Is Days Supply a Good Indicator of Success?

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Thread: Is Days Supply a Good Indicator of Success?

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    Is Days Supply a Good Indicator of Success?


    A lot of times, publications run to the inventory levels and days supply of a vehicle as definitive proof of that model’s success or failure in the market place. But does that paint an accurate picture of a car or truck’s popularity? Although I think it usually does, there are always other factors involved such as the other side of the equation: supply, so those numbers shouldn’t be the ultimate guage.

    For those that don’t know, inventory means a unit count of vehicles on hand at dealerships, factory lots, ports of entry and in transit on a specific date. Days supply means the number of days needed to sell all the vehicles in inventory based on the previous month’s daily selling rate. Or, in other words, how long it would take for them to run out of cars should production be halted. Typically, about 60 days supply is considered ideal. Too low means demand is outstripping supply, and too much means production is high and/or demand is low.

    The data is accumulated monthly, so all of the following is as of December 1 as reported in Automotive News.

    The popular Chrysler 300 has 14,600 units in inventory, giving it a days supply of just 30. So, one could say that the 300 is a hot item.

    But look at the second best selling vehicle in the U.S., the Silverado. It has an inventory of 218,200 units with a days supply of 131! What does that mean, then? Clearly, they’re popular vehicles, so the days supply doesn’t mean the truck is a marketplace dud, right? So is supply so great that even the high demand can’t keep up with the factories? Maybe you say that those numbers are normal for such a high-volume vehicle with many configurations (have to have something on the lot for everybody). But then what of the F-series’ 83 day supply? Or the much maligned (at least on GMI) Nissan Titan’s 74 days supply? Could that mean the Titan is actually more popular than the Silverado but limited by capacity? Or is it that Nissan just knows how to juggle the econ 101 idea of supply and demand better than the century-old GM?

    Look at some other days supply numbers:

    The Pacifica is supposedly a slow seller, but its days supply is an ultra low 38! And the Magnum is supposedly hot, but it’s number is 93. What about the ultra-exclusive, hard to come by Ford GT? Its days supply is 76. Speaking of “Year of the Car,” the Five-Hundred already has an 83 day supply (the Taurus and Crown Victoria are at 65 and 62, respectively), the Freestyle has an 86 day supply, while the Mustang has a 40 day supply.

    I wouldn’t get worked up over the numbers of the Five-Hundred. It could just be that since there weren’t all that many on the lots to sell last month, November’s daily sales rate was low thereby giving this month’s higher inventory a more bleak sales outlook than it actually is.

    The G6 has been out a bit longer, so I don’t know what to make of the 86 day supply. Or of the CTS’s 113 number. The STS and DeVille, and Cobalt are all good at 70; but the SRX is at 112, the 9-3 is at 248 (!), the Bonneville, Vibe, Relay, Tahoe, Colorado, and Avalanche are all well over 130. And we all know about the SSR: 301. And apparently, the two hottest cars made by GM are the Chevy Classic with a 21 day supply and the Saab 9-5 with a 13 day supply (Down from last month’s 119).

    So what do all those number’s mean? Should GM be worried about its inventory? Does a low supply number really mean the car/truck is “hot” as so many publications seem to indicate? I think that conclusion neglects the factors of supply, so I’ll partially disagree. In any case, the numbers do tell something interesting. What that may be is all up to interpretation.

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    Re: Is Days Supply a Good Indicator of Success?

    Highs and Lows (days supply):

    Lows (30 and below):

    Mini Cooper: 11
    Acura RL: 12
    Saab 9-5: 13
    Isuzu Rodeo Sport: 18
    Dodge Ram Van: 19
    Chevrolet Classic: 21
    Acura TL: 25
    Porsche 911 Carrera GT: 28
    Chrysler 300: 30

    Highs (120 and Over):

    Buick Century: 120
    Buick Rainier: 120
    GMC Yukon XL: 121
    Cadillac XLR: 122
    Nissan 350Z: 123
    Dodge Ram: 127
    GMC Sierra: 128
    Mazda RX-8: 128
    Chevrolet Silverado: 131
    Mercury Sable: 132
    Pontiac Vibe: 133
    Ford Focus: 134
    Pontiac Bonneville: 137
    Jeep Wrangler: 141
    Mercury Mountaineer: 141
    Saturn Relay: 142
    Chevrolet Avalanche: 143
    Chevrolet Tahoe: 145
    Ford Ranger: 145
    Mercury Monterey: 145
    Chevrolet Colorado: 147
    Buick LeSabre: 151
    GMC Yukon: 152
    Dodge Dakota: 157
    Mazda B-Series: 163
    Porsche Boxster: 163
    GMC Canyon: 165
    Saturn L-Series: 166
    Isuzu Axiom: 168
    Lincoln LS: 177
    Mazda Miata: 181
    Dodge Viper: 185
    Ford Thunderbird: 187
    Hummer H1: 192
    Isuzu Ascender: 207
    Mitsubishi Eclipse: 229
    Mitsubishi Eclipse Spyder: 236
    Oldsmobile Aurora: 240
    SAAB 9-3: 248
    Chrysler Crossfire: 286
    Chevrolet SSR: 301
    Honda Insight: 768 (Over a 2 year supply?!?!)

    **VW, Toyota, BMW, Suzuki, Subaru, Mercedes-Benz, Audi, Lexus, & Scion don't break inventory down by model.

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    Re: Is Days Supply a Good Indicator of Success?

    Olds Aurora? Hasn't been MADE for years (2, I believe). Nice car, but I find it hard to believe that any are around, haven't seen them on lots around here in a long time.

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    Re: Is Days Supply a Good Indicator of Success?

    Wow, the Chevrolet Classis is HOT!! 21 day supply!

    Days supply seems to be an indicator of what the manufacturer has decided to or is capable of producing vs. sales, rather than any indication of how hot something is. There are a lot of factors that go into it, such as where the product is in it's life cycle. New cars ramping up may be low, models getting redesigned may be over-produced (creating high days-supply) to cover extended model changeovers, like the Mustang was earlier this year.

    With 60-days usually being considered ideal for giving consumers enough choice on the lots while keeping inventory costs in check, any numbers lower than that usually means the manufacturer can't make enough, which is a problem, but one that most manufacturers wouldn't mind having. Cases like the Classic are special because as fleet-only, there's not much reason to keep a wide selection out there. Low volume cars seem susceptable to high days-inventory just because the sales part of the equation is so small that even if every dealer has only one or two, it's still nets a pretty big percentage of sales.

    I think it comes down to what you are saying. Each case needs to be looked at in detail to determine if it's really an indication of how successful a vehicle is.

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    Re: Is Days Supply a Good Indicator of Success?

    It would be a good indicatior, because a low days supply means that the manufacturer is selling what it thinks the market wants. Overly high days supply indicates a miscalculation by the manufacturer of what the demand and desire for the car is. Hitting a good number means the design is doing what the manufacturer wants, and it's thus a success.

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    Re: Is Days Supply a Good Indicator of Success?

    Quote Originally Posted by Buick61
    Or of the CTS’s 113 number.
    What's up with the CTS? 113 days isn't good by any measure. I know they are selling better this year than they were last year, though. I suppose Cadillac just overshot production estimates.

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    Re: Is Days Supply a Good Indicator of Success?

    Days supply is an odd measure since it is inventory divided by the volume sold in a recent period of time. A days-supply number of 131 days for a high-volume vehicle like the Silverado does mean that GM is making too many. If you have a large supply of specialty vehicles like the Viper or Prowler, that can mean different things. For example, if you were to have 3,000 dealers and most had a Viper on display to draw the crowds (this example works better for 1993 than 2004) and the Viper sold 200 units a month, inventory of 3,000 vehicles would be an outrageous 400+ days supply. But these vehicles are being used to attract buyers for other products.

    On high-volume vehicles like the Silverado, a dealer should have a supply of them on hand to allow a potential buyer to select a variant that would make them buy on the spot. Having a 60-day supply is considered to be good for this purpose. Having a great than 90-day supply is considered to be too much.

    The Chrysler 300 is a relatively high-volume vehicle and should probably have a 45-60-day supply, but at the current levels, it's a scarce product. Products like the Mini and Scions, where buyers typically order their own, low inventory levels are planned.

    When manufacturers can get down to the 10-20 day wait time between ordering a vehicle and having it delivered, perhaps all vehicles will be sold on a special-order basis. Until then, 60 days on-hand will remain the target.

    Back to the Silverado example, 131 days is far too high. This is why GM has already planned to shut down the plants for a few weeks in 2005. And remember when these vehicles were so hot that they didn't have any incentives at all? This all happens when you have an aging product in a market where your FOUR chief competitors have brand new products.

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