Inventory is a Waste

by Dennis McGinn, Founder and CEO, Rapid Recon - Source

Inventory is a waste if not managed for maximum speed to sale.

Said differently, how much does it cost not to sell a car?

When fixed and variable operations can’t agree about where internal work fits into the dealership’s priorities, or when there’s delay in recommending and authorizing used car repairs, things grind to a halt. When there is no focus on reconditioning efficiency, there can be only one outcome: Cars can’t be sold.

When cars finally do squeak out of recon, they’ve already aged there beyond their prime retail window. Their slow progress from transport to sale-ready has compiled such holding cost erosion that, if the car is sold, the gross is often zero.

Keep in mind that speed to sale isn’t one department’s or individual’s responsibility, but that of everyone who “touches” the car from acquisition to sales-ready to “sold” status. When you recognize these touchpoints, you can remove obstacles and delays. Consider the following departments’ roles in the process.

Reconditioning

Time to Line, or T2L, measures time from vehicle acquisition to sale ready. If you’re looking to make a profit, cars can’t languish on the transport or lot; someone must be responsible and held accountable for physically moving them into recon right away. The clock has started. Service must be notified promptly, and vehicle inspection must be started immediately. Repair approvals must be executed as quick as lightning. Lack of approval or waiting on the right parts means taking the car off the lift to wait — all the while, hours are burning, along with resources and money.

Don’t skip by the following numbers: A car accumulates a $40 per day holding cost burden from the time the dealership owns it until it is sold. Delays can result in pushing recon out anywhere between 12 to 21 days. Not only does the car then get to the lot as stale metal but it’s also carrying a $600 burden (assuming a 15-day cycle) against any sale gross. Get the same car sale-ready in three to five days and holding cost plunges to between $120 and $200. It’s not magic that makes the difference — it’s automated T2L recon workflow software.

Service

The used car department is a dealership’s most frequent and profitable customer. Service managers who operate accordingly get cars to internal inspection and repair quickly. Fast attention here moves each car quickly through recon and also generates labor and parts revenue. The “retail” versus “internal” rate debate might continue, but note that charging retail can add such a burden to a vehicle that it won’t sell quickly or as profitably.

Used Car Manager

For maximum profitability, condense your repair approval time like crazy! Consider pre-authorizing approvals for certain types and levels of common repairs. For cases that need approval, use text, e-mail and phone methods that enable instant communications. One 18-store group assigns repair approval responsibility to on-call speed-to-sale managers to bypass the hectic used car manager to get approvals almost instantly.

Sales Floor

Give salespeople access to recon T2L dashboard tools and allow them to connect with prospects sooner when vehicles of interest first enter the recon pipeline. Vehicle condition and repair reports and photos pulled from the T2L recon dashboard puts tangible evidence into their hands of maintenance work done by the dealership for the car the customer is considering.

What Is Your Path to the Sale?

It costs too much not to sell a car — holding cost, aged inventory, less margin, fewer turns and lost sales. By streamlining the path each vehicle takes from acquisition to the front line, you can maximize profitability and all the good things that come from advanced T2L.