are their payment terms? Do we have to pay when we order? Do they have finance terms or cash discounts for stocking dealers? Are we expected to take trades? Do they have interest-free terms on trades taken? Can they consistently supply our needs?
What is the factory lead time? Do they have sales training and support for the sales team? Do they support clinics for end users and operator training?
Another thing to consider is how many products does this manufacturer supply? If the manufacturer has multiple products that may fit your market, it may make sense to consider them before a manufacturer that only supplies one or two. This gives you access to several products without having to add more suppliers than you need to. More suppliers mean more relationships to manage, more processes to understand, and more chances for things to go wrong. It may be necessary to have more suppliers if you have a diverse market or have niche segments. This is why knowing your market and your customers’ needs is important.
If the terms of the whole goods make sense, the next question is warranty and service support. What is their warranty? Do they cover parts and labor? How do they approve and process warranty claims? How fast do they pay warranty claims? What is their warranty labor rate? Do they pay your posted shop rate? Do they have service training, or do they have a tech support line? Do they have service manuals or other support for technicians? Do we have the service capacity to support the product effectively and profitably?
Finally, how do they support your parts department? Do they have suggested stocking lists for their products? Do they have minimum stocking levels for parts? Do they have any expectations of display space or showroom exposure? Do they have any discount programs for preseason orders? Do they have seasonal parts return programs? How frequently can you put in stock orders? Do they advertise their MSRP on parts? What are their policies for parts returns and special orders? How do they handle freight charges? What is their warranty on parts sold over the counter? Parts sold through the shop? How do we get paid for parts replaced under warranty? Do they have parts manuals or an online portal?
Once a product or supplier has passed all of these criteria, it is still important to build a proforma to truly understand the potential profitability and risks. If it meets your expectations, then giddy up.
The dealership leadership team needs to have a standard procedure for evaluating new products or suppliers. This is not just a recommendation but a crucial step in ensuring the success and profitability of your business. In today’s market, where we are dealing with high-value purchases, a standardized process is more important than ever.
There are also a few other things to consider when looking at a new supplier. Do they have any marketing support, such as a co-op program or other financial support for advertising? What kind of onboarding process do they have for new dealers or new dealer employees once you are a dealer?
The dealership leadership team needs to have a standard procedure for evaluating new products or suppliers. This is not just a recommendation but a crucial step in ensuring the success and profitability of your business.
In today’s market, where we are dealing with high-value purchases, a standardized process is more important than ever. We aren’t just talking about $10,000 augers or $15,000 hay rakes anymore. We are talking about $1,000,000 seeders, $250,000 combine headers, $200,000 grain carts, and $125,000 augers. These expensive machines that involve taking trades and providing customer support are indicative of these high-dollar purchases.
At the end of the day, these products can provide huge opportunities for profitability and customer acquisitions. When done properly, they can play a large role in the success of your business. When mismanaged or without a proper process, they can be a huge cash vacuum. In today’s world, the margin between the two is razor-thin.
ARTHUR WARD is a trainer with NAEDA’s Dealer Institute. Prior to joining DI as a wholegoods and sales specialist and trainer, Arthur held leadership roles within Pattison Agriculture and its legacy dealerships in Canada, and he is currently the Chief Integration Officer for Aberhart Group. He looks forward to helping dealers succeed by improving whole goods and sales operations.
