Inventory Management Best Practices

Every dealership should have an organized plan for ordering and managing vehicle inventory. This includes ordering, receiving units, delayed billing, and relieving units from floor plan accounts. In this article we will address some best practices with regard to inventory analysis and ordering.

Inventory Analysis

  • Require your sales manager to complete a monthly sales history and stock analysis for every model.
  • Require your sales manager to analyze inventory for color and equipment balance. Only high-demand colors, engines, transmissions, and other options should be ordered. Expense option packages (sport, entertainment, luxury, etc.) should be ordered only if there is demand.
  • Identify your 10 oldest new vehicles in stock and consider a special incentive to clear them from inventory.
  • Compare your own inventory to market, region, and national inventory averages using manufacturers’ inventory analysis tools (days’ supply, fast turn reports, etc.). This way, you can ensure you have the proper mix of vehicles, colors, and equipment packages.
  • Review any lost sales from the past 30 days to determine if your current inventory mix is lacking popular models, colors, or options.


  • Consider dealer transfer opportunities before ordering. Your requirements may be met from another dealer’s stock to your mutual benefit, without placing additional orders.
  • Designate to your manufacturer or distributor, in writing, those dealership employees who are authorized to order vehicles. Inform the supplier that you will not be bound by commitments made by others.
  • Post your incoming inventory so salespeople can sell before new vehicles arrive.
  • If a representative of the manufacturer or distributor indicates to you that a given unit will not be delivered before a certain date, note the agreement on the order (e.g., “Not to be delivered before June 15, 2xxx”) and refuse delivery if the unit arrives before the agreement date.
  • Each week, review the specifications on units ordered but not yet produced. Cancel all orders for units that are no longer desired. Confirm all cancellations in writing to the distribution office.
  • Re-evaluate the demand for each model on a weekly basis. Establish a clear ordering policy and ensure that the person ordering units understands it.
  • Carefully consider the equipment levels of all vehicles ordered. Floor plan rates apply to options too. If an option is easily installed locally, order your units without it and add it if the customer desires.

This article is excerpted from NADA Inventory Planner, which is available through NADA University’s Resource Toolbox. The guide contains easy-to-use forms to aid you in your inventory decisions.