Dealerships are ever conscious of profits and expenses. Every transaction is measured and quantified. For vehicle sales this encompasses front-end, back-end and after sale components.
Within each of these components, transactions are further broken down into categories such as finance reserve, extended warranty, GAP, and the like.
Dealerships have a similar zeal for tracking and analyzing expenses. There is an ongoing awareness of what is spent. If a product or service is perceived as not being worth its cost, it is eliminated.
Yet, there is limited attention for another key area: operational efficiency.
Dealerships are operationally intensive organizations. There are multiple departments, each with many transactions. But the speed, effectiveness and efficiency of each operation go largely unmanaged.
Almost every industry with similar operational complexity routinely tracks and manages processes. The reason is that business understands the drain on profitability from processes that are inefficient and ineffective.
It's far too simple for dealers to presume their department heads are operational managers. In most cases, dealership department heads are individuals whose past careers have brought them up through the various positions within their department.
While this may make them a departmental expert, it does not mean they are operationally experienced or trained.
True operational managers usually possess similar personality traits and skills. These can be predictively profiled using established personnel profile tests.
In other words, there is a certain type of individual that can truly perform as an operations manager. The fact that dealerships do not generally recognize or test for such skills often means their departments operate at levels below optimal. This results in lost productivity and profit. Yet it's hardly ever measured or addressed.
What do these operational inefficiencies look like? An example would be vehicles that take too long to go through the reconditioning process, preventing an optimal return on investment.
Vehicles sold to customers that are returned immediately after sale for adjustments or repairs create a disruption to the proper flow of resource allocation.
Dealerships often pay to have their vehicles listed online, but such listings do not contain the best-practice number of photos. Vehicles often don't have prices.
Frequently the price online doesn't match the dealership's intention for extended periods of time after a price change has been executed.
I could go on without exaggerating the multitude of operational process inefficiencies at most dealerships.
Today, new tools allow managers the ability to define the milestones required to manage vehicles through their dealership life cycle. Such milestones often include time for transportation, reconditioning, detailing, photos, window stickers and website presence.
New technology can track each vehicle as it moves through the various milestones. Alerts are generated when vehicles do not achieve the next required milestone in a timely manner.
Such alerts allow for immediate intervention for the purpose of rectifying the problems that otherwise might go unnoticed and consequently result in a loss of productivity and profitably.
The use of the new tools immediately introduces opportunities for improvement. Combined with an operationally oriented and skilled manager, dealerships can begin to manage a whole new category of profit and expense metrics that are otherwise overlooked.
Moreover, this new technology allows dealerships to track their performance over time for the purpose of setting ever greater levels of performance improvement.
This emphasis on productivity and efficiency is the next horizon for improving dealership profitability.
Dale Pollak, founder and CEO of vAuto, Inc., is an authority on used-vehicle operations. He is at 877-828-8614 or [email protected].
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