Mastering Market Days Supply (MDS) for Automotive Dealers (Updated)
Market Days Supply (MDS) is a critical metric for automotive dealerships, directly influencing inventory decisions, pricing, and overall profitability. By fully understanding and strategically leveraging MDS, dealers can significantly enhance operational efficiency.
What is Market Days Supply (MDS)?
Market Days Supply measures how many days it takes to sell current vehicle inventory based on recent sales trends. The formula is straightforward:
MDS = Current Inventory / Average Daily Sales Rate
A lower MDS indicates high turnover and robust demand, while a higher MDS suggests slower sales or excess inventory.
Why MDS Matters to Your Dealership
Effectively managing MDS can help your dealership:
Optimize Inventory Levels
Regular MDS monitoring enables you to identify fast-moving models and prioritize stocking these vehicles. Conversely, recognizing slow movers allows proactive inventory management through targeted promotions or adjusted procurement strategies. The Laser Appraiser Pricing Calculator included with Dealer Studio helps track your regional MDS by a vehicle year/make/model.
Develop Strategic Pricing
MDS directly impacts pricing decisions. Vehicles with high MDS may require price cuts or incentives, whereas models with lower MDS can sustain higher pricing and improve profit margins. Keep your inventory stocked with lower MDS vehicles with help of the Laser Appraiser Auction Tools.
Forecast Accurately
Tracking MDS trends equips your dealership to anticipate market shifts. An increase in MDS signals reduced consumer interest, prompting timely marketing and promotional strategies. Use the Laser Appraiser Market Spy feature of our dealer management system, Dealer Studio, to maintain the right mix for peak profitability.
MDS Best Practices for Automotive Dealers
- Regular Monitoring: Check MDS at least weekly to respond swiftly to market changes.
- Set Benchmarks: Aim for an ideal average MDS around 70 days, adjusting based on vehicle type and market dynamics.
- Use Advanced Tools: Platforms like Laser Appraiser provide detailed market insights, helping dealers make precise decisions.
Conclusion
Incorporating MDS into your dealership's daily operations isn't just beneficial—it's essential. By mastering this metric, your dealership can dramatically improve inventory efficiency, pricing accuracy, and sales forecasting, ultimately driving profitability and growth.
For more strategies on managing your automotive dealership effectively, visit our Dealer Strategies.
