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Tag Archive: Auto Dealer

Steve Hall

Why Dealers Should Be In Express Service

Express Service

Dealers know you must provide fast, convenient, and competitively-priced service in order to retain your customer base.  They also know that oil changes and light maintenance are the most requested service items by customers.  Knowing this, why do dealers continually fight express service?

I’ve heard all the excuses: it hurts my hours per repair order; it hurts my gross profit percentage; it hurts my effective labor rate; I can’t make any money in express service; the list goes on and on.  Shouldn’t we think about it differently?

Isn’t it logical that if a customer comes to you for express services, you will have an advantage to getting the remainder of their maintenance and repair work?  Customers generally do business with people they trust.  If you start to grow that relationship from day one, when the only things that are needed are express-types of items, won’t you have the trust of the customer when the “real” repairs come into play?

We need to realize express service is the gateway to real profits, and if done properly you can make plenty of money along the way.   After all, how do you think all the mass merchandisers and independents stay in business?

Let’s look at it this way, have you ever taken a low profit (or no profit) deal on a new vehicle?  I’m sure that every dealer has, many times.  Why do you do this?  Often times it is because you are getting a trade-in you feel you can make money on.  Other times it is so you can move a unit off the lot to reduce your inventory costs, or maybe to help you reach unit bonus levels for factory incentive money.  Possibly, it was just so you would have an opportunity for the F&I department.  Whatever the reason you decided to take the short deal, you have a plan.  The loss of front-end gross on that unit gave you opportunities to make more money in the long run.  You had to make the deal to gain all of the other benefits.

Can you relate this thought process to express service?  We must retain the customer in order to get all of the long-term benefits.

But express service has an added benefit.

If properly structured, you will make money in express while retaining your customer.  That is a win-win, both short- and long-term!

Take a few minutes and examine how much money is spent on a single vehicle over the lifetime of that vehicle.  Include average warranty work, recalls, oil changes, maintenance, tires, brakes, breakdowns and everything else that happens eventually to every vehicle.  Once you add all of these dollars together and look at the complete picture, you really see what the customer is worth over the lifetime of the vehicle.  Now you must develop your plan to make sure that customer never goes anywhere else, and express service has to be part of that plan.

Let’s look at express service for what it can and should be, a profit center with long-term financial benefits.  Remember, customer retention is a good thing.  Get fast, get efficient, get competitive and get profitable!


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Permanent link to this article: http://blog.ncm20.com/2015/02/why-dealers-should-be-in-express-service/

Scott Norman

What Should My Controller Be Doing?

calculator-plusThat is a question that arises frequently in NCM 20 group discussions. To answer completely would take several articles; however, the first and most important answer to that question is, “Monthly reconciliation of your Balance Sheet accounts.”

Your Balance Sheet, the front page of your operating statement, shows accounts listed as either Current Assets or Current Liabilities as well as Long Term versions of Assets and Liabilities. The Current portions should be supported with documentation that supports the balances they contain, thus verifying each account’s accuracy. There is no reason you should not have a schedule to verify accuracy or timeliness of each of these accounts. Monthly reconciliation of each account may require you to physically touch each asset or you settle it with a simple reconciliation form.

Following is a quick checklist of Current Assets and Liabilities that should be corroborated at the end of the month.

CASH – Starting at the top, everyone should reconcile their Bank statements monthly. For internal control purposes the dealer should physically receive the statement and the reconciliation should be done by someone other than the person making deposits and writing checks. Currently many clients perform a daily reconciliation using “positive pay” and a download from their bank. Using a schedule, you can quickly see which checks have cleared and if there are any problems with deposits.

CONTRACTS IN TRANSIT – As a scheduled account, this should be easy – Either the contracts have been sent for collection or they are still in the office. Can you verify where each contract is? Are there any contracts over seven days old? Do you log any returned contracts?

VEHICLE & FACTORY RECEIVABLES – These schedules are aged for a reason!  Are there amounts due that are so old as to be uncollectible? Even though this account is scheduled, your assets may be inaccurately stated if they contain uncollectible balances. Is there documentation on all balances?

SERVICE, PARTS & BODY SHOP RECEIVABLES – Do you have separate accounts for each Department so the Managers can track and collect their responsibilities? Are past due receivables being reviewed and a reserved set up for their potential un-collectability? The ONLY Body Shop Receivables should be from Insurance Companies with which you have a DRP or Pro Shop Agreement!  All other Customers need to pay by Cash or Credit Card BEFORE Release! If you do write-off a balance in a vendor’s account, do you keep track of that amount? Consider a zero-balance schedule, controlled by the vendor number and the offset control number is the year written off or Department written off against.

WARRANTY/SERVICE CONTRACT RECEIVABLES – A warranty schedule will help you quickly review this account. Do you have any claims with an outstanding balance where only partial payments were made? What about the remainder? Are there claims over 30 days? Can they all be supported and justified?

HOLDBACK RECEIVABLES – Again, as a scheduled account this should be easy. Depending on when the holdback payment is due the balance will fluctuate, but there should never be any holdback receivable older than the last payment. Since the factory pays you by VIN, shouldn’t this schedule be controlled by VIN? Is yours controlled by stock number?

FINANCE RESERVES RECEIVABLES – Side-by-side schedules are useful when you have numerous finance sources. This of course implies that you have a separate GL account for each finance source that pays you a reserve, and you should. If your bank notifies you about the reserve amount when the deal is funded, adjustments should be made at that time by the appropriate office personnel, not F & I staff. Shortages/overages should be reviewed with the Finance Manager to determine why the difference between bank and book.

VEHICLE INVENTORIES – Are both new and used inventories verified by physically touching each vehicle?  No cheating by handing the manager a list. They should start with a blank sheet of paper and list each stock number as they come to the vehicle. Also, this is the perfect time to verify that all proper labels are affixed. Do you verify for each vehicle on the inventory schedule that you either have for new inventory a MSO/CSO, or for used inventory a title or copy of a current payoff check? Are Dealer Exchanges/Trades in inventory floored? See Floorplan Notes Payable below.

PARTS, TIRES AND ACCESSORIES – Here, a schedule won’t do, so utilize a monthly reconciliation form to track variances. Your Parts Management Report will never reflect the same balance as the General Ledger. There are too many variables – work-in-process, parts returns, un-posted invoices, etc.  To account for the variance each month complete a reconciliation form. If you need a form, please call the NCM Institute at 866.756.2620. Use your system’s management reports to track aging or inactive inventory.  A low days supply may not necessarily mean your inventory is clean and usable. What about your Special Order parts bins, are they filling up?

SUBLET INVENTORY – The schedule should be compared to your Open Repair Order report. Any discrepancy should be handled immediately. If you have credit balances, determine why you are not receiving or posting the vendor’s invoices on a timely basis.

WORK IN PROCESS –  This account can either be scheduled and compared to the Open Repair Order report, with variances being researched and adjusted, or a simple reconciliation form can be completed and variances researched and written off, with the Manager’s approval. The Service Open R.O. list should be reviewed weekly with no R.O. over three days without explanation, none over five days without “family history.” In Body Shop, five days, two weeks. A Work-in-Process schedule is recommended if you frequently have to write off large balances and it cannot be determined what is causing the discrepancy.

BODY SHOP MATERIALS – A physical of the Body Shop Materials should be done on a monthly basis by the Manager. To reconcile to the General Ledger Balance you must estimate the material used on Open Repair Orders, add that to the physical balance and reconcile the number to the General Ledger Balance.

PREPAID EXPENSES – Documentation should always be available to corroborate the balance in these accounts. Only those expenses where the benefit extends over more than one month should be set up in this account.

FIXED ASSETS – Annually, you should physically inventory your capital assets to verify the equipment/furniture is still in use and can be accounted for.

ACCOUNTS PAYABLE – All debit balances on this schedule should be researched. One useful way of monitoring this schedule is not to post current month’s invoices until you’ve paid most vendors. When the schedule only has a few balances from the previous month it is easy to spot irregularities.

FLOORPLAN NOTES PAYABLE – This account should be on a side-by-side schedule with the appropriate inventory. Any time there is a balance in one column and not the other, the discrepancy must be researched. Either you have unfloored inventory or a floorplan payoff has been missed.

MISC. PAYABLES – Tag, Vehicle Payoffs, Service Contracts, etc. should all be scheduled, current and verifiable.

TAXES – All taxes should be sufficient to cover the liabilities and paid in a timely manner. Verify by comparing any return or payments to the month end balance.

ACCRUED PAYROLL – This account should reflect payroll due for unpaid time at the end of the month and is usually reversed at the beginning of the next month. Accruals for monthly commissions should have documentation to confirm the appropriate amount is being accrued.

Verifying all Balance Sheet Accounts involves cooperation from all departments and should be taken seriously every month. Dealers and managers often do not grasp the significance of the balances in these accounts. The question we should be asking ourselves when we see a balance in an account is, “Is that a reasonable number?”

One last thing, does your CFO prepare for you each month a Cash Flow Statement? In Accounting classes this goes by several names such as Sources and Uses of Cash. It is a report that verifies the change in your cash balance for an accounting period by showing you where cash was used or cash was generated as it shows you the changes in the balances of the accounts on your balance sheet.

Historically there has been little training in the understanding of not only the Balance Sheet, but the rest of the operating statement itself. NCM holds Principles of Financial Analysis training where all of these accounts and topics are covered. Click or call the NCM Institute for more information at 866.756.2620.

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Permanent link to this article: http://blog.ncm20.com/2013/09/what-should-my-controller-be-doing/

Loyd Rawls

Bigger versus Better: Business Growth and Succession Planning

Business growth is important to succession planningSuccession planning is all about the long-term continuation of success through the next generation of owners and managers. Discussions of long range success generally bring up the subject of growth. This is a natural discussion because inherent  with the concept of being successful is the assumption that successful businesses are vibrant and “growing” businesses. Furthermore, there are many who believe that succession and growth are synonymous. This belief is based upon the assumption that if you are preparing for the continuation of success there must be growth because competition is increasing and margins are decreasing.

Predominantly, growth is needed for succession because assuming the business has the same margins in the future as it does today, it must grow if multiple successors are going to achieve the attractive lifestyle of the current owner. As I’ve said many times, the first succession imperative is “teamwork.” I now contend that the second succession imperative is “growth.” The status quo is not an option for the future. In order for a business to withstand the challenges associated with the transition of the ownership, leadership and management, there must be growth.

Growth from my perspective can come in two forms; bigger or better. What I have witnessed in my many years of working with business owners is that their fundamental assumption of growth is “bigger.” Bigger involves expanding operations via opening new outlets, starting new businesses or buying businesses. However, I contend that the first and most important growth objective for those seeking succession is not “bigger,” it is “better” — as in increasing volume, efficiency, net profit, management teamwork, management  bench strength, etc. At the risk of sounding crazy, I contend that “better” is the foundation upon which a prudent business owner pursues “bigger.” The low hanging fruit of growth is in “better”. The freedom from the burden of additional debt is in “better.” The peace of mind that working capital is sufficient to withstand unforeseeable challenges is in “better.”

Reciprocally, I contend that bigger and better are not good teammates. Bigger does not naturally make you better. In fact, bigger can dilute management disciples and distort long-standing core values and processes. Bigger reduces working capital or increases debt. Bigger creates a level of stress that generally creates a distraction from the business basics.

No doubt there are benefits of bigger including economy of scale, greater profits, reduced market vulnerability, reduced product vulnerability, more excitement and more opportunity for successors to show what they can do. However, as Howard Hughes discovered with the “Spruce Goose,” bigger is not always better.

GMEPbanner

Permanent link to this article: http://blog.ncm20.com/2013/08/bigger-versus-better-business-growth-and-succession-planning/

Jeremy Anwyl

What Drives Great Success?

surefire-pathway-to-increased-profitsI have been doing lots of flying recently. The travelling is rarely fun, but the meetings I have been having with dealers usually are. You’d think that dealers would be pretty happy these days, and that generally is the case. Sales are looking good and the dealer count is down — seems a surefire pathway to increased profits.

Despite this, there are some conversations that take a different turn. Sometimes, a dealer is focused on increased regulation, competitive discounting, bullying from manufacturers, (think stair-steps and facility mandates), employee turnover — the list can be lengthy. Meeting with these dealers can leave me drained. But then I run across a dealer who is completely different. These meetings can run all day, but feel like they lasted an hour. The dealers tend to be optimistic and thoughtful. Most interestingly, these dealers have what I call an “itch.”

They acknowledge the competitive pressures all dealers face. Despite all these, they are successful, but still not satisfied. Their “itch” drives them to try new things, push different boundaries; not in the simple pursuit of profit, but to find a way of doing business that is dramatically better.

I have been thinking along these lines for the better part of my career as well—so we have lots to talk about. What anchors these talks is the opportunity articulated in my last post where I noted there are a few dealers around the country whose performance is head and shoulders above what we would normally consider successful. These stores draw from very larger geographic areas. They are stable. And perhaps the biggest twist is that their gross profits are higher than average. (Proving that really high volume doesn’t have to mean low—or no—profit.)

Very simply, the opportunity is for more “typical” stores to achieve this heightened level of success. And with the opportunity being so huge, the wonder is that every dealer is not working to achieve it — especially when we realize that what these stores are doing is actually not that hard to figure out.

It is really only three things:

First, the dealers have identified the things that a large number of consumers really, really value when buying a vehicle. We covered some of these in my first post; things like efficiency and respect for their time. A feeling of confidence that the dealership’s pricing is fair. A dealership point of contact who has the customer’s “back.” (Someone the customer feels they can trust.)

Second, the dealers have developed processes that consistently deliver on these features. Consistency is the key; meaning that these experiences are delivered every day, to every customer.

Thirdly, the dealership efficiently communicates to the marketplace to build demand and expectations around the aforementioned experience.

A big part of what I am describing is really the building of a brand — at least in the way I think about brands. Valuable brands are built from a set of expectations, or promises about a product. They are also trusted or credible, meaning there is little doubt the expectation will be met. While brands can be influenced through advertising, by far the best way to build a brand is through word of mouth.

These three steps to success are easy enough for me to write about, but I have to also acknowledge they are devilishly tricky to implement. They start out easily enough — understanding what consumers value is no mystery. (Dealers can simply ask their customers, or look at the decades of research in this area.) And it is not that hard to design an experience that responds to these needs. It is the consistency part where things start to get tricky. Sticking to a process is not something most dealerships are good at. Salespeople like to do business in their own way. Turnover also undermines consistency. Perhaps the biggest obstacle is the pressure to hit a number that encourages managers to stretch for a deal that really should have been passed on.

Think about that one for a minute — passing on a deal is really, really hard. But sometimes it is the right thing to do; first, because of the need to deliver the same experience to every customer, with no exceptions. Second, if the dealership did its homework when designing their consumer experience, it will be highly valued by many consumers, but probably not work for some others. You’ve heard the expression “You can’t be all things to all people.” As it relates to branding, you shouldn’t even try. For example, let’s say you have designed a sales experience around fair prices and an expedited sales process. This might be valued by 80% of the market, but the 15%-20% of the market who obsess only about the “deal” will not be impressed. Instead of undermining your credibility with the 80%, why not leave the deal-obsessed to your competition?

Today’s super-successful stores developed their versions of this road map long ago and have followed them for years. When the market was tough, it was not viewed as cause to change. The big payoff for this commitment would have been an ever increasing rate of referral business. Prospects became customers, who shared the experience with their friends, who in turn became prospects then customers and the cycle continued. Referrals are the underpinning of a profitable store and the only real way to build a business, but they build out over decades.

Who has that kind of patience?

This is probably the single biggest barrier that blocks dealers who want to see dramatic performance gains: The cycle time. The stores I have been referring to that are already at this level have been at it for decades and they have achieved referral levels that can exceed 80%. (Think about that for a moment. It is a huge number.)

But before you dismiss super levels of success as practically unobtainable, let me offer up a ray of hope…

I just covered an example of how referrals used to play out; one customer sharing with one or two friends where perhaps one of those friends would remember and visit the store at some point in the future. Until just recently, this was the norm. We all had fairly well defined peer groups. Today the Internet — especially social media — has blown those traditional boundaries apart. Communications are no longer one-to-one, but one-to-many. This raises the possibility that the cycle time that dealers had to endure in the past can today be radically shorter.

This could be a big deal — and we will look into it more in my next post.

GMEP_CTA

Permanent link to this article: http://blog.ncm20.com/2013/07/what-drives-great-success/

Gene Daughtry

Managing a Healthy BHPH Portfolio: Recency vs. Delinquency

financial_portfolioI have heard how important keeping your accounts current is to the success of a portfolio of receivables. I would put that statement down the list four or five spots when discussing how well your Buy Here, Pay Here portfolio is performing. In Buy Here, Pay Here (BHPH) you need to manage your receivables portfolio differently.  Why? Because in BHPH, many of your customers are going to have trouble keeping up with their payments; it’s simply the nature of the business, but one that with proper processes and oversight, is manageable and will provide an excellent return on your investment.

In my BHPH operations, I would tie a small bonus to the percentage of current accounts to help keep my collectors’ eyes on who is not paying as they should. When a collector has several hundred accounts to maintain, I want their focus on what is most important – cash flow. Because I feel cash flow is the primary bell weather of a successful receivables portfolio, I place higher priority on two other important receivables management metrics: recency and collection potential.

In a BHPH portfolio, your recency metric should generally remain, at a minimum, in the 90’s. This means 92 to 96 percent of your open accounts have made payment in the last 30 days. Collection potential is the amount of payments your portfolio has due each week based on contractual terms. This is the money, the life blood of your operation. If you are taking in 110% of total payment dollars due each week (average weekly payment times number of open accounts) while meeting your recency goals, you will see the performance anticipated from your portfolio and the cash flow you should expect.

There are other dollars coming in, of course:  down payments, deferred payments, wholesales, service income, cash deals, payoffs and other services you may provide. Generally, I experienced 72 to 74 percent of my monthly cash flow as payments. My collectors’ largest incentives each month were tied to recency and collection potential. Both must be met to receive the bonus.

So many dealers I have worked with are very concerned about missed payments. Some of these dealers will repossess a vehicle one or two days after a payment is missed. My approach was different.  I would make every effort to keep the vehicle with the customer. I would try to find ways to collect our money. Yes, if customers break too many promises or skip out then I would advise you go after the car. If the customer comes in and wants the car back, I’d give it to them. The customer and I would have a discussion beforehand, of course. My advice is to require proof of insurance and some money before they drive off, but not require everything that might be due. You want the customer to get the message that you are serious about getting your money, but you also know that if the car is on your lot the money isn’t going to come in, either.

Repossessions are a fact of life in BHPH. Don’t be fearful of them. Even though you will refer to repossessions as “losses” on your P&L, the aggregate of your repossessions should actually be profitable. Look at every deal like a hand of poker. The hand is dealt and must be played out. Folding might save you money but you’ve already made a big investment and you want to win. Winning is making profit on each deal. So stay with your customers as long as they are working with your collectors. Watch your exposure or “cash in deal” as you make decisions on delinquent accounts.

The bottom line in BHPH is that dollars through the payment window is the score to go by. Knowing how much should be coming in and tracking that number will be more important than if all of your accounts are current today or not. As long as you bring in more than what’s scheduled and all of your accounts paid you something this month, then you can focus your attention on your expenses and selling more cars.

Gene Daughtry teaches BHPH Service and Reconditioning Management  for the NCM Institute.  To learn more about management training for BHPH dealers and managers in sales, service and reconditioning, and underwriting and collections management, and to register for our next classes coming up in August and September, click the link below or call NCMi® at 866.756.2620.

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Permanent link to this article: http://blog.ncm20.com/2013/07/managing-a-healthy-bhph-portfolio-recency-vs-delinquency/

Dennis Kane

Dealer Beware: Pitfalls of Selecting the Wrong Contractor or Subcontractor

paper_stacksmedI have seen a significant number of high value claims as a result of contractors or subcontractors not carrying insurance or inadequate limits of insurance.

Examples of high value claims against dealerships include:

  • Claim against a dealership’s workers’ compensation carrier or general liability carriers due to an injury of a subcontractor’s employee and the subcontractor doesn’t carry workers’ compensation insurance.
  • Claim against a dealership’s property insurance carrier because a roofing contractor started a fire repairing the roof and didn’t have adequate insurance.
  • Claim against a dealership arising out of work performed by a subcontractor to modify or perform specialty services on a vehicle.  The work performed was later determined to be faulty or negligent resulting in serious injuries and the subcontractor was out of business with no insurance.
  • Claim against a dealership’s liability carrier arising out of a contractor’s negligence for services performed while removing snow and the contractor didn’t carry insurance.

Here’s what you need to know:  You can be held liable for injuries to employees of, and the negligent work of, contractors and subcontractors. The good news is there are relatively simple steps you can take to reduce your exposures to high value losses.  Use this checklist for selecting contractors or subcontractors:

  1. Require the contractor/subcontractor to provide a certificate of insurance as evidence of coverage for Workers’ Compensation, General Liability and Umbrella Liability. It’s very important the limits of liability insurance are adequate. A good minimum standard for establishing the limit of insurance is requiring the same limits as your business liability insurance. This is effective to address inadequate limits by contractors and subcontractors. Review the effective dates of insurance to confirm the insurance is valid.Certificates need to be mailed directly from the contractor’s agency or carrier, not the contractor. This prevents contractors from issuing their own certificates to satisfy the insurance requirements and secure the winning bid without proper insurance.
  2. Require your company to be added as an “additional insured” on the contractor’s General Liability policy. You should require a copy of the endorsement from the carrier or the agency of the contractor.
  3. Ask your attorney to draft a “hold harmless and indemnifications agreement” that contains absolute defense and indemnification language and repayment of any expenses incurred in accordance with your state law to insulate you for any type of claim due to any inference of negligence. This agreement needs to be executed before work or services begin.
  4. Do not use “friends” or a friend of a friend to do any type of work, use only certified licensed contractors.

As you bid out work for your dealership, make the steps outlined above a required part of the selection process. You will find many legitimate contractors/subcontractors with excellent reputations for quality service and work willing to comply with these standards.  If any of the steps above can’t be provided by your contractors or subcontractors, it’s definitely an early warning of potential problems that need to be investigated further.

GMEPbanner

Permanent link to this article: http://blog.ncm20.com/2013/06/dealer-beware-pitfalls-of-selecting-the-wrong-contractor-or-subcontractor/

Steve Hall

Does Your DMS Match Your Actual Parts Counts?

Fotolia_36189691_XSHave you ever had this happen?  … A service advisor contacts your parts department to see if you have a specific part in stock. You check the computer system and it shows that you have it. A price is given, “Yes, we have it in stock” is told to the advisor.

The advisor proceeds to sell the job to the customer; the information is relayed to the technician who then comes to the parts counter to get the part. Your counter person goes to pick the part from the shelf, only to find the spot on the shelf is empty!

What happens now? You either have to pick the part up from another dealership, possibly hold the vehicle over while the part is ordered, or have the customer return at a later date. None of which are good end-results.

What caused this to happen and what can be done about it? If you believe that you “can’t sell what you can’t find” then you need to have systems in place to make sure that you can “find it.” Let’s look at a few basic rules for a parts department:

  1. Every part must have a “home.” A bin location must be assigned to every part that you have in stock. Even if you are cramped for space, you must designate a space for every part in your system that has an on hand quantity. This includes special ordered parts.
  2. Each bin or location should have a designated number for identification. Does the numbering system make sense? Can a new counterperson or stocker locate the appropriate bin quickly and efficiently?
  3. Each bin should be arranged in alpha numeric order. Shelves should have parts tags for each part that is stocked in it. This makes for easier, faster and more accurate stock replenishment.
  4. If space allows, leave the top and bottom shelves empty. This will allow space for growth within specific bins. You will need this as you add additional part numbers into your stock.
  5. Perform I-bin counts. Individual bin or “I-bin” counts should be a daily discipline within your department.

Items one through four are pretty basic, but I would like to expand more on item five. Parts managers should be aware of this term, whether they apply it or not. General managers or owners may not have been exposed to it, so let me explain how and why to perform these counts.

I-bin counts are used to check the accuracy of your DMS parts system vs. the actual on-hand quantity.  Ideally, they should be set up the following way:

First, make a spreadsheet listing each of your parts bins number. Have additional columns for the date the bin was counted and a column for who counted it. You should have one more column noting that there were, or were not, discrepancies found and adjustments to on-hand quantities.

Each day, the parts manager should print off and have on hand quantity or inventory sheet for the bins that need to be counted. Ideally, you should count enough bins so that you “look” at your complete inventory every 30-45 days. In most parts departments, this only a few bins a day.

Once the sheets are printed, the count should happen quickly. The reason for this is, if any parts are pulled after the sheets are printed you will show a discrepancy and have to research it before any potential adjustments are made. Normally it only takes a few minutes to count a bin, with the obvious exclusions of high-density drawers. In those cases, you may want to count a couple of drawers a day to break it into bite-size chunks.

After the count is completed, if you find any discrepancies, research them appropriately and if the count truly is wrong, make the adjustment in your system. At times you will have positive adjustments as well as negative adjustments. After you are finished with the bin, including the necessary research and adjustments, you should retain the count sheets for future reference.

On a side note, it is a good idea to have different people do counts periodically. Though we don’t like to think that any theft would happen within our store, it can happen. Having a variety of people doing bin counts will make it harder to cover up. As a general manager, be willing to go back and perform some counts yourself; it can be an eye-opening experience.

By doing the perpetual count and check, you will get to see how accurate your DMS and actual on-hand inventory really are. You might just find that the “missing” part in our example above was just stocked in the wrong location!

If you are interested in continued training for your parts manager, be sure and check out the upcoming NCM Institute Principles of Parts Management I and II courses that are launching this fall.

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Permanent link to this article: http://blog.ncm20.com/2013/06/does-your-dms-match-your-actual-parts-counts/

Thomas Bear

Used Vehicle Inventory – Checking on Your Investment

Used-Car-Investments_webIn a typical automotive dealership one of the biggest uses of working capital is the investment in used vehicle inventory.  Just like your personal investments in the stock market, you need to check on your investments in used vehicle inventory to see what is changing, where your stock is and whether you need to buy or sell.  A big percentage of you have adopted the Velocity concept, which is part of what we are talking about above.

If you would really like to know how the investment in your used vehicle department is performing, take some time bright and early one morning and do a physical used vehicle inventory.  All of you have done this at least one time in your life, but I bet for a lot of you, it has been a long time; you have probably delegated this process and are assuming everything you want to happen to your used vehicle investment is, in fact, happening.

Your Challenge:  Take the time to personally do a used vehicle inventory this month.

Here are some suggestions:

  1. Have your controller print out a used car aging report with the oldest car listed first.  You will want the year, make, model, serial number, mileage and a column to make notes on vehicles you have discovered items you want to have addressed after the physical inventory.
  2. Have your controller go with you to keep notes, keep you on track and so he/she can reconcile any differences at the end of the physical inventory.
  3. What are you looking for?
    1. Overall look of the lot – Do you have holes in the lot? Are they lined up straight? Does the lot look the way you want it to everyday?  You may think you look at the lot every day, but this morning you are looking at it like one of your 20 Group members is reviewing your used vehicle department.
    2. Location of the units – Are the oldest units located in the hot spot of your lot;  or, at least where a customer has to see the oldest unit in stock? You know you are going to find some of your oldest units on the back line.
    3. Damaged or missing equipment – You know you are going to find some – list them so you can review it with your management team.
    4. Reconditioning of vehicles – Look for vehicles with wax in the corners, tires that are not up to standard, door dings, etc.  You know you are going to find them, so note them.
    5. Missing and faded stickers – Stock stickers, Buyers Guides “As Is” (English and Spanish), window stickers (equipment, make, model, etc.) – you know the oldest units will have faded or missing stickers.
    6. Units not on the inventory listing – List them and find out if there is a deal working on the unit (and for how long), waiting for paperwork and finance approval, etc.  Did you just buy from a wholesaler or auction and the paperwork is in process?
    7. Units that are in the shop or waiting to get into the shop – Find out the date the paperwork cleared on this trade and really see how long it is taking to get vehicles through your shop.
    8. Units not personally inspected – You will have a list of vehicles that are not on the ground today.  Where are they:  Body Shop? Upholstery shop? Loaned to someone? Sold to a wholesaler and you are waiting to receive funds?  Remember to keep this listing and personally touch every vehicle in which you have your money invested.
    9. Titles – Have your controller verify you have titles for every used vehicle you have on your lot.  Most states require you to have the title in hand before you can sell the unit.

As the result of this inventory the following items need to be reviewed with my management team:

  1. ___________________________________________________________________
  2.  ___________________________________________________________________
  3.  ___________________________________________________________________
  4. ___________________________________________________________________
  5. ___________________________________________________________________
  6. ___________________________________________________________________
  7. ___________________________________________________________________
  8. ___________________________________________________________________
  9. ___________________________________________________________________
  10. ___________________________________________________________________

Make sure you pick a nice cool, sunny morning to do this physical inventory.  What did you find?  What processes have evaporated?

Remember, those are your dollars you have just inspected – are they up to your standards?  Now it is time to have a used vehicle meeting with your variable management team.  Good luck and good selling!

Used vehicle management best practices like this are taught in the NCM Institute’s Principles of Used Vehicle Management training programs, in our used vehicle management webinars, and in select regional training programs.  Find out more about our regional training program, “How to Make the Phone Ring and the Door Swing in YOUR Used Vehicle Department” by clicking on the link here or call 866.756.2620.

Permanent link to this article: http://blog.ncm20.com/2013/05/used-vehicle-inventory-checking-on-your-investment/

Garry House

The Difference Between ‘Good’ and ‘Great’ Auto Dealers

good_to_greatIn the first couple of paragraphs in his book, Good to Great, author Jim Collins makes several interesting statements:

Good is the enemy of great. And that is one of the key reasons why we have so little that becomes great. Few people attain great lives, in large part because it is just so easy to settle for a good life. The vast majority of companies never become great, precisely because the vast majority become quite good – and that is their main problem.

Although I’ve worked with a lot of “good” dealers during my professional career, I’ve never been privileged to work with a “great” dealer. That is not to say there aren’t great dealers; there are a number of great dealers, they’ve just not needed my help! Not surprisingly, all of the good dealers with whom I’ve been associated wanted to be better, but most never seriously aspired to greatness. In fact, one of my good client-dealers recently said, “Garry, you wouldn’t believe how difficult it is getting my team focused on performance improvement when we’re making a million dollars a month!”

What does “great” mean at the dealership level? In my personal opinion, as a dealership resources professional, a dealer can claim “great” or “world class” status when he/she achieves ALL of the following:

  1. 100%+ of assigned market share for each new vehicle franchise represented
  2. Retail Used to New Sales ratio of 1.00 to 1.00 or higher
  3. 80%+ share of calculated Service market potential
  4. Net-to-Gross (pure) of 30%+ and/or Net-to-Sales of 4.5%+
  5. Annualized ROI of 25%+ against true projected liquidation value
  6. Measurable best practices guidelines in each inventory and receivables category
  7. Measurable highest levels of employee engagement, satisfaction, productivity and retention
  8. Measurable highest levels of customer loyalty, retention and satisfaction
  9. Measurable highest levels of recognition for community service and for service to the retail automotive industry in general

By comparison, what does “good” mean to me when looking at the dealership level? This is tougher, and certainly more subjective, but here’s my take:

  1. 80% – 90% of assigned market share for each new vehicle franchise represented
  2. Retail Used to New Sales ratio of at least 0.75 to 1.00
  3. At least 60% Share of calculated Service market potential
  4. Net-to-Gross (pure) of 22.5%+ and/or Net-to-Sales of 3.5%+
  5. Annualized ROI of 15%+ against true projected liquidation value
  6. Measurable best practices guidelines in most inventory and receivables categories
  7. Measurable average levels of employee engagement, satisfaction, productivity and retention
  8. Measurable average levels of customer loyalty, retention, and satisfaction
  9. Measurable average levels of recognition for community service and for service to the retail automotive industry in general

As you’ve probably guessed, this article, unlike Jim Collins’ book, is not about how to transition from good to great, but rather it is concentrated on differentiating good from great. At the NCM Institute Center for Automotive Retail Excellence (NCMi), we don’t spend a lot of time focusing on becoming a “great” dealership; that is a challenge that would involve a long-term commitment and relationship between the NCMi faculty and a dealer’s entire employee body. NCMi does not have the resources to undertake that challenge, nor has it ever been our mission to do so. That is a challenge that is best undertaken by the NCM Retail Operations team.

The NCMi mission, and challenge, is to help transition the managers of a dealership, one or two at a time, from good to great. We do this by focusing on world-class (great) department processes…what they are, why they’re critical, how to implement them, and how to execute them. Part two of this article series will select one or more department processes, and I’ll show you the difference between good and great. Remember, great processes that become disciplined habits produce great and predictable results!

Permanent link to this article: http://blog.ncm20.com/2013/05/the-difference-between-good-and-great-auto-dealers/

David Kain

It’s Time for 3rd Party New Vehicle Lead Providers to be Transparent

fishbowlThe 3rd party new lead providers I know are operated by genuinely good people who want to provide a valuable service to the auto shoppers, dealers and manufacturers they serve. For more than 15 years in some cases, companies like Autobytel have worked diligently to bring car buyers and car dealers together using the magic of the Internet. Like Autobytel, AutoUSA and Dealix are also very well-intended companies that realize in order to grow their business they must also grow the businesses of the dealerships that write the checks for their leads. Beyond the well-known 3rd party new vehicle lead providers are other new vehicle lead providers that don’t have the marquee profile of these industry stalwarts, but send leads in the thousands each month to dealerships all over the country in the name of vehicle manufacturers. These companies are Shift Digital and Urban Science and their new vehicle leads show up in your CRM or lead management tool as Manufacturer 3rd Party Leads.  All are necessary and generally beneficial to the healthy growth of new vehicle sales across the country.

However…if they want to thrive in the future (not just survive), they need to be totally transparent with the originating source of the leads they sell to dealers. The business model used by most 3rd party new vehicle lead providers is that of a lead aggregator. They sell leads to dealers and manufacturers from their own sites (AutoByTel & AutoUSA) and sites they own (Dealix owns InvoiceDealers), as well as leads they buy and then “aggregate” to dealers from root lead sources.   There are literally hundreds of these root lead sources that are not well known to dealers, but you can easily find them if you search for your brands’ current make and models in your community.

These root lead sources typically show up on the side bar with the other pay per click advertisements just to the right of the organic search.  A recent search I conducted on Google using the terms “2013 Ford Fusion Lexington KY” returned several pay per click options, including one that said Ford Fusion with a sub-message that promoted “Don’t Pay $21,700 for a Ford Fusion – Submit Form for a Free Quote!”…A click on the link took us to a site where the headline reads, “Did You Know Every New Ford Fusion Has a Secret Price?” Once I filled out the form to obtain my Secret Price and hit submit, I was then provided the option to get additional pricing on a Mazda, Honda and Chevrolet.  Wow, four quotes for the effort of filling out the form just one time! Sadly, four dealerships will now receive this 3rd party new vehicle lead from a presumed buyer interested in their brand, but the salesperson will likely not know the original root source because it will be masked as a well-known source; in my opinion, too often as a manufacturer 3rd party lead.  Oh…these four dealers that received my test lead…they will each pay for the lead even though none of them will know whether their brand was the primary selection of the auto shopper.

Here’s where we come in. We teach dealers each day how to effectively respond to their leads and how to motivate car buyers to come in to their dealerships. One technique is to read the lead and identify the source.  When the source is identified as a Manufacturer Partner Lead or a Manufacturer 3rd Party Lead or even one of the Big 3 lead providers (Autobytel, AutoUSA and Dealix) the salesperson or Business Development Center agent can’t be sure of the original source and therefore, they will not know what the customer experienced during the lead submission process.

We encourage dealers to take electronic field trips online with their Internet sales team to click where the customer clicks so they can have a clear understanding of their experience before they hit submit. When a dealer knows what the customer experienced, the dealer can respond in kind knowing what the customer was told during the shopping process. This helps buyer and seller appreciate one another more, especially when a salesperson or agent states during the call or email that they are the preferred dealership representing the root lead source. This works great when the sources are clear-cut such as Kelley Blue Book or Edmunds.com, but they are confusing when the source is called Manufacturer Partner or 3rd Party leads.

There is no good reason why this root lead source isn’t clearly identified to the dealership that buys the leads. The reasons for not providing the names of these obscure sources are likely to keep the dealers from being concerned with the quality of individual sources, but that’s not fair to the ones who are writing the checks. All dealers appreciate that leads are scrubbed for working phone numbers and email addresses before they are sent to them. The leads I am concerned about are the leads that get through the filters without telling the dealerships they are likely the 3rd brand choice, or that a price has already been provided below invoice. This would be great for the salesperson or agent responding to know so they can provide a more valuable reply to the auto shopper.

If Trilogy SmartLeads and TrueCar can provide the sources of their leads, so can all the 3rd party new vehicle lead providers. It’s time to help car buyers and selling dealers by reducing unnecessary tension.  Let the buyers know that a dealer will likely be calling them to provide a price, and tell selling dealers that a buyer has selected their vehicle, it was their second or 3rd choice, and they already know the invoice and were told they should pay less. It’s only fair and it’s also the best way for your business and you’re paying dealers to thrive. Just my two cents.

This article was reprinted with permission from KainAutomotive.com. David Kain is a well-known speaker and trainer on Internet sales and management best practices for automotive dealers and he also moderates NCM’s Internet 20 Groups. To find out more about NCM 20 Groups for Internet Directors and Managers, call 877.803.3627

 

Permanent link to this article: http://blog.ncm20.com/2013/05/its-time-for-3rd-party-new-vehicle-lead-providers-to-be-transparent/

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