How the best dealers manage turns

Over the last decade the boating industry has seen both sides of the inventory challenge. 

In the 2007-09 period, we saw dealers stuck with way too many boats when the housing market – and then the rest of the economy – crashed. With dealers dropping left and right and consumers defaulting on loans, excess inventory and repossessed vessels flooded the market.

That debacle made manufacturers and dealers understandably cautious about overstocking as the industry recovered. Inevitably, we ended up with shortages of popular models, leading to sparse showrooms and longer waits for new boats. 

Neither problem is a good one to have, so the best dealers recognize they have to find ways to manage their turns and try to keep inventory at that just right level. It’s a practice that many Top 100 dealers spend a lot of time working on. 

A good turn strategy starts with the basics: studying past and current trends, and devising forecasts for each specific model, said Dan Bair, CEO of Quality Boats of Tampa Bay.

Once in inventory, each boat is assigned a specific timeframe that it will remain in inventory without utilizing special pricing or promotions. The sales team is involved and incentivized to move specific models and boats as time in inventory increases.

“We have a program targeting new boat inventory turns that is reviewed each week at our sales meetings and counts down the number of boat sales until we reach our intended forecast goal,” Bair said. “At the beginning of the model year, we set goals within our sales department for targeted models and volume of each boat line. As we sell a specific model within a respective boat manufacturer line up, we strike one more off the list of our goals and work the number down accordingly. Typically, as we have learned from our boat suppliers, those sales departments that set goals for the year actually work up to that level of set goals.” 

For used boats, Quality Boats actively and religiously researches values of its inventory on a bi-weekly basis, while professionally detailing, servicing and inspecting each used boat prior to putting it on the market.

“We have implemented a system for the sales department to continuously research ‘like boats’ in the marketplace nationwide to make sure that we are competitive, if not the least expensive,” Bair said. “This system has allowed us to move used boats quickly, which we feel saves us money in the long run.”

“If you start with high inventory, you are looking at two years before your turn increases to a respectable level,” said Matt Lodder, general manager of Lodder’s Marine. 

Tracking and documenting historic sales is key to working with manufacturers. Lodder’s has data back to 2002 that allows the dealership to track what sells and how fast.

“We fill in these spreadsheets with our projection at the beginning of the model year and update it monthly to see how we are tracking,” Lodder said. “This allows us to make decisions on continuing to bring in inventory or start to cut orders. Most manufacturers agree a dealer needs at least a two turn and once you get them to agree to that and show them your market share is right, it’s just a matter of running the numbers through the spreadsheet that will produce a two turn.”

As Marine Connection plan its orders, it also takes into consideration each of its manufacturers’ production schedules and delivery history, says owner and managing member Danny Goldenberg.

“We know when we need our boats, but we have to rely on the manufacturer to ensure we get delivery on time,” he said. “This requires that we know when to confirm our orders in keeping with their respective production schedules. Some manufacturers are great about delivering to schedule, while others have ongoing production problems that can negatively impact desired delivery and then impact sales.”

After past problems with manufacturers failing to deliver on time, Marine Connection has tried to work harder to be aware of facility limitations and other delivery challenges.

“We take it upon ourselves to become educated about our manufacturers’ current and projected production schedules and status, so that we can adjust the timing of our orders and correctly anticipate any production and delivery concerns,” Goldenberg said.

For example, when one of its manufacturers had delivery problems in 2015, the company stocked up earlier in 2016, which allowed the company to meet customer demand when other dealers in Florida were unable to deliver boats.   

Jonathan Sweet is the director of the Boating Industry Top 100 program and former editor-in-chief of Boating Industry magazine. He can be reached at jsweet@boatingindustry.com or 763-383-4419.  Follow him on Twitter at @JonathanWSweet.