How to Improve Your Recon Turn
Dealers are using time-to-market to improve reconditioning processes, reduce costs, and maximize profits on used-vehicle sales.
July 2016, Auto Dealer Today - Feature
Sometimes “best guesstimates” are fine, but for determining reconditioning efficiencies, only hard, data-based facts really matter. When recon is managed and operated by the numbers and subject to accountable processes, it will push more profit into your used units.
Most dealers believe their recon runs a healthy three- to five-day cycle. In reality, you are more likely running at six to 10 days. That’s a big difference — in getting vehicles ready to sell and how this longer cycle adds up daily holding costs that erode sales margins.
If your goal is to reduce cycle time, it’s mandatory you work from a known baseline. Workflow techniques can identify this starting point. Whatever your baseline is, it can be halved. In dealerships that practice time-to-market workflows, the general manager champions a more efficient and more communicative recon process. The GM sets the tempo and holds key managers and staff accountable for achieving three- to five-day time-to-market.
When you get vehicles frontline-ready a highly attainable 2.5 days faster, you’ll add one additional inventory turn per year. A five-day improvement means two extra turns a year. When you can achieve this recon time improvement, service and parts are kept busier and more profitable, and you can sell more cars! Here’s how it is done:
1.Cut Costs, Add Turns.
With each unit you acquire — whether through trades, private purchases or auction — a holding cost comes with it. There is a share of the floorplan, advertising expenses, and other operating expenses. After compiling numbers from its 20 Group numbers, NCM Associates calculated the average figure at $32 per vehicle, per day; that figure is higher for luxury brands.
It is eye-opening to see your holding costs in black and white. A dealer who shaves six recon days off a 100-unit monthly recon volume will save $19,200 a month — that’s $230,400 a year!
2. Improve Communication and Flow.
Reduced time-to-market doesn’t happen without first laying aside spreadsheets, sticky notes, or whiteboard calendars. None will give you the information you need, so they eventually fail. They are static and not easily shared among the crew, including sublets like dent repair vendors.
On the other hand, workflow software is highly sharable and vastly improves communication between staff. A shop using this software will be better organized, with each step in the process flowing more smoothly. It also helps establish, measure, and monitor processes to help management identify and address areas that still need improvement.
3. Create a Time-to-Market Culture.
Dealerships who take time-to-market by the horns make it core to their business — and consistently enjoy a three-to-five-day cycle. When introducing a time-to-market culture, thoroughly explain the idea your crew and sublets. Explain how a disciplined approach will remove uncertainty and doubt from their position, streamline and improve communications, and lift productivity for those who are or should be compensated on the outcome.
Finally, as you consider implementing a time-to-market recon culture, keep the following pointers in mind:
- Pull everyone together to look at live systems. Ask vendors for demos of their products and consider the various systems’ flexibility to work within your processes and make them better. Solicit feedback from everyone in the process and encourage them to make suggestions.
- Talk with dealers who are already practicing time-to-market. 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 you master your time-to-market principles and practices. This professional can also help you determine a starting point within your existing recon processes, and then create a roadmap to improvement.
- Assign ownership of every step of this new workflow. Each person whose job touches recon must follow a written and clearly defined plan for their function and its relation to the other steps. Make these individuals 100% responsible and accountable for ensuring their function is completed and no cars are in the wrong place.
- 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. Best practices dictate that combination of mechanical (including inspection and parts hold) and detail must be two days or less. The body shop will likely add another day to 35% of your cars, taking 4.5 days on average. Work out a system for photographing inventory so you can market the vehicles online immediately. 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 that work to get done.
- Get training on the time-to-market software you use — bringing them onsite to teach your staff how it works in their own environment — and continue to reinforce best practices through team meetings and performance reviews.
- Use report data that measures each step within the recon process to establish new targets for improvement and monitor and forecast progress.
When a time-to-market objective is driven by a committed and process-oriented dealer or general manager, reconditioning can achieve remarkable gains in efficiency that improve gross sales, increase inventory turn, reduce tension between departments, and drive an overall healthier dealership.
Show me a dealership in which the used-car operation hits on all cylinders, and I’ll show you a well-run, profitable operation. A time-to-market culture is a distinguishing difference.
Dennis McGinn is founder and CEO of Rapid Recon, a workflow tool for reconditioning and used-car departments. Contact him at firstname.lastname@example.org.