Process Insanity Wrecks Used Car Profits - AutoSuccessOnline

Process Insanity Wrecks Used Car Profits

T2L disciplines should be the core metric by which you measure modern recon science. This metric will allow you to ask one simple but vital question: “Is my current system bolstering my used car profitability?”

For this month’s column on the time-to-line (T2L) profitability model and its ability to improve your used car operations, I want to use the wisdom of two great scientific minds to make my points.

The first great mind is that of Sir Isaac Newton, who said, more or less, that objects stay in motion at the same speed until they are acted upon by an outside force. The second belonged to Albert Einstein, who among many lofty theories postulated, “The definition of insanity is doing the same thing over and over and expecting different results.”

Here are my 2019 interpretations of these wisdoms:
• Business cultures remain static until acted upon by a competitive threat or market disruption, forcing change.
• It is insane to continue managing reconditioning using guesswork but expecting to improve productivity. Without workflow automation and accountability, T2L will never decrease significantly, and cars will continue to get to the frontline having already used up most of their 21-day premier margin window. 

No Wishful Thinking

Times have changed and running a car business on gut and emotion is bad for business. To make progress, some things are going to have to change. Yes, your team needs discipline around its job assignments and accountability. Yes, when you apply T2L disciplines to reconditioning, waste falls away, the team gets invigorated and intentional, and cars start flowing from acquisition to sale-ready in half the time — or less — that you’ve accepted as reasonable until now.

The change to bring about stronger used car margins, additional inventory turns and more streamlined recon doesn’t require scientific thought, a confusing algorithm or deep pockets. It does, though, ask you to embrace modern reconditioning workflow practices so the better tomorrow you hope for can start taking place today.

Sound, Proven Thinking

We know from our work with more than 1,300 dealerships that recon operations run by guesswork is insane. Why guess about such a critical, bottom line-affecting aspect of your dealership when you can have your T2L velocity validated by accountability and backed by 15,000 weekly users? 

We’ve worked with dealerships of all kinds and sizes. Each of these dealerships has different evolving recon and used car needs, but there is a constant that we’ve observed. As soon as they embrace and start practicing recon T2L disciplines, they see recon cycles start to drop from a typical 10 to 21 days to a highly efficient and profitable three- to five-day cycle.

Drop a recon cycle by 2.5 days and the result is a gain of one additional inventory turn. Drop it by five days and add two turns. Consider what leaving two turns on the table is worth in an ever-changing market, not to mention maintaining a three-week window to make your target profit.

Your team won’t wait long to experience the positive outcome of this change. These outcomes include:
• less confusion because the location and identity of every vehicle in inventory is trackable;
• less stress between recon, fixed ops and used cars because workflows and communication are structured, monitored and measured within and across these functions; 
• elimination of blame and finger pointing because accountability eliminates guesses;
• reduction in depreciation because faster T2L reduces holding cost erosion against sale gross for every vehicle in inventory; and
• more robust gross because cars are sale-ready with most of their 21-day prime sales window intact.

Where else can a dealership experience a $50 return for a $1 investment? Two additional turns on 100 cars times $1,500 gross per car equals $25,000 a month or $300,000 a year, which is a remarkable ROI for a monthly T2L software investment of $500. Even for a smaller dealership selling 50 used cars a month, adding one additional inventory turn will generate a $15 return for every $1 investment in T2L recon workflow software.

If you’re considering upgrading your existing recon processes with T2L disciplines, demand examples and proof from anyone you ask about it, including vendors, third-party consultants and your peers. If you can, do a site visit and see T2L in action; the visit will prove enlightening. 

T2L disciplines should be the core metric by which you measure modern recon science. This metric will allow you to ask one simple but vital question: “Is my current system bolstering my used car profitability?” T2L is no less an essential management measure than PVR, sales volume and inventory turn. All three depend on time-to-line recon efficiency. Guesstimates or best-case recollections do not advance accountability and efficiency or force you away from the wasteful practices and processes that are currently destroying your used car profitability.

Click here to view more solutions from Dennis McGinn and Rapid Recon.

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