Auto dealers are experiencing sluggishness in the new-car market and off-lease cars are washing ashore into used car departments in increasing waves. Both will dampen profitability and force increasing pressure on fixed operations to cushion the blows.

The new normal is upon us.

In the meantime, new attention is being given to how the reconditioning department can be evolved into a profit center for the dealership. That would be a novel perception of this operation, which increasing automation and numbers-driven management is creating some remarkable and uncommon returns out of this traditional and somewhat haphazard assembly line.

An alternative in step with the times is to practice a Time-to-Line (T2L) culture in your dealership that focuses on improving all recon processes – through recon, the service department, detail and sublets, to the used car manager and frontline – using lean manufacturing principles. We get into what some changes look like later in this article.

Let’s make money

What a T2L recon culture does for a dealership is get acquired and traded vehicles frontline ready faster, within three to five days. Many dealers believe they’re achieving this efficiency with a whiteboard, spreadsheet, and other tracking methodologies, but the fact is when T2L workflow software looks, their actual recon cycle can be eight to 12 days or more!

When you look closely at this process, you’ll see opportunity there – significant opportunity to flow eye-opening cost from the operation to your bottom line and outstanding opportunity to get vehicles frontline ready faster so you can retail them sooner and increase inventory turn – up to two additional turns per year!

According to our 20 Group clients and moderator experts, daily holding cost for the average dealership is $32 per vehicle per day based on the franchise and market area, NCM Associates tells us. Here’s the math: Shave six recon days off 100 units and the savings accrue to more than $19,000 a month or $230,400 a year! Is that worth getting excited about? Go here (http://www.rapidrecon.com/holding-cost/) to calculate the numbers for your store. Eliminate 2.5 days from your recon cycle and gain one additional inventory turn.

Benefits for Your Service Department

Here’s what T2L does for you:

• It defines the work to be done to achieve a particular outcome – and who is to do what, when and how.
• It identifies key steps in a process and helps determine which if any can be eliminated to speed workflow without compromising quality.
• It assigns people having the right skill sets to specific tasks to ensure efficiency and quality.
• It creates a smoother, faster workflow, relieving managers from having to focus on tasks.
• It builds rhythm into work and creates crew confidence, so productivity increases.

Leverage T2L Best Practices

Best practices dictate that a combination of mechanical (including inspection and parts hold) and detail must be two days or less. The body shop will likely add another day to 35% of your cars, taking 4.5 days average.

Image inventory for online marketing and market online immediately. Set response standards for used car manager repair approvals. Identify how off-site sublet work is to flow into the mix – and set tight parameters for that work being done.

Finally, organize your “new normal” recon processes around these steps:

1. Speed repair approvals: Improving communication between recon and the used car manager can reduce bottlenecks. Inability to approve a work order by the used car manager can delay the start of work from a few minutes to a few hours or more.
2. Set spend preapprovals: Giving recon some level of authority to proceed with needed work without used car manager approval can keep work flowing uninterrupted. Consider assigning repair dollar “buckets” for vehicles of varying mileage –low, medium, high -- based on the mileage and repair averages of the vehicles you recon.
3. Structure phase times: Set a time frame for accomplishing specific types of work. Vary times based on the condition of the vehicle. Monitor times and hold staff accountable for adhering to them.
4. Compensate for vehicle completion time, not per vehicle: Focus compensation on a production-based measurement. A specified end time window per vehicle will stimulate parties involved to work smarter and harder to move units through recon in fewer days. Consider spiffs for meeting goals; when considering spiffs, remember the larger picture – reducing holding costs, and turns that improve gross.
5. Equip for quality and manage by the clock: Make no allowance for less quality work, but beware of tendencies to over-condition. The additional recon cost is rarely recouped and often contributes little to the vehicle’s sales-ability. Pay attention to visuals such as dings and dents, scuffed wheels, cracks and chips in glass, and other blemishes that will catch a buyer’s eye before any mechanical issues might.
6. Get training: Specifically on the use and application of the reconditioning software you use. Preferably, this training is done at your site, driven by an experienced performance manager. Then, continue to reinforce best practices applications through team meetings and the review of performance reports.
7. Use report data: Measure each step within your recon process to establish new targets and to monitor and forecast progress.

The reconditioning function within your dealership is a cost center or revenue generator, depending on how it’s managed. Given that both time and cost can be taken out of the average reconditioning process and flowed to the bottom line improving structuring reconditioning processes and bringing to it both workflow volume and productivity helps convert any reconditioning department into a profit center for the dealership.

DENNIS MCGINN
Founder and CEO, Rapid Recon
Dennis McGinn is founder and CEO of Rapid Recon, the industry’s most advanced T2L workflow tool for auto dealership reconditioning and used car departments. www.rapidrecon.com