The supply chain from manufacturers to distributors to auto businesses and then on to customers is a continuous balancing act in which all entities involved fight to save money and increase their bottom line while maintaining a healthy margin in their cash flow.
As an automotive business owner, the success of your auto center depends on your ability to manage the cost of goods sold (COGS) in the supply chain and leverage your buying power to remain competitive in your local market.
What Is Cost of Goods Sold?
The cost of goods sold is what your business pays for the products it sells. The total can include purchases like raw materials, resale items, packaging, and even direct labor for producing or selling the items.
The COGS is the lowest price you can sell a product to break even, and it's critical for managers and business owners to keep track of because without knowing the break-even point and the cost of goods sold, you won't know if you're losing or making money.
What Can You Learn About Your Business From COGs?
Whether you are a new franchise owner or have been in the business for years, the cost of goods is a major contributor to letting you know your margins, so you need to be comfortable learning about how they function. Keeping track of the cost of goods can help you adjust if necessary to meet your profit goals and can also help you understand areas that need streamlining to reduce costs.
They allow for financial insight and analysis so that every expenditure is accounted for and help you take steps towards keeping your business costs under control and increasing your profitability and company growth.
The bottom line is your cost of goods will directly impact your revenue, so having an accurate understanding of how they function ensures that expenditures are covered without negatively affecting your business's finances.
Learn How to Manage COGS at Your Business
In a nutshell, managing the cost of goods in your business will help you save money while increasing your bottom line. Keep reading our tips below to learn how to manage COGS and make it work for you to increase revenue while reducing costs.
If you have any further questions or want further information on buying or selling an automotive center, contact AutoCenter Sales today at 800-874-5793.
Monitor & Manage Your Inventory
By effectively managing your inventory, you can have the right products in the correct quantity on hand and avoid products being out of stock and funds being tied up in excess stock. You can also ensure you sell your products before they become obsolete or pile up in the stockroom.
Here are some practical techniques that successful business owners employ to manage their inventory.
Accurate Forecasting
Base your projected inventory needs and sales on factors such as sales history, local marketing trends, predicted growth, the current local economy, and how well your marketing efforts are paying off.
First In, First Out (FIFO)
Sell all products in the same order that you received them. The FIFO method allows you to keep precise records while ensuring that your customers receive new products.
Place your incoming inventory in the 'back of the line' to let your old stock sell first.
Monitor Low-Selling Stock
Unloading your low-selling product requires a bit of strategy. You can sell these items at a discount or launch a special promotion. Identifying the low-turn stock will help reduce how much product you purchase in the next cycle.
Take Inventory Regularly
Only depend on your inventory records for a short time. Set up a schedule system for taking inventory and stick to it. What is in your stockroom and what is in your records should align at all times.
Invest in Inventory Management Software
Look for software with real-time sales analytics. Inventory management software updates instantly with every point of sale and adjusts your inventory numbers for quick reference.
Modern systems give you many features, including automatic ordering and notifications when inventory is low.
Quality Control Assessment
As you assess the quality of the products in your automotive center, consider the following:
● Manufacturer defects
● Distribution and transportation damage
● How long a product has been in stock
● Expert and customer reviews
● Your personal experience with the product
● A product's lifecycle
Get on Board With Supply Chain Management Software (SCMS)
The first line of defense in managing the cost of goods sold is to boost your buying power. To achieve this, however, is to embrace the technology dominating the supply chain process.
The days of making phone calls, sending emails, and waiting on suppliers for RFQs are all but gone. Auto Centers and other automotive businesses succeeding in managing the cost of goods are now using supply chain management software.
The benefits of utilizing SCMS or RFQ software are endless:
● Understanding a vendor's cost structure
● Accessing a supplier's direct competitors
● Assessing supplier strengths and weaknesses
● Viewing a vendor's target market and customers
● Staying current on a supplier's product availability, pricing, and location
● Comparing quotes and bids from a wide range of vendors on demand
In essence, SCMS or RFQ software puts the power back in your hands and gives you complete control over product procurement so that you can effectively manage the cost of goods sold.
Buy or Sell an Automotive Business With AutoCenter Sales
If you want to buy or sell an automotive business, contact AutoCenter Sales. We offer a wide range of properties on the market right now.
If you're going to sell your business, we can help you list it and find an investor. We utilize aggressive marketing techniques for all buyers and sellers.
To learn more about our services and products or to schedule a consultation, call us at 1-800-874-5793. You can also send a message online, and we will get back to you shortly.