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Vehicle Reconditioning Processes Should Run Like a Factory

Vehicle Reconditioning Processes Should Run Like a Factory

Car dealerships can cut costs and increase profits by speeding up how long it takes to get vehicles frontline-ready.

I learned in an Earth-science class that fast-moving rivers slow down as they silt up.

Dealership reconditioning departments can silt up too. Their work flow slows as best practices fall out of use, guesswork replaces measurement and everyone seems to forget that time is money when it comes to getting acquired used-car inventory frontline ready for retailing. 

Consider these points:

  • Vehicle tracking via spreadsheet or whiteboard, while an improvement over sticky notes, is neither transportable nor shareable. In my experience, use of these tracking tools falls into disuse after a brief and energetic start.
  • Misplaced vehicles can be taken out of the process temporarily while they await parts or repair authorization. The busy-ness of the day means these units are too easily forgotten about – or take time to locate again when ready to reenter the process.
  • Misplaced communication between recon and the used-car manager slows repair approvals, causing delays that mount up and erode gross margin.
  • Many compensation plans are based on time, not units of production

Each of these inefficient processes cost money – in time, labor and days in recon. 

The recon process should flow from point A to B in linear fashion. If that looks like an assembly line, it is. Your recon processes may not include each of the steps that this illustration shows, but running recon like a factory focuses on maximizing output and reducing cost.

Remove the silt by having clearly defined processes at each step. Hold individuals assigned to performing those steps accountable for time and cost goals. Compensate staff based on production measurements, not time spent per job. Recon workflow software structures each step and identifies the specific actionable tasks to be performed when and by whom. It builds accountability into each step. This same process connects the recon department, used-car manager, general manager and service director in real-time. The result is closed-loop communication that speeds up and increases workflow time and volume, respectively.

A shorter workweek for techs might seem contrary to their desire to earn more income, but the opposite is true. Dealers who have modified service technicians’ schedules to 3-day weeks, push increased production through the service department – for both customer and recon needs. Shifts ensure the week’s days are covered.

It eliminates idle time and keeps techs busy (which they’ll appreciate). It keeps service bays turning a profit through more hours of the week. A similar work structure and compensation plan for recon teams (internal and external) based on their achieving pre-approved reconditioning cost and time buckets will increase production and reduce costs as well.

Smarter recon practices give you control of time. Dealers need to own the clock. If you don’t, daily per-vehicle holding costs will erode your grosses.

Every day a car isn’t frontline-ready costs gross.

NCM Associates from its 20-Group client studies tells us the average daily holding costs across all brands and franchises is $32 a day per vehicle. 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.

Monitoring and managing the process cuts down on time.

“We thought we had good insight into how long it was taking us to get vehicles front-line ready, but when we turned on this recon workflow software, it showed we were at 12 days,” says Jared Ricart, service operations manager for Ricart Automotive, a Columbus, OH-based dealership group. “That long process was killing gross.”

Since then, Ricart has lowered it to less than four days.

Anthony Martinez manages a recon center handling 600 cars a month for two Greenway Auto Group stores in Florida. He brought to Greenway a quality-control mentality honed at a prior position as a regional quality-control manager for an automaker.

“A recon department itself is an assembly line, with inputs and outputs, and something as simple as where you park waiting cars – and how long it takes someone to retrieve them and bring them into recon – impacts how much profit recon can make for the company,” he says.

Dennis McGinn is founder and CEO of Rapid Recon, a time-to-market workflow tool for dealership reconditioning and used-car departments. 

TAGS: Dealers Retail
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