When I’m asked to analyze a dealership’s vehicle reconditioning department, it’s quickly apparent from my performance-report review who is running the show.
Stores with recon processes that get used cars to the frontline faster for more gross are managing their recon processes much differently than are operators who take 10 to 15 days to get vehicles to retail.
The most telling difference is who is in charge. In highly productive, assembly-line efficient recon shops, the general manager is setting the tempo and holding key managers and staff accountable for delivering a 5-day time-to-market culture.
That culture is disciplined, process-driven and quick. Its reconditioning steps are clearly defined (and written) activities, responsibilities and accountablilty goals. By adhering to this process, management and staff run recon by the clock and profit from it.
General managers who instill this culture get cars to retail faster so they sell sooner for higher gross. Getting vehicles’ frontline ready just 2.5 days sooner equals one additional inventory turn. A 5-day improvement means two extra turns a year.
When you achieve this change, service and parts are kept busier and more profitable. Because recon and detail staffers work smarter, their efficiencies can lift their compensation.
Cut Costs, Add Turns
The industry reconditioning time-to-market average is 10 to 15 days. If your goal is to retail more used units at the magical 30-day mark, you can’t afford to have half of that time burning up in recon. Stodgy recon processes delay units getting to the frontline – and such delays erode sale gross.
With each unit you acquire, whether through trades, private purchases or from auctions, you acquire a cost associated with each vehicle. This cost is each unit’s share of floor plan, advertising and other operating expenses. NCM Associates notes from its 20 Group studies this figure is $32 per vehicle, per day, more for luxury brands.
Based on NCM’s $32 per day per vehicle cost, a dealer who shaves six recon days off a 100-unit monthly recon volume will save $19,200 a month. That’s $230,400 a year.
Use this calculator to determine your holding cost erosion.
Reduced Time-to-Market doesn’t happen without first laying aside spreadsheets, sticky note or whiteboard calendars. Most don’t work out satisfactorily. They eventually fail because they’re static and not easily shared among with the crew.
On the other hand, frontline readiness accelerates when general managers plug time-to-market workflow software into the mix.
This software helps organize and structure the many steps of reconditioning. Its communications apps reduce repair approval delays. It helps establish, measure, and monitor benchmarks that guide ongoing improvement.
When introducing a time-to-market culture, make sure all involved understand its benefits to their job. Reinforce with staff – from managers to lot runners – how this approach will remove doubt from their job, streamline communications and lift productivity for those compensated on the outcome.
The most successful time-to-market culture:
- Pulls everyone together to look at live systems; that is, ask vendors for demos of their products. Consider the system’s flexibility to work within your processes and make them better.
- Engages a qualified process-performance technician to help. This professional also can help you lay out a starting point within your existing recon processes.
- Assigns ownership of every step of the recon processes within this new workflow. Each individual whose job touches recon must follow a clearly defined – meaning written – plan for their function and its relation to the other steps. Make these individuals 100% responsible for daily making sure their function is done and no cars are in the wrong place.
- Applies Time-to-Market practices first to mechanical and detail operations, as they are the two crucial workflow steps. Decide what level you need to operate at to hit a 4-day average time-to-market. Best practices dictate a combination of mechanical (including inspection and parts hold) and detail must be two days or less.
The body shop will likely add another day to 35% of your cars, taking 4.5 days average. Set response standards for used-car manager repair approvals. Identify how off-site sublet work is to flow and set tight parameters for it.
- Trains on time-to-market software, and continues to reinforce best practices at team meetings and performance reviews.
- Uses report data that measure each step within the recon process.
When driven by a committed and process-oriented general manager, efficient reconditioning can improve gross, increase inventory turn and reduce tensions between departments.
Show me dealerships with used-car operation hitting on all cylinders, and I’ll show you an exemplary time-to-market recon culture.
Dennis McGinn is founder and CEO of Rapid Recon at www.rapidrecon.com.