A recon management program is designed to help control the reconditioning process at a dealership. While all dealerships have a process for handling how they get cars frontline ready, not all do this efficiently. The recon management program is an opportunity for the dealership to take back control of the reconditioning process by controlling speed, cost, time and morale.
I have seen quite a few ways dealerships are currently handling the recon process, from as simple as sticky notes all over the used car managers’ desk to expensive recon software that is being used as a spreadsheet. Some ways work better than others when it comes to moving the cars through recon, but all are lacking a key item — measurability. Something I learned a long time ago in business is that “you can’t improve what you can’t measure” so if you are not tracking performance standards in the recon process, you are throwing good money away.
The recon management program is your way of getting your personnel and outside vendors on the same page to achieve your standards or goals. Two key factors for a recon management program is to have. The first is a point person who controls the process that was created by the dealership. This person can be a manager at your dealership or a vendor manager you put in charge of the program. The other is for a recon management program to use a recon software system to manage and measure the recon process.
How Will a Recon Management Program Benefit My Dealership?
Why would you consider implementing a recon management program into your dealership? Here is where the rubber meets the road. To start, let’s begin with some national figures to put everything in perspective. The national holding cost per vehicle is $32 a day. The average time for a vehicle to be front line ready is 10 to 14 days. For this example, let’s assume it takes 10 days to get a vehicle frontline ready, so your holding cost on a car would be $320. If you are averaging 50 used cars per month that is $16,000 per month or $192,000 a year in holding cost that comes off your gross profit. That is the cost of a car just sitting in the back not ready for frontline. Holding cost are not an expense you can completely eliminate, but the faster you can get the car frontline ready, the less of an impact it can have on your bottom line. If you can cut your turn around time to five days, that is a savings of $8,000 a month or $96,000 a year.
Another factor in a longer turnaround time is your selling windows and when you have to start reducing the price of the vehicle. If it is taking more than 10 days to get vehicles frontline ready, you are missing prime selling days. If you could add five selling days in your prime window, do you believe you could add profit to your bottom line?
The recon manager is responsible for providing technicians (vendors) who are fully trained and performing services in a professional manner. The recon manager could be an internal or external person. This internal or external recon manager will allow the dealership to use any vendor they like; in other words, you can keep your current vendors.
A good recon management program will afford management the flexibility to make changes in individual technicians/vendors as required. This is one area that the recon software is valuable for the recon manager. The workflow software is used to track and measure every step and every person in the flow of the recon process from check in to frontline ready. Through every step of the process, each technician or vendor will be notified — preferably through an app on smartphones or smart devices — when they have a vehicle ready for their service, plus they know they are on the clock when they are alerted. Having the capability to track real-time data allows the recon manager and dealership management to address individuals that are not performing to standard and make changes if needed. This will also help in understanding your needs to increase your capacity to handle more used cars in a month.
The recon manager needs to be the individual checking in the cars for recon work and entering this into the workflow software. With one person checking in all recon work, it eliminates all the vendors walking the lot and looking for work then stopping a manager and getting approval. If you are the manager who approves recon work at your location, think about how much time you spend on this process. Managers I have worked with speak to at least one vendor a day on approving work for recon. The recon manager checks cars in daily which puts the car on the clock day one, which gets the process started immediately and helps avoid delays. As an added benefit to having one person checking in all the work, it eliminates vendors who try to cheat the system by charging more than once for a vehicle. I know that has happened at least once at every dealership I have spoken to.
Currently, most vendors have a day of the week they stop to work at a dealership but if you are looking to increase your turnaround time, “once a week” cannot be the standard. Think about this for an example of how this can slow down your recon process, if your vendor misses their day on your lot due to weather, vacation, illness etc., that is an additional seven days before work you need done will get done. How does that affect your five-day turnaround time?
With the workflow software, you will have the vendors set up to receive on their smartphone or tablet what work is waiting on them at the dealership. It will also be the link for them to let you know if they are unable to do the work in the time frame you have set so you can send to another vendor. You will need your vendors to be available at least two times per week and if they are not then you will need additional vendors to handle the work. This is where having a great recon manager in place they will have good communication with your staff and vendors, which will be necessary to make this transition smooth.
What we are seeing with master vendor programs is an increase in the amount of used cars sold at the dealership so there is more work for vendors at the lot and with the additional work the increase need for additional vendors. Vendors that are working within a master vendor program are getting the benefit of additional work at the dealership plus they are saving time from having to walk the lot checking every car for potential work then chasing down a manager for approval.
With a recon management program, you will want to control recon cost and, now that you are working with multiple vendors doing the same work, you will need to set up standard pricing for services. This will need to be communicated to the vendors and pricing set up in the workflow software. The software will also create all invoices making it easier for the accounting department.
If using an outside master vendor, my recommendation is to set up a fixed-price program for all services that will be included in the program, such as exterior paint (scratches, spot blends, cracked bumpers), exterior non-paint (PDR, headlight restoration, windshield repair, wheel repair, interior stains and odor removal, tears and holes) and detail if not in house. Having a fixed-price program will help control cost and to assure every vehicle going to retail will be standing tall on the lot.
We are currently seeing fixed-price programs increasing the morale of the sales force when they have the confidence that every car on the lot will meet a set standard. When the sales force is excited and confident with all the cars on the lot, they will move more cars. With a fixed-priced package, you will have cars that fall outside what the package covers and will need additional work which requires approval but with one outside recon manager “master vendor” on your lot daily and with the communication from the workflow software this is handled quickly and easily with little to no interruption in your dealership’s management schedule.
Another area of the dealership that gets bottlenecked with the recon process is the accounting department. Currently, each car can generate mounds of paperwork with ROs, POs and management authorizations, just to name a few. This is where the workflow software, and having one person as “the recon manager” checking in the cars, reduces they multiple layers of paperwork. If using an outside master vendor, you can reduce invoices to one per car and having to pay only one vendor. The master vendor will be responsible for paying all the other vendors.
The recon management program is also geared to be implemented in other areas of the dealership, such as the service drive and F&I products that generate additional profits. When you have vendors that are available and a point person who is controlling the process plus fixed pricing for services, you can bring recon services to the service drive.
Factors for Implementing a Recon Management Program Internally and Externally
When considering implementing a recon management program at your dealership, here are some questions to consider:
· How much is the dealership willing to invest in management of the program?
· Do you have the point person in place or will you need to hire someone? Do you have a current vendor that can fill the role?
· Will you have the resolve to stay with the plan, or will you fall back into old habits?
· Do you currently have inventory management/scheduling tools to monitor workflow and, most important, measure performance? If not, what are the costs, licensing fees, etc.?
· Do you currently have the vendors to handle an increase in work? Are they reliable and will they be available daily?
· Are your vendors compliant with OSHA, EPA, local and state regulations which will reduce your risk of fines and other litigation?
· What is your current holding time? What is your average cost for vendor recon services per car?
Let me leave you with this thought: If you were planning a trip to a place you have never been and were looking for the fastest route, would you plan that trip without using GPS? The recon management program is your GPS for getting cars frontline ready faster.