Managing used equipment inventories and remarketing equipment is one of the biggest challenge facing equipment dealerships today. Used machinery on a dealer’s lot can be a good thing when buyers are looking to fill specific needs, but when that inventory grows beyond demand, it can become costly in a hurry for any dealership.
In this post we collected how our system NAXT helps equipment dealers to better manage used equipment inventory.
How do I know the price of the specific used equipment?
The key to anything on remarketing or used equipment is the pricing strategy of the equipment. How to use multiple sources to gauge the correct value for trades? “Figuring out what the value of used equipment is will be the hardest job you ever do” – says Trent Hummel, trainer and consultant with Western Equipment Dealers Association’s Dealer Institute.
It’s hard, but not impossible! There are several options, but the following KPIs will help you with your calculations, right from the system:
Aged Equipment Reporting: Aging tracking
Dealers usually don’t set an expiration date on used equipment, but they are monitoring equipment aging through NAXT, which is the source of information for this purpose, either through calculated KPIs, or through more complex BI reports. Both are good tools in helping the decision making of the dealer on how long they should keep their equipment in inventory.
Calculate real book value
The other important component of the equipment’s book value is depreciation and its effect on the book value, since the lower the book value the more important is to sell the machine and remove it from inventory. These two factors are monitored in parallel for both used and new machines.
Additional costs affecting the book value, such as freight or transportation charges can be tracked in NAXT as well. The system automatically tracks all cost information for each piece of equipment such as import duties, deductible trade discounts and rebates – which means real book value.
What is a “Washout Calculation”, and how can it help liquidate some of my inventory?
A “washout cycle” is a strategy that works through lower-value used inventory that can help some dealers move surplus machines in a way that sustains sales into the future. “Washing out” used machinery may mean selling at a lower price, but it can pay off in the long-term by eliminating the cost of maintaining higher used inventory.
NAXT calculates the washout percentages of both the asking price and the new price, by gathering the washout expenses based on the charges set up by the user. This is a flexible setup that can be customized freely and changed at any moment by the dealership.
The formula behind the washout calculation can be customized as well to assure that it’s tailored towards the dealership’s requirements and business processes.
Does NAXT have key metrics to monitor for inventory & cash flow?
NAXT provides real-time inventory tracking capabilities, therefore the inventory in the system at any moment is accurate and up to date. For more detailed, managerial reporting, the system provides powerful BI reports on both inventory and sales tracking.
Users can view inventory based on division, store and location, review in stock, on order and reserved quantities.
Sales can be viewed and filtered by basically any attribute that was part of the transaction, such as the equipment’s model, manufacturer, the equipment itself, customer or customer group, region, sales person, store and division.
How can I rate used units and determine how much money to put into reconditioning?
NAXT provides equipment grading capabilities, which help the users to categorize the used equipment based on their grade of usage. This functionality helps in setting up different tiers and provides a more accurate picture of the equipment’s condition and the reconditioning effort.
Users are able to grade each equipment individually and attach a condition report to the machine with the specifications of the condition and a detailed reasoning on the grade received.
There’s no easy or perfect solution for dealerships to track their used equipment, but all agree that neglecting this topic can be a ticking time bomb. We at XAPT believe that whatever tactic you choose to handle your used inventory, you can only make a good decision based on data and analytics. We built our system specifically for equipment dealers with a special focus on managing used equipment.