Final article in a series on how to evolve the reconditioning department into a profit center
A new language is emerging to describe the evolution in used car reconditioning. These terms define how managing recon by the clock get inventory frontline-ready sooner, increasing turn and margin.
Let’s review these new terms and why they’re fundamental to evolutionary reconditioning:
- Time-to-Market: Measures the overall time required to process vehicles from acquisition to the sales lot. Unless each step in this process is time stamped, dealers have virtually no way of knowing how long their Time-to-Market cycle actually is. The goal is 3-to-5-days, yet many operations take eight to 15 days or longer.
- Holding Cost: With each unit obtained by trade or auction comes with a holding cost attached. This is each vehicle’s share of the floor plan, advertising, and other operating expenses. NCM Associates says this cost is $32 per vehicle per day. It runs higher for luxury brands. Holding cost accumulates each day a vehicle remains in reconditioning until sold.
- Continuous Improvement: An ongoing improvement culture focuses on always getting better. The recon department uses workflow software to identify time delays, redundant steps, and poor resource utilization that erode margin promptly eliminate or reduce them.
- Centralized Recon: For groups of two or more dealerships within a 40-mile radius, centralizing recon for both stores centrally under one roof brings economies of scale, shared resources, and a sharper focus on recon output.
Time-to-Market is critical to understand and apply, as practicing this culture in a dealership will increase the volume of vehicles through reconditioning in less time as it reduces recon costs. Furthermore, practicing Time-to-Market:
- Defines the work to be done to achieve specific outcomes, bringing clarity to processes and procedures – who does what, when, and how.
- It identifies steps or practices to be eliminated to speed throughput and reduce cost – without compromising quality.
- It helps assign people having the right skill sets to specific task assignments to ensure efficiency and quality.
- It builds rhythm and flow into this work and confidence into those challenged with turning out higher production levels in less time
Dealers who’ve implemented these new recon strategies reap results, they say. “This Time-to-Market culture is the one way we can always be sure the shop is loaded,” Edward Hyde, dealer principal at Legacy Auto Network, London, Kentucky, told me. “Everything runs by the clock, which starts the moment a vehicle hits our lot. My service manager and everyone who touches vehicles from acquisition to frontline are engaged and accountable for their part of the process and overall results.”
Tom Dunn is general manager for the Fred Martin Superstore in Barberton, Ohio, and a user of reconditioning workflow software to manage this critical function. “Everyone here who works with used cars knows the faster we can get them to the lot the better chance we have of selling them at the highest gross profit,” he said. “We could hire more employees to push more cars through recon faster, but we accomplish so much more by practicing a Time-to-Market culture here.”
I’m often asked where and how this evolution should begin. My advice is that interested dealers:
- Pull everyone together to look at live reconditioning software workflow systems. They ask vendors for demos of their products.
- Talk with dealers practicing Time-to-Market and, if it makes sense to do so, invest in a road trip to learn from others and see their processes live.
- Engage a qualified process-performance technician to help them master Time-to-Market principles and practices. This professional can also help establish a start point within existing operations.
- Assign ownership of every step of the recon processes within this new workflow. Each individual whose job touches recon must follow a clearly defined – meaning described and written – plan for his or her function and its relation to the other steps. Make these individuals 100% responsible and accountable for making sure that at the end of every day their function is done and that no cars are in the wrong place along the workflow map.
- Apply 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 four-day average Time-to-Market. Best practices dictate that combination of mechanical (including inspection and parts hold) and detail must be two days or less.
- Set response standards for used-car manager repair approvals. Identify how off-site sublet work is to flow into the mix – and set tight parameters for work being done. Establish pre-approved repair “bucket” costs. Base them on make/model and mileage. Pull service histories to determine the bucket ranges of the vehicles you typically reconditioning.
- The body shop will likely add one additional day to 35% of your cars, taking 4.5 days average. Apply Time-to-Market disciplines to body shop processes to make their recon-related process more efficient, so body shop requirements will add minimal time to the total recon cycle.
- Take photos of incoming inventory at onboarding and upload those images to the Internet or BDC department so units are marketed online immediately.
- Get training on Time-to-Market software you use, on-site, and continue to reinforce best practices applications through team meetings and the review of performance reports.
- Use report data that measure each step within the recon process to establish new targets and monitor and forecast progress.
When a Time-to-Market objective is driven by a committed and process-oriented general manager, reconditioning can achieve remarkable gains in efficiency. This improvement will enhance sale gross, increase inventory turn, reduce tensions between departments, and make the dealership healthier.
Show me dealerships whose used car operations hit on all cylinders and there’s a well-run, profitable dealership. Centralized reconditioning using automation-driven continuous improvement and embracing a Time-to-Market culture creates a potent competitive difference.
Author: Dennis McGinn
Dennis McGinn is founder and CEO of Rapid Recon, (www.rapidrecon.com) the industry’s most advanced time-to-market workflow tool for auto dealership reconditioning and used car departments.