If the history of vehicle reconditioning were a baseball game, it’s now the seventh-inning stretch. Anyone who’s sat through six-and-a-half innings in stadium seats knows its function — to stretch, catch one’s breath, and prepare for the game’s final critical innings.
Dealers have been playing recon for many long innings now, and frankly, their teams are not looking good. Their processes are costing them too many errors, and they’re not putting runs on the board as they should be. At this seventh-inning stretch, I am suggesting the coaches reconsider the teams they field, work on their fastball and get better at performing the basics.
In recon, the team that generates the highest profit per vehicle and does so at the lowest reconditioning cost wins the series. And make no mistake, you’re always in the playoffs — with strong competitors out to eat your lunch.
Ask your service or recon manager to evaluate the recon department’s play and they’ll inform you they’re in the Majors. Yet, when stats are put to their performance, most departments are playing at “Double-A” level. A few will have developed into “Triple-A” players, but only a handful are actually ready for the Big League.To improve, focus on skills development. Better understand recon’s flow from vehicle acquisition to a vehicle’s reconditioned placement on the retail used car lot. Establish rules for the time you allow for each phase of reconditioning flow of work. Fine-tuned this way, recon moves from being a cost center to a profit center.
The relevant recon center easily keeps up with inventory needs and requires significantly fewer days to do so. This highly productive workflow, when leveraging continuous improvement practices, looks like this when applied to reconditioning:
Reconditioning workflow organizes, structures, and accelerates the many reconditioning steps, managing all according to strict clock times to achieve a three- to five-day input to output goal.
Put a stopwatch to old game films — your old recon processes — and prepare to be shocked. Most believe they’re moving vehicles through recon in five days or less, but the clock doesn’t lie.
Dealers who begin using recon workflow software to manage, track and report on recon’s individual steps learn their shop’s actual efficiency is more often eight- to 10-days — or greater.
The Right Line Up
For this strategy to bear these results, it’s critical teammates are at the right positions and know the rules. This table summarizes these positions and their output requirements; you may need to adjust resources to achieve best practices:
Every action in the game must support Time-to-Market (TTM) objectives. TTM defines the time required to get inventory on-boarded into the reconditioning department, reconditioned through all phases and ready for retail. If the goal is to retail used units within the magical 30 days, you can’t waste half of that time in recon.
TTM software provides clarity and transparency into each step in the recon process. When you can clearly see where productivity, dollars and time leak from your processes, you can address and fix them faster.
Relevancy for the Future of the Game
By achieving and consistently holding to improved TTM, these benefits typically flow out:
- Reduced holding costs
- Improved gross margins
- Increased inventory turns
- Fewer units wholesaled
- More engaged players
- A more-competitive dealership
Here’s what I mean:
- Holding costs is a daily cost of $32 per vehicle in recon, part of each car’s share of dealership overhead, floorplan, advertising and similar expenses. Shave six recon days off 100 units and recon saves $19,200 a month, or $230,400 a year.
- Improved gross margins result because reduced holding costs equate to less erosion of sale total. A “sale” gross of $2,300 is actually $2,108 for a vehicle having consumed $192 of opportunity in an inefficient recon department.
- For every 2.5 days shaved off your recon cycle, inventory turn increases by one. A more-efficient used car operation turning inventory faster enjoys higher grosses on more units sold.
- Faster recon, particularly when recon is centralized — so it is not sharing assets with retail service — can be successful at reconditioning older vehicles for the retail lot, rather than taking wholesale losses.
- Processes run and managed by recon workflow software build a rhythm that creates happier teammates. Satisfied workers stay put longer.
- Dealerships having developed a TTM culture— and especially those having moved to centralized recon for groups of two or more rooftops — will flow more revenue to the bottom line. Improved efficiencies that reduce costs are a double play that extends savings to retail so the dealership can be more competitive in its vehicle pricing.
How Abner Doubleday’s game is played can teach us much. Over the years, reconditioning has played six-and-a-half innings with little change-up. In this seventh-inning stretch, recruit new ideas that’ll invigorate your team and reduce costly errors, so you put more margin dollars on the scoreboard.