At George’s Marine & Sports, President Jeff Wilcox uses forecasting as the No. 1 component in his inventory management strategy.
The Ottawa, Ontario-based dealer, which ranked 52 in this year’s Top 100 Dealers, bases his purchasing on his current inventories and a comparison of sales to the past five years. By doing this, Wilcox says, “we are able to forecast our situation with simple math calculations.”
An accountant by trade, Wilcox has developed a detailed spreadsheet to monitor inventory levels, a practice modeled after that which auto dealers often use. Total sales for each of the past five years on the spreadsheet are broken down by month and by quarter. Wilcox can then evaluate the average percentage of sales that each month and quarter make up on an annual basis to help him forecast for the coming year.
Having this detailed information on hand prepares him to purchase what his business will need in the coming year as opposed to accepting what manufacturers may encourage them to buy.
“Manufacturers have had little to no interest in how we forecast,” he explains. “In fact, most of them, if not all, calculate a dealer’s purchases based on what was retailed the previous year. This does not take into account non-current inventory or slow-moving inventory.”
The truth is that very few dealers forecast the way George’s does. They normally accept what manufacturers recommend they purchase, or they buy into more product than they should because of discounts or extended flooring terms.
Because of the forecasting spreadsheet Wilcox has developed, he can use it to illustrate in black and white how much product he should buy: “I am not saying that I have an ability to circumvent a manufacturer’s program,” he explains, “but I have found it extremely useful when in negotiations about product purchases.”
But dealers using such a system must be dedicated to it, Wilcox warns. If you don’t have accurate raw numbers to input, he says, then what you will get out of it will be inaccurate and will cause more grief than it is worth. And that may be the most crucial component in determining what dealers purchase for the coming year.
The numbers don’t lie. It’s almost scary how accurate this method has proven to be from one year to the next, and the accuracy improves as you move through the year and additional data is compiled into the spreadsheet. Once you are a few months in, you will be able to better determine what the year may bring and then adjust — or hopefully add to — orders you’ve already placed.
Based on what the company has purchased vs. what its sell-through will be at the end of the year, Wilcox has a clear picture of what product should be discounted, moved to another dealer or which he should purchase more of. It’s become such a valuable tool, George’s now uses it throughout the dealership, including parts, service and even the F&I department.
“This is, without a doubt, one of the most useful tools we use,” he says. “We create monthly financial statements, and these, combined with our forecasting, provide an extremely good picture of what the future will hold. Averages are just that — averages. They change very little over the years and therefore allow us to get a very good picture of what is to come.”