Used-vehicle inventories are the most elusive and volatile that a dealership own, yet often we spend less time and fewer resources managing them.
The very essence of “successful” inventory management is identifying the fastest turning, highest grossing products and building our inventory within parameters. If you don't stock what they want, they can't buy. If you overprice, they won't buy.
Let's look at and compare two of the principal inventory managers in our dealerships — the parts manager and used-vehicle manager.
Review your financial statement and examine the gross profit generated by each department. Then think about this:
Parts manager: Controls an inventory averaging 100,000 to 300,000.
Used-vehicle manager: Often controls an inventory in the millions of dollars.
Parts manager: Usually a long-term employee.
Used-vehicle manager: Often with you less than a year.
Parts manager: Trained well and participates in ongoing training.
Used vehicle manager: Learned mostly from the wholesaler.
Parts manager: Computer literate and comfortable with new technologies.
Used-vehicle manager: Functional to a point, but often struggles with new technologies.
Parts manager: Works from a predetermined-inventory cost.
Used-vehicle manager: Works with a fluctuating-inventory cost.
Parts manager: Knows which parts turn every 30 days, and stocks what sells.
Used-vehicle manager: Probably guessing what vehicles turn every 30 days, and stocks on gut feeling or on how many parking spaces are available.
Parts manager: Records and tracks all lost sales.
Used-vehicle manager: Well, just needs more traffic.
Okay, before you write old Uncle Tony any barbed letters expounding on how you are not that used-vehicle manager, let me note that there are many great ones who share some common traits.
Really good managers know the strength and weaknesses of their sales staff. They direct their training to improve the weak areas.
They know for a fact what historically sells on their lot by make, model, year, cost and possibly payment.
They know what they gross and how fast they should sell. The great ones do not make frivolous purchases just to fill a hole on the lot. Because they know what sells on the lot, they can confidently and comfortably step up on the occasional trade to make an extra deal or two.
A good manager works within a set framework of dollars in inventory and days in inventory, using smart stocking policies and all the tools available to make decisions based on facts, not impulses or motions.
Have your used-vehicle manager run reports of at least the last six months of sales by days to sale, cost, mileage, year, make, model, color and gross profit.
Identify your fastest turning, highest grossing units. This will tell you the strengths and weaknesses of your sales team (address those issues with training) and provide an idea of what your core inventory should be.
Compare your analysis with what you have in stock. The end result is a “model” inventory. It eliminates frivolous purchases that result in aging issues.
If you hire a new used-vehicle manager today and do not provide the essential analysis necessary to stock the lot, what will he or she do? They will stock the lot with vehicles that worked for them at the last place they were employed.
As an industry, we cannot continue to just replace used-vehicle managers when they are in inventory trouble.
We need to provide them with the training, the tools, a common understanding and the direction to effectively manage our used-car inventories.
Let's face it, there was something you liked about this person when you hired them.
Tony Albertson is executive conference moderator for NCM Associates. He is at firstname.lastname@example.org.
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