Dialing in your recon processes to a three-to-five-day time to line (T2L) turnaround is like making money. In fact, it is about making money — real, measurable money that improves used car department profitability.
Dealers tell us they make $50 in cost, gross improvement and increased turn rate for every $1 spent to automate their reconditioning operations. For dealers reconditioning just 50 cars a month, the return on investment is $15 for every $1 spent.
Look hard elsewhere, but you’ll not find a better ROI for the entire dealership than putting your money to work improving reconditioning performance.
By using software to structure, measure, monitor and account for each step in this multi-faceted, multi-layered operation, recon runs smoother, faster and more profitable for the used car operation.
Calibrating recon to get cars from acquisition to sales-ready faster makes so much sense in today’s price-driven, margin-compressed and highly competitive used car market.
Dealers investing in reconditioning workflow software are able to tweak recon to shave five days or more from their cycle times. This savings translates into two additional inventory turns a year. At an average sale gross of $1,500 per car on a 100-car volume, two extra turns a year generates an additional $300,000 in gross.
T2L describes how fast, in days, it takes your recon shop to onboard cars in the DMS from auction or trade until they are sales-ready. In too many cases reconditioning shops — despite what the whiteboard or spreadsheet tracking techniques say and regardless of guesstimates — are taking far too many days to get this done.
On average, we’re seeing traditionally run shops taking from seven to 15 or more days to move cars through this pipeline. That T2L is killing used car profitability.
Your T2L goal should be three to five days!
One doesn’t merely fall into this sort of change-up that changes everything. If you want to pull waste, delay and cost out of how you recondition cars, first agree to put in the hard work this kind of reward will demand. Though this hard work won’t require picks and shovels, the treasure you’ll turn up will make this investment in your recon department and its team seem like a small sacrifice.
The first change it will ask of you is to get dialed in. “Dial in” is a mechanic’s phrase for tuning up a point-ignition engine. It means adjusting the ignition timing so precisely that the engine delivers maximum horsepower with maximum fuel efficiency. Recon managers getting the most performance from their reconditioning efforts have theirs dialed in.
When our process performance managers conduct a post-mortem on a dealership not enjoying these results, most often we find it’s because the calibration efforts discussed already get everyone dialed in and using the software correctly have not been done completely or done at all. We’re here to help make rapid reconditioning the universal recon best practice, so call us if your recon needs to be re-dialed.
Sometimes the problem with dealers dialing in is they don’t know how far out of time their recon engine is — and you can’t time recon’s ignition system without the right tools for calibrating the process. This is what recon workflow software does — it helps you calibrate the gap between your current recon cycle time and where Best Practices suggest you should be for your dealership, brand and market.
Modern vehicle onboard computer systems now regulate engine timing and a multitude of other performance metrics to make them extremely efficient, clean and fast. Rapid reconditioning software produces the same efficiencies, flow and speed from reconditioning functions.
Some dealers get all wiggy about this idea because it will challenge some deep-seated ways recon might be run in their stores. We used to run the used car department using gut feel and guesstimates too — until inventory-management software tools put measurement and analytical tools into the hands of our used car operators. Now, with this technology, cars are bought, priced and sold using market pricing strategies that reduce aging and help dealers sell more cars more profitably. Calibrating recon may seem an extension of inventory management tools but in reality, calibrating recon and driving delay and cost out of it causes margin potential to flow into inventory management to optimize its effectiveness.
Here’s what must be calibrated:
- Time to Line: Work to eliminate delays, redundant processes and lost or misplaced cars
- Holding Cost: A standard calculation that states each day you own a vehicle costs the dealership on average $40 per day. On recon T2L alone, a shop processing cars five days faster than another is accruing $400 less holding cost margin erosion per car. That’s $400 of lost margin before the car even gets to the sales line!
- Inventory Turn: More turns per year translates to more cars sold, also generating more profitability from service, parts and F&I.
- Vehicle Location: Busy dealerships misplace cars all the time. They’re pulled out of internal repairs to await a part. They’re unloaded and forgotten on the back lot. A sublet forgets to let you know the glass replacement is completed and so the car sits. Every day a car is out of the recon cycle another $40 on average accumulates onto its holding cost burden to erode that car’s gross when finally sold.
- Employee Focus: Employees who know their performance is being monitored tend to work smarter and accomplish more. Recon workflow software having built-in accountability functionality helps you track every step of the recon process — and who’s doing what when — so cars don’t linger and your staff keeps their part of the workflow moving as designed.
If you’d like to know more, I wrote the book – RECON T2L, The Starting Line for Reversing Margin Compression. Get a copy here.
About the author: Dennis McGinn is founder and CEO of Rapid Recon, the industry’s most advanced time-to-market workflow tool for auto dealership reconditioning and used car departments. Read more reconditioning best practices in his latest book, RECON T2L, The Starting Line for Reversing Margin Compression. Visit www.rapidrecon.com