Second in a series on how to evolve the reconditioning department into a profit center
Continuous process improvement, an efficiency discipline learned from manufacturing, should drive the modern auto dealership. A good first place to implement this culture is in the reconditioning department.
The way a dealership gets cars frontline faster is to break down reconditioning into a continuous flow of work managed by the clock. This practice, known as Time-to-Market, will shave five or more days off your current recon timetable.
Instilling a Time-to-Market workflow culture in your dealership is the foundation that enables and supports continuous process improvement that helps identify and eliminate or reduce costs and add value to each step of reconditioning.
- Time-to-Market describes the total time in days it is taking the dealership to move vehicles from the moment the dealership acquires them at auctions, as trades, or as private purchases until they’re sold.
- Continuous improvement means apply disciplines to recon practices to continually identify ways to remove waste, reduce time, and improve employee satisfaction within all departments directly involved.
- Centralized recon requires dealer groups of at least two rooftops located within a 40-mile radius. The center has its own leadership and staff, but reports to and is governed by the fixed ops, used car, and recon managers.
Achieving a 3-to-5-day Time-to-Market is critical. If the goal is to retail more units at the magical 30 days, you can’t afford to have half of that time burning up in recon.
When asked, many recon and used car managers will state they’re recon process from acquisition to frontline is three to five days. However, when reconditioning workflow software measurements are applied to their processes, they’re shocked to learn the reality – their existing processes require from seven days to up to 12 days (and someimes longer).
Any delay to get vehicles to the frontline erodes sale gross.
This erosion results from what we discussed in the last article in this series, holding costs. This is a per day per vehicle cost the dealership holds from onboarding to retail. The cost includes each inventory unit’s share of floor plan, advertising, and other operating expenses. NCM Associates notes this figure to be $32 per vehicle per day. It is higher for luxury brands.
Reduce holding cost and more sales gross flows to the bottomline.
Who does what, when?
A most critical requirement of a Time-to-Market recon shop is accountability. Every team member must consistently perform their job thoroughly and quickly – with quality outcomes every time. The right Time-to-Market strategy identifies who does what and when – and makes their accountability to their assigned tasks, task outcomes, and productivity essential.
This accountability culture flows from a GM committed to creating a modern recon department down to vehicle runners, sublets, and key managers.
For a typical reconditioning shop, those steps, responsibilities, and clock times look like:
|Who||What||Clock Time Best Practice|
|Advisor & Technician||Inspection, RO, Mechanical||4 hours|
|Used Car Manager||Approval||Under 15 minutes|
|Dispatch-Advisor||Shop Loading, Project Management||1 hour|
|Detail||Cosmetic detail, Delivery Prep||4 hours|
|Digital specialist||Online Photos/Web Upload||4 hours|
Holding firm to these time practices provides for body shop and other sublets, and quality checks for off-brand and warranty/recall vehicles within the 3-to-5-day Time-to-Market.
As we noted last month in the first article of this series, another way to shave recon time is to establish pre-approved repair “bucket” costs. Base them on make/model and mileage. Pull service histories whatever buckets you typically recon – say, vehicles under 15,000 miles, under 30,000, 30,000 miles to 75,000 and above. This practice alone will shave off hours if not days from ordinary recon times.
Vehicles frontline just 2.5 days sooner increases inventory turn by one. A five-day improvement means two extra turns a year.