How much money are you spending to manage your time to line (T2L) — the days it takes to get cars from acquisition through recon to sales-ready status?
If the answer is, “I don’t know,” then hit the pause button. You need to know your T2L because improving this productivity measurement is profoundly inexpensive for your used car operation when considering the impact of reversing margin compression.
Dealers think nothing of spending $2,000 a month for inventory acquisition software or $300 per car per day for merchandising. Unfortunately, without investing another $5 per car to reduce T2L, the dealership limits the ROI potential of those two more substantial investments. Lagging T2L also puts the brakes on inventory turn, which means already-stale cars hitting the lot.
Understanding and controlling T2L is essential today. We know from work with more than 1,000 dealers and groups that most of their recon operations once took 10 to 21 days — or more — to get cars from acquisition to sale-ready. Slow T2L also bleeds off much of the value a dealer expects from tools for sourcing, pricing and merchandising cars.
T2L Economics
By applying T2L workflow software to recon management and accountability, these same dealers quickly eliminate recon process delays and bottlenecks to reduce T2L by half or more. While it’s not the only economic factor, slow T2L greatly increases holding costs. NCM Associates has identified this charge at an average of $40 per day per car. Consider:
• At $40 per day, a 10-day T2L accumulates a $400 depreciation load against each vehicle. Across 100 vehicles, a 10-day T2L runs up $40,000.
• The new prime retail standard for selling vehicles is 21 days; a 10-day T2L leaves only 11 days to retail for maximum margin.
• A recon cycle of five days versus 10 days translates into two additional inventory turns. Two extra turns on 100 cars at $1,500 gross per car equal $300,000 a year, or $25,000 a month — a remarkable ROI for a monthly T2L workflow software cost of $500.
Where else can you find a $50 return for every dollar spent?
Mind the Gap
I suggest you evaluate your own T2L gap between acquisition and merchandising. The trend in retail of getting cars online minutes after acquiring fresh inventory is now a norm for many stores. To take advantage of this strategy, the dealer — along with the sales staff — must know precisely where each car is in the system to be ready to talk directly about approved or completed recon when the phone rings.
Dealers who practice T2L reconditioning mind this gap unfailingly. No manual or DIY shortcuts can match the verifiable metrics available through automated T2L. This data gives management and users clarity into the recon workflow and accountability of task completion to reduce T2L.
Who manages this objective is up to the store using this strategy, but in our experience best results come from a GM at the steering wheel. One GM may delegate the day-to-day activities to the used car or fixed ops manager and get involved only when something goes pear shaped. Other GMs are hands-on and active daily. Either approach works with recon T2L workflow software, depending on the strength of the team.
Prepare for Now
Here is how scalable T2L workflow minds the gap, complementing investment in inventory management and retail marketing technologies:
• It defines the work to be done so personnel can achieve specific outcomes; it brings clarity to processes and procedures — who is doing what, when and in what timeframe.
• It identifies critical steps in recon processes and alerts management of bottlenecks to be removed so workflow is not disrupted.
• It assigns people with the right skill sets to the correct task assignments to ensure workflow efficiency and quality.
• It builds rhythm-and-flow into the work, and confidence in those individuals challenged with delivering faster T2L.
• It cuts T2L in half or more, getting cars sale-ready faster.
As used car sales have grown as a percentage of dealership profitability in recent decades, it has become critically necessary to develop and apply performance metrics to reconditioning departments. In the most basic terms, the speed at which you get cars through recon determines the profitability of your used car operation.
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