Article

Inventory Management Programs: Tracking to Profits

June 2008, Auto Dealer Today - WebXclusive

by Kimberly Long - Also by this author

With the current economic climate forcing many dealers to rely on used vehicle sales to pull them through the slump in new car sales, it’s more important than ever to have a solid system in place for management of used vehicle inventory. There’s a varied selection of programs out there, and while they may differ in their approaches to inventory management, they all have the same goal: to maximize profits and minimize losses. It’s up to dealers to decide which program will do that the best. With that in mind, look at highlights from seven inventory management programs on the market today:

AAX Inventory Management by JMsolutions
Formerly known as AAXchange, AAX Inventory Management looks at the actual sales transactions within a store or group of stores and can custom-build the ideal inventory based on that history. The program will make buy/sell recommendations based on current stocking levels and past sales performance and will identify which units have fast turn times and higher gross profits. AAX assists with pricing decisions by allowing the dealer to compare a vehicle’s price against the market price and the dealership’s sales history.

AAX offers a used car group trade feature that facilitates trading between stores within a group. It can determine which vehicles are needed at each store and point out when inventory should be moved between locations. When appraising a trade-in, the program will send an alert to another store that is in need of that vehicle. For inventory purchases, AAX offers the Run List application; this feature monitors several auctions, including ServNet, ADESA, ATC-Onlane and GMAC SmartAuction, allowing a dealer to plan in advance what to purchase to meet ideal inventory levels.

AAX updates nightly from the DMS and provides a large number of ready-made reports for individual or multiple stores; the dealer is able to access these reports from any Internet-capable computer. Dealers who want a little extra help can take advantage of AAX’s Dealer Results Management service, which provides a trade professional to analyze the dealership’s data and work with the dealer on-site or over the phone to provide improvements in key areas.

Auto$ense by Davis, Keller & Wiggins, LLC
Auto$ense has the distinction of being one of the first programs ever developed to help dealers manage inventory. The accounting firm of Davis, Keller & Wiggins, LLC designed it to utilize a dealership’s used vehicle sales history and current inventory data to produce customized inventory management and sales reports. Assistance is provided to teach dealership personnel how to review, interpret and utilize those reports.

Auto$ense is probably best described as an outsourcing solution, since there is no software to install and no Web site to log onto. The dealership provides Auto$ense with access to their DMS or sends the data to Auto$ense by e-mail, diskette or hard copy. The service is currently compatible with ADP and Reynolds & Reynolds systems. Sales data is obtained at the close of the month and reports are generated and provided to the dealer electronically or by hard copy. Data is pulled from the sales accounting journal, rather than from F&I, so reports reflect true gross profit.

Auto$ense reports will show average gross profit on a vehicle and number of days in stock, enabling any dealer to trade more aggressively and to determine what to buy or sell at auction. Profit/loss progress reports chart the monthly progress of total gross profit, the cost of excess inventory over a 45-day supply and estimated monthly interest costs. For stores with multiple locations, a report is available to assist in determining what types of vehicles are selling best and at which stores. A composite report for a region or 20 Group can be supplied. Auto$ense’s numerous reports can be sorted by more than 25 different options. Dealer Progress Reports chart month-to-month progress toward dealership goals.

Roy Schmidt, dealer principal of Ford Square in Mt. Vernon, Ill., uses Auto$ense to see what models are turning, which ones aren’t selling and what vehicles he needs to buy. The program keeps track of the dealership’s gross per unit and shows how many units they’re on track to sell for the year. Said Schmidt, “It’s just a pretty neat tool to give you a barometer on what you’re doing. It helps us buy what we need to buy; it helps us keep an eye on our grosses and how we’re tracking from last year.”

First Look by INCISENT Technologies
First Look offers several different products within its core product suite. The entire core product suite can be purchase or a select few of the products can be purchased cafeteria-style. It is designed strictly for used inventory management and purports to be the solution for those who are not analytically skilled or do not have the time to examine traditional data reports.

First Look’s EDGE Inventory Management Center can identify high-risk aging vehicles in inventory and has tools to create actions plans for those vehicles. It will also use a guidebook chosen by the dealer to instantly analyze the amount of water or equity in their current inventory and perform a loan value analysis to find those vehicles that are the easiest to finance. EDGE Optimal Inventory Analysis shows what vehicles to stock based on a dealership’s sales history, and First Look’s search engine will automatically search the Internet for the vehicles needed.

First Look’s PING II Price Analyzer helps keep online prices competitive by utilizing data from online consumer guides like Edmunds TMV and KBB Retail, real-time Internet pricing, retail market transactions on similar vehicles, and a store’s own sales history for similar vehicles. The program performs a daily analysis of inventory and can send alerts for cars that may be under- or overpriced to a dealership employee. It will also allow a side-by-side comparison of competitors’ pricing on similar vehicles.

Bruce Heath, Area Vice President for Penske Automotive Group in Indianapolis, Ind., likes that First Look provides book values and auction data for used vehicles in addition to the store’s historical data. He says the program helps with lot promotions, advertising, wholesale decisions and retail pricing. “First Look gives us an advantage of knowing what the cars are doing at the auction in real time; it also helps us on retail prices vs. like vehicles priced on the Internet.”

Inventory Pro by DealerTrack
While DealerTrack offers a wide range of products for dealers, its Inventory Pro application can be used as a stand-alone product. Even though setup is remote, training is available both in-house and via the Web. Inventory Pro will work with nearly any DMS and can be used for new inventory, as well.

The inventory summary will quickly show all retail and wholesale vehicles in terms of units and dollar amounts. The program has the ability to integrate with Kelly Blue Book, NADA or Black Book, and links to Manheim Market Report data. The program will check the VINs of the cars in inventory against MMR data on a daily basis, alerting dealers to wholesale opportunities for certain vehicles. A vehicle’s information can even be sent to the auction without ever logging out of the program.

Like many of the programs, Inventory Pro can make buy/sell recommendations based upon the store’s days supply and sales history. Sales history data will show cost, profit and ROI on each vehicle sold and can be drilled down to details like trim level and color. The program will also produce a 30-day profit opportunity analysis, which identifies inventory needs by volume count and sales history and projects how much money could potentially be lost over the next 30 days by not stocking a particular vehicle.

Pre-Owned Vehicle Analyzer (PVA) by ADP
For those using ADP or Reynolds & Reynolds dealer management systems (DMS), ADP offers the Pre-Owned Vehicle Analyzer, or PVA, to provide in-depth analysis of historical sales and current inventory data. Sales data can be compared with current inventory by make or model and the data can be exported to an Excel spreadsheet, if desired.

PVA provides graphs for analysis by source, model year, unit cost or manufacturer in the categories of inventory, retail ROI, retail gross profit and wholesale. The system issues an alert if it identifies an area of concern within these categories. PVA will identify vehicles with the highest gross and ROI and will help determine whether a dealer needs to buy or sell to get an ideal 45-day supply. The Top 20/Bottom 20 report quickly shows the best and worst vehicles in inventory for gross profit.

Sales data is pulled from accounting, not F&I, through the DMS nightly. For dealers with multiple stores, PVA provides an Enterprise/Regional View that combines information from all stores.

Josh Cecil, pre-owned sales manager for Overland Park Jeep in Overland Park, Kan., said PVA allows him to sort inventory based on the source, shows how much profit the dealership is making and identifies where the most money is being made. “The main reason I use it is to keep an eye on my aged inventory. I track front-end gross on used vehicle trades and auction purchase cars, and I like the fact that you can track gross by model year, also.”

Valuinsight
Valuinsight eliminates the need for a dealer to remember to run reports; data is extracted from the DMS nightly and the reports are regularly e-mailed to the dealer or other designated recipient. At the time of setup, a dealer determines which reports to receive and how often. Customized reports are available to meet the needs of individual dealers.

Sales and inventory data can be drilled down to details like equipment, trim, age, mileage and cost. Valuinsight allows tracking of aging vehicles and generates a Hit List Report of units that have aged past the number of days designated by the dealer. Stocking decisions are aided by using the Target Supply Report, which analyzes past sales performance by individual model number, package and trim. The Long and Short Report will show the top 10 sales segments and model years that are over or under the dealership target days supply.

With a username and password, dealership personnel can access sales and inventory data from any computer with Internet access. The system tracks who logs in and when, as well as what information is accessed; a weekly e-mail is sent to the dealer/GM with this information. Additionally, Valuinsight will follow up with the dealership on a regular basis to assess how well the dealership is progressing toward its goals and provide guidance in holding effective inventory management meetings.

Mark Wyant, general manager of Palm Chevrolet in Gainesville, Fla., believes Valuinsight’s Long and Short Report is of particular value to dealers with multiple stores, enabling them to determine what can be traded between stores to get the vehicles they need without having to go to auction.  According to Wyant, Valuinsight gives you “the biggest snapshot of what’s hot and what’s not in your market,” and helps the dealership acquire cars based on facts, not gut feelings. “This absolutely gives you a scientific way to purchase the right car, bring in the right inventory and make the right choice.”

vAuto
In addition to looking at a dealership’s past sales performance, this program provides what the folks at vAuto refer to as a Live Market View, which scrapes the Internet for information on every competing vehicle and then organizes that information to show supply and demand for any vehicle in the dealer’s market area. And since not every Web site will describe identical vehicles the same way, vAuto utilizes its AutoMatch technology to standardize all vehicle descriptions, allowing an apples-to-apples comparison of a vehicle, down to its exact equipment, no matter the source of the data. It will reflect the market days supply of a particular used car in any given market at any time.

While providing access to wholesale information from the traditional books, vAuto also provides the retail profile of a vehicle with its rBook function, which will illustrate the number of vehicles in a dealer’s market area with identical equipment as well as the average mileage and average price of those vehicles. The vRank feature will show how a dealership’s vehicles rank in value against competitors on identically-equipped vehicles, taking into account both asking price and mileage. The program can issue e-mail or text message alerts on vehicles that are at risk due to aging, overpricing or an unreasonably high days supply in the market.

Joseph Gilsdorf, general manager of Henry Chevrolet Buick Pontiac, appreciates having the market days supply and the multiple sources of data vAuto offers. “This just does it all in a blink, because you get auction data, KBB, NADA and Black Book,” said Gilsdorf. “Plus, it’ll tell you what else is in the market around you right now. It helps you make more intelligent decisions about vehicle pricing and takes the emotion out of appraisals and auction purchases.”

Inventory Management Solutions

Web-based   Software to Install  Used Inventory New Inventory  Cost Determination Contract

 AAX

 Yes

 No

 Yes 

 Yes

 Monthly fee per store

 1-3 year

 Auto$ense

 No

 No

 Yes

 No

 Monthly fee per store, per module selected

 None

 First Look

 Yes

 Yes

 Yes

 No

 Monthly fee

 Negotiable

 Inventory Pro

 Yes

 No

 Yes

 Yes

 Monthly fee based on average monthly used sales volume & number of stores

 1-3 years

 PVA

 Yes

 Yes

 Yes

 No

 Monthly fee based on number of stores

 60 months

Valuinsight

 Yes

 No

Yes

 Yes

 Monthly fee based on the products and services selected

pay month-to-month or lack in lower rate w/1-2 year contract

vAuto

 Yes

 No

Yes

 Yes

 Monthly fee per store based on package selected

None


Things to Keep in Mind

While not specifically addressed in each section, nearly all of these programs offer appraisal tools of some kind, most with access to multiple sources of data like NADA, Black Book and Kelly Blue Book. Most appraisal tools have mobile capabilities, meaning they can be utilized with a handheld device such as a Pocket PC or Smartphone.

Some kind of training and/or technical support is available for all the programs mentioned here, even if not specifically noted. Most providers offer multiple options to dealers as to the amount and degree of training and support they need; however, some of those options may require an additional fee.

It would be nearly impossible to cover every feature of each of these programs without writing a book, and there are even more programs that are offered as part of a bigger package of dealer services (ProMax, for example, has inventory management). Additionally, the providers discussed here may have made changes or additions to their programs or services since this article went to press. Dealers are strongly encouraged to do their own research and evaluate their dealerships’ needs.

Effective inventory management is critical to a dealership’s bottom line. A dealer who is not doing everything possible to optimize how used inventory is bought, sold and appraised is overlooking a significant amount of profit.

 For more information on:  Go to:

 AAX

 www.jmfe-jmsolutions.com 

 First Look

 www.DriveYourNumbers.com

 Inventory Pro

 www.dealertrack.com

 PVA

 www.dealersuite.com

 Valuinsight

 www.valuinsight.com

 vAuto

 www.vAuto.com

Vol 5, Issue 6

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