Could the savings dealers are realizing year after year once they implement a time to line (T2L) profit model be too good to be true?
How does a savings of $18,000 a month or more sound? A Florida BMW store recently reported a $1 million-a-month savings from practicing this T2L model.
More than 1,000 dealerships — from the smaller, single rooftop franchise and independent to large, public groups — are now practicing T2L workflows. Before deploying this workflow automation and disciplines in their stores, these dealers suffered recon cycles of from 12 to 20 or more days — and were leaking considerable margin dollars every month.
After implementing T2L standards in their stores, they were quickly able to improve their time-to-line recon processes to achieve a new cycle rate of three to five days. A few are now getting cars from acquisition through recon to sale-ready status in just 48 hours.
This does not happen just by installing a piece of software and expecting everyone to fall in line. In fact, if a T2L model is not planned and orchestrated correctly, it is more likely to fail than to succeed.
Therefore, beginning with this month’s contribution and continuing for the next 10 months’ articles here, I’ll be laying out many exciting revelations about the T2L culture for improving used car department profitability. I’ll compile these revelations in a new book, to be available at NADA 2020.
Modeled for Proven Success
A famous person known to most of us as
Mr. Velocity is vAuto’s Dale Pollak. At one time, Pollak maintained that once you own a car and decided to retail it, the price paid for that asset didn’t matter. The only driver should be how much immediate interest there is in that car.
Unfortunately, the system of risks and rewards in the used car business does not support that model, because it is based on front-end gross per car but there are notable exceptions.
Consider the most profitable retail used car model in the universe, CarMax. By profitable, I am speaking about its sales volume and extraordinary earnings per share produced over time. For its business model, the company took a page from the old Circuit City retail chain model and applied its measure and manage strategy to a car lot.
CarMax, at great cost, put into place technologies that allowed it to measure customer demand and then adjust vehicle prices after five days, without regard to what the company had in the vehicle.
The point here, once you decide to retail a car, getting first photos online to get buyer attention immediately — and the vehicle from acquisition to sale-ready — should be your only driver.
Whatever system you use to guide your acquisition decisions — even expected profit based on precious metals, bananas or whatever (the descriptive language used by Pollak’s latest strategy) — the actual customer’s direct interest in that car is what matters above all else.
It is in the detail of these processes where a T2L profit model gets interesting, and that determines whether the time-to-line outcome is a three-day or a 10-day average.
In our considerable experience, the only way dealers sustain three-day T2L results is when those individuals doing the work are held individually responsible and accountable for the times they’re assigned for the work they control.
With a T2L recon profit model, your managers have real-time oversight of recon’s functions, from service writer and technicians to detailers, parts counter and photographer, including managers having authority to approve recon repair estimates. As a result, finger pointing disappears and those accountable for recon outcomes lean in together to reduce your cycle time and get cars retail ready faster.
The only accountability that is truthful and scalable is one where those doing the work are clicking a key that says, “this car in my step that I own is complete,” and moving that vehicle up the line into the next step or to the sales lot.
Reduce your vehicle reconditioning workflow by half or more of what your current recon cycle is and considerable “found” margin will flow to your bottom line.
Send me an email at the address above if you’d like to see the Florida BMW dealership’s report or if you’d like a copy of my book, Recon T2L – The Starting Point for Reversing Margin Compression.
Click here to view more solutions from Dennis McGinn and Rapid Recon.