How to Run a Lean Store

My wife and I attended the Andy Williams Christmas Show, his final season in Branson, MO.

He introduced the members of his eight-person orchestra and had two members demonstrate the amazing full sound that a single computerized keyboard can produce.

Following the demonstration, Williams noted how that improves the efficiency of the show, “not to mention how much less expense it is.”

In a Wall Street Journal article headlined “Behind Surging Productivity,” a similar situation was described with the Opera Company of Brooklyn.

In this case, what once was a full orchestra is now comprised of 12 musicians. As a result of this particular reduction in staff, the Opera Company is now able to offer more performances, which obviously enhances gross revenues.

The U.S. Bureau of Labor Statistics announced an 8.1% annualized productivity rate for the third quarter of 2003 on the heels of a 7% annualized rate in the second quarter. Productivity, in this analysis, is defined as the output per hour worked by the average U.S. worker in the non-farm sector.

This, coupled with an increase in consumer confidence and a declining seasonally adjusted unemployment rate, bode well for our industry.

In the auto industry there is much talk of continuous improvement if employee productivity.

Gross per employee is one of my hot buttons.

We manage that measurement by monitoring our support to revenue-producing personnel and ensuring their numbers never drop below 50% of all staffers. The bottom line here is our monthly gross production.

But that's only part of the equation.

It doesn't matter how much gross we produce if we don't have processes in place to manage our expenses and the efficiency of our organization.

We see auto manufacturers working with their suppliers to lower prices and manage costs to be more competitive. It would behoove dealers to do the same.

Webster defines efficiency as “the capacity to produce desired results with a minimum expenditure of energy, time, or resources.”

With the competitive pressures each of you endure in the retail arena, it's essential you identify areas where you have the ability to improve your efficiency.

That Wall Street Journal article mentions the effect of modern-day airport computer terminals that allow passengers to check in on their own. Not only does this provide a better check-in procedure that is more user friendly to the customers, it has helped improve the financial health of the airlines. One kiosk is 25% of the cost of compensating a single employee, according to one estimate.

I certainly am not suggesting you eliminate staff.

But I am suggesting that you and your management find ways of gaining that competitive advantage through improved efficiency.

As more pressure is brought to bear on our margins — both in the variable and fixed operations — the winners will be those dealership operations that manage the delicate balance of productivity and efficiency.

All economic signs point to a good 2004.

By visiting with your management team and gaining their commitment to maximize these opportunities, 2004 should be one of your best years ever.

Good selling!

Tony Noland ([email protected]) is the president and CEO of NCM Associates, Inc.