Last month, I described four common traits of dealers with top-performing used-vehicle operations. One trait is a daily management process known as the “bucket system” or the “stock walk.”
I received many e-mails asking me to define the process and cite the benefits it can offer the pre-owned department.
The terms bucket system, bucket walk or stock walk describe a process to identify and control aging inventory. It is done by walking the lot every day.
Upon inspection of those specific units, we consider additional reconditioning, re-pricing or wholesaling. These decisions are made early to avoid aging issues and wholesale losses that can occur with no process in place.
Many dealers rely solely on a “hard turn policy” in an attempt to avoid aging issues. Despite having a 45-, 60- or 90-day hard turn policy, the unit may not be evaluated in terms of the current salability until it is up against the turn limits.
Your ultimate turn policy is not as important as knowing on a daily basis if the unit is ready for sale, priced right for the market and has the highest probability of sale.
The first step in this process is defining your current inventory by four specific age categories or buckets (hence the name “bucket walk”).
Bucket 1 will be any unit that is up to 16 days in stock; bucket 2 includes all units 17 to 32 days; bucket 3 includes all units 32 to 48 days; and bucket 4 includes any unit that is over 48 days in stock.
The exact number of days you include in each bucket is somewhat arbitrary, but I would not recommend more than 16 days in each bucket.
Those that use this process refer to units in inventory as being in bucket 1, 2, 3 or 4. Many also use this in the way they price the inventory on the lot.
They would have all units that have been on the lot 17 to 32 days with a price that ended in a 2. All the units that were 33 to 48 days end with a 3, and so on. This allows the manager to know the age of specific units simply by walking around the lot and looking at the last number on the price.
In the event the pre-owned vehicle manager was walking the lot and noticed a unit parked at the back with a price that ended in a 4, he would know at a glance that it was an aged unit. He would ask why it is not up front where it could possibly get more retail attention.
The daily bucket walk starts with the pre-owned vehicle manager running a current inventory by days in stock. The manager then identifies any specific units that are aging from one bucket to the next.
These units are referred to as “bucket jumpers”. At a predetermined time every morning, the pre-owned vehicle manager and all the sales people go out to the display area and “walk” those specific units.
The process includes starting the vehicle, checking the gauges and inspecting the exterior and interior. The manager solicits feedback from the sales people to determine if the unit has been test driven, shown or has any obvious issues that would prevent it from selling; basically asking, “Why has this vehicle not sold?”
Based on the response from the sales team, the manager needs to take action. Remember, this is taking place as early as 16 days on the lot.
The actions available to the manager at this point are:
Change the retail price on the unit to better reflect the current market.
If the unit requires additional reconditioning, do it quickly and get the vehicle back on the lot.
Wholesale the vehicle and put the money into a unit that may offer a faster turn.
Given the volatility of the current wholesale market, there is no more important daily process you can put in place in your pre-owned vehicle operation.
Manage your pre-owned vehicle inventory just like you would manage a fruit stand.
Keep it fresh, watch for rot and price it to sell.
Tony Albertson is executive conference moderator for NCM Associates. He is at [email protected].
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