On today’s show, we’re excited to talk more about the recon process with Dennis McGinn, founder and CEO of Rapid Recon, and Jon Burkeen, the corporate velocity manager at Hudson Auto Group out of Charleston, South Carolina.
Jim Fitzpatrick: Thanks so much for joining us in the studio, gentlemen.
Jon Burkeen: Thank you.
Jim Fitzpatrick: This is great.
Dennis McGinn: Thank you, Jim.
Jim Fitzpatrick: Dennis, I’m going to let you start here. You’ve been on the show before. We’ve done many shows about the recon process and how important it is to make sure that cars are getting to the front line in time. Talk to us about that. Bring us up to date as to what’s going on. Then we’ll get into Jon’s role and how that has kind of changed things.
Dennis McGinn: That’s great. Thank you. I found out about this a few months ago that Hudson have 18 stores. They have Rapid Recon in most of their stores, I think maybe all of them. That they had decided they were going to create this role at the group called velocity manager. Jon can tell you exactly how that went. Then they had put velocity managers in all the stores. But, they weren’t necessarily car people. They report to the general manager. I thought, “Well this is a really interesting because ultimately it’s about process.” A lot of times I think that the people in the car business know too much when the job is just to take some of the kinks out of things that are going on.
Jim Fitzpatrick: We’re our own worst enemies, huh?
Dennis McGinn: Yeah. Rather than have somebody that’s maybe paid more, you could get a process person in there. Their job is just to get things tied together, expedite things. I was really interested in that. Then it fits right in with what we’re doing with time to line, T2L, as we characterize it, which we are now evolving into a turn tool. I mean that’s really what it is. By taking time out of your time to get the car ready to sell, that’s actually driving your turns now. There are tools out there in the industry, of course via auto and [Dale] stuff.
Jim Fitzpatrick: Yeah. It’s the best.
Dennis McGinn: It’s just terrific stuff. They’ve just created a really good backdrop for the used car managers to replace the cars, to provision their vehicles. Time to line is really the first part of that. Managing your time to line is really getting that car into the sales process as fast as you can. Between the time to line and the average days the cars are in stock before their sold, that’s really your turn agenda.
Dennis McGinn: That’s kind of where I am now. I’m really excited about what Hudson’s doing because it kind of helps to focus things around both the front-end, on the back-end. The front-end I feel is time to line. The back-end is provisioning.
Jim Fitzpatrick: Jon, brings us up to speed. What is a corporate velocity manager? I know the dealers that are watching right now say, “Wow, that sounds like a new position that we don’t have in our stores.” It’s not one that I’m familiar with either. Kind of give us the elevator pitch, if you will, as to what that role is all about.
Jon Burkeen: First, we’d just go to the velocity managers. Their role is to speed things up, to focus on the process, to speed up the process and compress the cost of that process of reconditioning cars. Their job is to go really, really fast. My job is to support them.
Jon Burkeen: What we decided to do was to have this position to, from a 30,000 foot view via Rapid Recon, was to go in and monitor these things. How quickly their turned? How quickly their time to line? Their average days in recon, cost, all of that stuff. My job is to see the anomalies and try to help.
Jim Fitzpatrick: Before Rapid Recon came into your life or your dealer’s life there, what kind of a turn were you looking at on average?
Jon Burkeen: Oh, my word. I don’t know. You don’t know.
Jim Fitzpatrick: You don’t know.
Jon Burkeen: You could pretend that it was three days like everyone did. Or you could be honest with yourself and say, “It’s way too much. We need to do something different.” I think that’s brings awareness. The Rapid Recon has brought awareness to what we’re doing so we could do a better job.
Jim Fitzpatrick: Is it safe to say that a turn could be as long as two weeks?
Jon Burkeen: Absolutely.
Jim Fitzpatrick: Or maybe longer in some cases?
Jon Burkeen: Absolutely. Absolutely.
Jim Fitzpatrick: Sometimes the dealer principal, the GM, the staff isn’t aware of it. It gets by you. You realize that the vehicle is sometimes 30 days old in just the first week. You’re looking to get rid of the vehicle already, right?
Jon Burkeen: Correct. Correct.
Jim Fitzpatrick: That’s a major problem.
Jon Burkeen: It is a major problem. You don’t know what’s been done.
Jim Fitzpatrick: How has it changed your world inside the dealership when everyone is communicating with one another on the recon process?
Jon Burkeen: It’s changed dramatically. It’s changed things for the better, obviously. It’s changed things so that we know what we’re doing. We can monitor. You know the car guy saying is, “You can’t manage what you can’t measure.” We’re being able to measure every step of the way, every process. Even if it’s bad, we can see it and try to fix it.
Jim Fitzpatrick: That’s great. That’s great. When a program like this is newly installed in those first couple of weeks, do you get any pushback?
Jon Burkeen: Sure. Sure.
Jim Fitzpatrick: You do? The key is to say, “No. We’re committed to this. Through the training from Rapid Recon, everything will work out.” Right?
Jon Burkeen: Right. Nobody likes change.
Jim Fitzpatrick: Right, exactly.
Jon Burkeen: Nobody likes change. But what we’ve tried to do is go in and take what we know to be true. Take the processes we know that work with their processes and say, “Look here, Mr. General Manager. We’re going to try to do this the best way we can with your process and what we feel like is best.” So that we’re not going in there and changing everything day one. We try to help them see what we’re doing, but also use their own process.
Jim Fitzpatrick: Before a technology like this, we were really at the mercy of everybody just kind of throwing their hands up in the conference room or around the weekly meetings with the GM to say, “How come we can’t get these cars out quicker?” These car managers say, “I bought the car 10 days ago. It’s still caught up in recon. I need that car out there.”
Jim Fitzpatrick: Sometimes the vehicle will make its way online. All of a sudden now you have a whole new set of problems because you’ve got the sales people and the consumers coming in, “Where is this car that I want to take a look at it?” Everybody looks foolish. Don’t they?
Jon Burkeen: Sure.
Jim Fitzpatrick: You bring down the credibility, probably going to affect the gross profit. Certainly going to affect the interest if in the event that the dealer is flooring his or her used car operation.
Dennis McGinn: I have another experience that just happened that I’d maybe like to just share. I love to just kind of drop in and see people in some of the dealerships. Because a lot of times, trying to set an appointment with them is impossible. Dropping in to see them is great. I was in Seattle a week ago. That’s where I picked up this cold. There’s a Lexus store in Bellevue. I knew the store. They have had our software in for quite a while. But, they weren’t the best. I could see from the analytics that they were still trying to figure some things out. But I dropped in. I said, “Where’s the general manager?” He was at the desk. I walked up to him. I hadn’t met him before.
Dennis McGinn: I gave him my card. He goes, “Oh, Oh yeah, okay. I’m so glad you’re here.” He said, “I am so upset.” He said, “My time to line went from seven days to 12. I’ve been beating up on my used car guy. My turns are all shot now.” His turn agenda was shot. I thought, “Okay, this registers with me.” Of course, he said, “I’m down a couple of tacks. We’ve got a backup [inaudible 00:00:08:40].” He said, “The reason I knew things were off track, I sold half the number of used cars last week that I should have sold.” That was important. He was trying to figure out, okay, he knew he was off track. How am I going to get back into it?
Dennis McGinn: He knew what he needed to do, but that’s the thing, no surprises. The thing that drives people crazy I think in this business more than anything else, is surprises.
Jim Fitzpatrick: There’s no question.
Dennis McGinn: That was kind of fun. I said, “Okay, we’re going to help you work this through and send some folks in there to kind of smooth things out.”
Jim Fitzpatrick: It’s amazing that, here we are in 2019, that this is an area that has basically been left untouched for so long. For the amount of time I was in the business for 28 years prior to opening up a media company and advertising and such, we never had any kind of technology that focused on this. It was just pound your fist on the table and say, “Those cars got to get out.” The fixed ops manager would pound his hand on the tables. Does this sound familiar?
Jon Burkeen: Sure.
Jim Fitzpatrick: “They got to get out. Well, we can’t get them out in time.” Or, “We’re waiting on parts,” or this and that, all different kinds of reasons. But we didn’t have any kind of technology like this to actually track the process and hold everyone accountable.
Dennis McGinn: That was back when people thought the real cost of the car being there was just the interest on the cost of the money. That was a delusion by itself. But now we know it’s 30 to 70 bucks, 35 a day. That goes right off the bottom line.
Jim Fitzpatrick: If you’ve got a high-volume dealership, even if you’re getting out a couple 100 cars a month, new and used, you’re getting out 100 used, which is very common, it makes a difference there. That’s a store typically that really needs every single nickel they can get their hands on. Because they don’t have the huge gross margins among so many cars. It works for a small dealer. Also works even better for a larger dealer.
Dennis McGinn: Sometimes it seemed more important for a small dealer. One car can make a big difference for a small dealer. Sometimes people say, “I’m not big enough to really do that.” But I mean we’ve got lots of dealerships that are selling only 35 or 40 cars a month. It’s really important to them. I never really thought of it that way.
Jim Fitzpatrick: No. It’s true. It’s true.
Dennis McGinn: It’s all scale.
Jim Fitzpatrick: What impact does something like this have on the sales department? The car hits the internet or they see it get pulled in or the used car manager gets up in their weekly meeting and says, “Here’s all the cars that I bought.” Right away all the sales people run to the phones or they run to their text message, “Hey, the car is in. We got the vehicle that you’re looking for.” Then it goes into the abyss under the old program. I would imagine this has got a real positive impact on the sales department.
Jon Burkeen: It’s huge. I don’t think you can quantify it. But it’s knowing where the car’s at at all times. Especially on bigger lots with lots of cars. You know, the 30, 40, 50 car lots where it’s still great. It’s still great. But for the bigger stores, you know where they’re at. You know where the cars are located. There’s a scan tool.
Jon Burkeen: You can scan the car, geolocate the car. You find the car. You know where it’s at. You mention to the customer, “The car’s here. It just got out of detail.” How do I know that? Because it’s timestamped. How do I know that? Because I’m watching. I don’t have to get up and go find the car. I know where the car is at. I think it’s huge in the sales part of the store just because it’s gives us an understanding where everything is.
Jim Fitzpatrick: This is a no-brainer for a dealer. For the dealers that are watching, it’s certainly something that you really need to learn more about. Because if you don’t have Rapid Recon taking care of your recon, then you’re leaving money on the table in a big way, aren’t you?
Jon Burkeen: Absolutely.
Jim Fitzpatrick: While you’re here, let me talk to you a little bit about the industry. What do you see in the balance of 2019? How are we going to finish the year?
Jon Burkeen: I hope well. I hope strong. We’ve talked a little bit about this. I think the only way for us to finish strong is to focus on our reconditioning. I mean sales are sales. In the age of transparency, everything’s on the internet. Everybody’s cars on the internet. Everybody’s prices, CarGurus. That’s not a plug for CarGurus, but I’m just saying that everything’s out there. You can see everything. We can’t increase our prices.
Jim Fitzpatrick: This is true.
Jon Burkeen: I think the only way to do it is to compress our cost. Whether it’s buying cars at auction, buying cars, trades. But in the shop, I mean we’ve got to compress our cost on reconditioning. If not, we’re going to lose.
Jim Fitzpatrick: Where does Hudson currently get most of their vehicles, the auctions?
Jon Burkeen: Everywhere, private sellers, auction, trades.
Jim Fitzpatrick: Buy them right off the road.
Jon Burkeen: Everywhere. We have a buy team of eight people. We’re buying 700, 800, 900 cars a month.
Jim Fitzpatrick: My gosh. You got to have a system like this in place.
Jon Burkeen: We do.
Jim Fitzpatrick: You can’t afford to have-
Jon Burkeen: But also too, you can’t measure the transportation. You’re buying that many cars, cars come in, the CR was wrong or something. You’ve got to have a way to monitor everything. Not just oil changes and tire rotations, but transportation, arbitration. You’ve got to be able to manage front to back the whole thing. Because if you don’t, there’s going to be a crack somewhere. A crack is not good.
Jim Fitzpatrick: Outside of the recon issue, which it sounds like you’ve covered already and gotten that taken care of, what other challenges do you see in the industry as we move into 2020?
Jon Burkeen: Cars, just not getting enough, not having enough.
Jim Fitzpatrick: A nice problem to have.
Jon Burkeen: It is.
Jim Fitzpatrick: Better that than customers?
Jon Burkeen: That is correct. But I think just finding sources for cars is a huge, I’m not going to, it’s a challenge.
Jim Fitzpatrick: Sounds like things are running pretty smoothly over at Hudson Auto Group. Kudos to you-
Jon Burkeen: Thank you.
Jim Fitzpatrick: … for making that happen and your other velocity managers. I love that title, corporate velocity manager.
Jon Burkeen: Thank you.
Jim Fitzpatrick: I really wish I had one of these-
Jon Burkeen: Thank you.
Jim Fitzpatrick: … when I was running a dealership. Dennis McGinn, founder and CEO of Rapid Recon and Jon Burkeen, corporate velocity manager. Thanks so much for joining us.
Jon Burkeen: Thank you.
Dennis McGinn: Thank you. I appreciate the time that you’ve taken to be with us here. Thank you.
Jim Fitzpatrick: Great. Thanks for joining us.
Thank you for watching the official new source of the retail automotive industry. This has been a JBF Business Media production.