Almost all dealerships who have a successful streamlined reconditioning process do some sort of Daily Trade Walk with their sales and service teams. This gives everyone an opportunity to learn about their fresh inventory and begin the reconditioning and selling process immediately. Service begins opening repair orders, determining inspection types, pulling parts, ordering parts, and assigning technicians. Sales begins calling prospects who would be a perfect fit for this newly acquired unit. As we all know, inventory is a depreciating asset – every day you hold that unit, you are losing money and chipping away at the potential gross profit.
This crucial step is actually when the initial “visual” inspection begins. This inspection is different than what most people think of when we mention “inspection” of a pre-owned unit. This is not the full-service inspection conducted by a technician when they have the vehicle on the lift. The purpose of this walk-around inspection will be to proactively design the reconditioning workflow plan for that individual vehicle. We find that much of the reconditioning work that will need to be done (parts that can be ordered, and parts/tires that can pulled, etc.) can be identified during this process. A precise plan is made for this unit to achieve the most efficient workflow and get this vehicle to the front line more quickly. This can all start before the vehicle enters a technician’s bay.
So, why is it important to design the recon workflow up-front on the trade walk, versus waiting until the next day for the technician’s inspection?
Here are a few common scenarios…
- Often, when dealerships trade for a car, it ends up in a “bullpen”. The next day, if you’re lucky, the vehicle gets properly stocked in and assigned to a technician to begin the mechanical inspection. At that point, the technician will decide what work and services the vehicle needs, send this information to a manager, and await approval before the work can actually begin. In some dealerships, if the car needs little work done, they might have a certain threshold for a preapproved amount where manager involvement is not required. Usually, this is a dollar amount up to $500 for example. Some dealerships also add a stipulation that says the amount must not exceed a certain percentage of the margin in the vehicle.
- The ugly truth is that most stores are physically walking these internal repair orders/estimates to the manager for approval. Then walking approved repair orders back to the parts department in stacks, hours later, not as soon as the mechanical inspection is approved.
- Most dealerships have a daily parts cut-off time around 2:00-3:00pm. So, if the technician does not get the parts order to the parts department by that time, they will miss the cut-off time and must wait an additional 24 hours to get the parts ordered.
- Next, the Body Shop might have to order their parts (bumpers, fenders, windshields, etc.) that can take another 24-48 hours to receive before they can begin their work on the vehicle.
The above scenario can easily add 5-6 days to their Retail-Ready time because the dealership did not inspect the vehicle up front during a Daily Trade Walk and proactively order parts and begin the process. If your current average inventory age is around 30 days, cutting 5 days off your average recon time is giving you 5 more selling days and can equate to an additional two inventory turns per year.
At that point, you are selling on a 14-month calendar year versus 12 months. So, if you sell 150 used cars per month, you are looking at a potential 300 units per year growth in volume. Multiply that by your average PVR (per vehicle retail), reduced holding costs, additional service revenue and the numbers start to get exciting!
So, what is the key take away?
The Daily Trade Walk should be the starting point for every used vehicle, so you can create the proactive reconditioning plan up-front and get all parts ordered immediately. The used car manager, salespeople, internal service writer, internet manager and anyone that touches a used car should be involved. Implementing this process is proven to reduce your recon time, decrease holding costs, and improve margins.
Velocity Automotive delivers innovative software solutions that transform how dealerships share car buying information with their customers and create operational efficiencies in the reconditioning process to increase market readiness and gross profits. Velocity Automotive connects recon to retail with accelerating customer digital retail engagement, recon workflow management tools; and provides original OEM window stickers for maximizing buying strategy at auction. Founded in 2018 by Hugh Hathcock, founder of ELEAD1ONE, Velocity was built to help dealers streamline sales and service processes, improve communications, and maximize business opportunities. Read more at VelocityAutomotive.com.
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