Article

Data Drives Profits

Utilize your DMS’s built-in reporting capabilities to efficiently manage inventory, sales, service and parts.

March 2014, Auto Dealer Today - Feature

by Allan Stejskal

The dealer management system (DMS) is the backbone of every dealership. It is the source of virtually all the information needed to run a profitable business. It tracks everything from the smallest expense to vital insights for stocking the most profitable and fastest-turning vehicles. It offers a treasure trove of data that, properly mined, can help you control costs, grow market share and maximize profitability.

Your DMS records are your dealership’s entire history; it’s no wonder they’re a powerful tool that can help control costs storewide. From paper towels in the restroom to landscaping to service uniforms, there are a whole host of costs you may be able to reduce.

To get started, group your vendors into major categories of cost. When you spend some time reviewing your accounts payable data for all your expense accounts, you may find opportunities to slash hundreds of dollars from your operating budget. This is especially true for dealer groups. Each store may employ a different vendor to provide the same service. Consolidate the business with one vendor to benefit from volume pricing discounts. Here are two more key areas in which your DMS data can be incredibly valuable:

1. Inventory: Inventory reporting enables you to track the costs associated with reconditioning vehicles, carrying aged inventory and wholesaling vehicles. Tony Rhoades, executive director of information and consumer strategy for Gunn Automotive Group in San Antonio, uses the group’s DMS data to set inventory pricing and cut wholesale losses. “DMS reports help us manage the cost of our inventory. We can identify vehicles that have been sitting too long and price them appropriately so that we get them off our lot as quickly as possible.”

2. Service and Parts: You can use your DMS data to analyze service technician efficiency and productivity reports. Is your service staff being fully utilized or is unnecessary downtime, like waiting on parts, costing you money? Deborah Condon is the general manager of Heller Automotive Group, which operates stores in Escondido, Calif. “A quick glance at my DMS shows me how many service tickets I have and if my shop is loaded,” she says. “If I’m not full in the afternoon, I use social media like Twitter to shoot out a quick special. I’m usually flooded with phone calls, so my shop is full that afternoon and the next day. If I didn’t check my DMS, my techs could be standing around idle, which would cost me money.”

In your parts department, your DMS can help you analyze your parts inventory and turns so you’re not wasting money on overstocking or losing money on parts that sit on the shelves for months. It can also help you price right and maximize manufacturer returns. Create an inventory analysis report with status levels such as active parts in stock, active parts with excess stock, active parts to phase out and inactive parts with stock on hand. Get rid of parts that take up valuable space for too long and replace them with parts that turn more rapidly. Condon employs these strategies to keep her dealership’s parts department profitable. “You could have $100,000 sitting in parts inventory and, if that’s not turning, you’re losing money. Our DMS data helps me keep tabs on what we need for upcoming service appointments, so we can get parts in and get them out and make some money.”

Market Share
Much of the key data that populates your CRM, whether it is part of your management system or provided via a third party, comes from your DMS. This data is a gold mine of information that can help your dealership increase sales; for example, vehicle purchase data and service history reminders. Uncultivated opportunities sitting in your database are an easy putt, and they are probably a lot of the same people you are paying to reach via advertisements.

In your sales department, encourage your staff to practice equity mining. Identify customers with positive equity in their vehicles and extend an offer that gets them into a new vehicle and lowers their monthly payment. In my experience, a dealer who utilizes equity prospecting can sell an incremental 10 to 30 vehicles per month. The cost per vehicle retailed is often far less than $200, resulting in a gross that is well above average. As an added bonus, equity prospecting is a great way to source in-demand used vehicles.

Encourage your service team to mine the data for customers who have never been in the lanes or have only been in once. Market a promotion for a free oil change, for example, or send reminders about upcoming recommended maintenance. And if a member of your sales team calls a customer to offer a screaming rate on a new loan, but they say they’re more concerned with a needed repair on their current vehicle, get that customer into your service bay and follow up after six months. By that point, that same customer may be in the market for a new vehicle.

For the CRM data to be effective, it has to be complete and accurate. Email addresses are a great example of key data that is frequently overlooked. Be sure to capture or confirm each customer’s email address whenever you communicate with them. When you get in the habit of continually mining your CRM data and showing customers that you care about their needs, you can create relationships that pay off over and over again.

Drive Profits
Profitability is about getting the most profit from every transaction, and your DMS can be your most powerful ally. Take your inventory, for example. By combining pricing data with your specific transaction data and market data, you can pinpoint what inventory to sell and at what price point. Analyzing data in this way is paying off for Todd Wenzel Automotive, a group based in Grand Rapids, Mich. CFO Ron Ver Planck says Wenzel’s used-vehicle sales are coming back in a big way, and DMS inventory reports are playing a crucial role in helping management price vehicles and move them off the lot. “During the summer, our days to turn dropped quite a bit because we had the data we needed to price our used vehicles right for the market.”

Finally, analyze your F&I product data to identify what products are selling and to whom. You may find that prices need to go up (or down), or that you simply need a more productive selling strategy. A number of dealerships have recently discovered that an interactive presentation which puts the customer in charge, such as using an iPad to present your menu, can significantly boost sales. In the service department, your DMS data can drive bundling and pricing strategies by showing you which products usually sell together and at what price point.

With these areas of focus in mind, it’s time to mine your DMS. Mastering your data will make your business transparent, so you can make better business decisions that will ultimately lead to controlling costs, growing market share and maximizing profitability.

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Getting Started

Every dealer knows there is value that your DMS data can bring to your business, but many of you have never familiarized yourselves with the reporting functionality. Most systems offer robust reporting, from standard reports to ad hoc customizations. Standard reports span every department and offer high-level details as well as more in-depth information. Custom reports allow you to cull exactly the information you need, and they’re often easy to create. Most systems allow you to cut and paste data from a DMS screen into an Excel spreadsheet. Some allow you to import data directly from the DMS. Once in Excel, filtering capabilities make it easy to compare data.

It is also best if your system includes real-time data so you can see what is happening, as it is happening. “The best business decision is made on a daily basis,” says Heller Automotive’s Deborah Condon. “I can make a change right now that will affect my profitability. I don’t have time to wait overnight for my data to be updated. That lag costs me money.”

One of the most fruitful areas to dip into first is your month-end financial statement. The historical information it provides can be useful in projecting future results, highlighting seasonal patterns and pinpointing areas for growth. If you want to start controlling costs by examining operating expenses, begin reviewing your general ledger and accounts payable reports, for example. Many management systems offer monthly trend reports showing all of your general ledger accounts side-by-side; these reports are easy to review and offer a relatively simple way to pick-up on department variances. These are just two of many, many areas you can begin diving into today.

Don’t feel discouraged if your dealership has never or only minimally used your system’s reporting capabilities. Many vendors offer low-cost or no-cost online classes to get your employees up to speed. It’s worth investigating what your provider offers. A small investment of time or cost now can pay big dividends in the years ahead. 

Allan Stejskal is vice president and general manager of sales and F&I solutions for Dealertrack Inc. and an expert in dealer software solutions and implementation.
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