Many dealerships assume their parts inventory records are accurate—until an audit or reconciliation exposes discrepancies. Even with regular tracking, inventory accuracy can drift over time due to small, unnoticed errors that accumulate. Here’s why your physical inventory might not be as precise as you think and what you can do about it.

1. Misplaced or Unlabeled Parts

A common issue in parts departments is misplaced inventory. Parts get stored in the wrong bin, missing labels, or end up in service bays without being accounted for.

💡 Fix: Implement a strict bin location system and ensure that every part has a clearly visible label matching the DMS.

2. Unrecorded Special Orders

Parts ordered for a specific repair but never installed often sit in limbo. If they aren’t returned or properly logged, they create phantom inventory.

💡 Fix: Regularly audit special order shelves and return unused parts promptly.

3. Negative On-Hand Quantities

Some DMS systems allow negative on-hand counts when a part is billed before being properly received. This causes significant inaccuracies in physical inventory counts.

💡 Fix: Enforce policies that require all parts to be received in the system before they can be billed to a repair order.

4. Shrinkage from Theft or Misuse

Even small levels of theft or misappropriation add up over time, leading to unexpected variances.

💡 Fix: A third-party physical inventory can act as an impartial audit, identifying inconsistencies and highlighting areas that may require tighter security controls.

5. Unreconciled Accounting Discrepancies

Many dealerships assume that if their DMS inventory total looks correct, it must match accounting records. However, missing invoices, incorrect cost adjustments, and posting errors often lead to discrepancies between the physical inventory and the General Ledger (GL).

💡 Fix: A regular parts-to-GL reconciliation ensures that your inventory values align with your accounting records, preventing costly surprises.

6. Lack of Regular Cycle Counts

A single annual inventory count is helpful, but if it’s the only time you verify accuracy, errors may go undetected for months.

💡 Fix: Implement a cycle counting process, checking different sections of inventory on a rotating basis to catch mistakes early.

Final Thoughts

Even well-run parts departments experience inventory errors. By taking proactive steps—such as conducting thorough physical inventories, cycle counts, and reconciliations—dealerships can reduce inaccuracies, minimize losses, and maintain a more reliable parts inventory.

🚀 Want to ensure inventory accuracy? Learn how a professional physical inventory count can help keep your dealership on track.