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DennisMcGinn

founder & CEO of Rapid Recon \ 866.268.3582 \ dmcginn@autosuccessonline.com

THE ROLE OF THE GM IN MANAGING TIME-TO-MARKET

While on a recent conference call with a dealer group president, he asked the following question: “What is the single most important factor in successfully managing time-to-market (TTM) in a dealership?” My answer was, “The commitment and active involvement of the general manager.” At the time, this seemed to be stating the obvious, but the more I thought about why he was asking this question, the more it occurred to me that, from his perspective, it may not be all that obvious. Historically, some GMs view recon as a scheduling task and leave it up to the service manager or the UCM to sort it out. This approach works for a while, but eventually the conflict between service and sales turns to finger pointing, and then the GM is forced to take a stand, launching yet another cycle of, “We need to fix recon.” More recently, GMs are seeking hard evidence from other dealers who have not only fixed their recon problems in the short term, but have also adapted to process changes over time. The evidence is quite clear that when the

GM stays involved, TTM numbers drastically improve, making a strong case to not delegate this responsibility. Beginning 2010, when real-time workflow process automation was introduced into reconditioning, the reservoir of TTM proof points and metrics began to accelerate rapidly, producing huge amounts data. As a result of this data, it is now possible to calculate the difference in gross profit when time-to-market is properly structured and managed. For example, a typical store that sells 100 used vehicles per month and has an average TTM cycle of 10 days incurs $384,000 a year in absorbed gross. Reducing the TTM cycle to a very achievable four days radically frees up gross without any expense cutting or selling more cars. Here’s the math, using an average holding cost of $32 per day per unit (suggested by NCM Associates’ 20 Group clients, based on franchise and market area): 100 cars per month times $32 times 12 months times four days equals $153,600 in holding costs, a difference of more than $230,000 of freed up gross.

In order to reach and maintain a four-day level, the GMs in these dealerships are almost always actively involved. They monitor the metrics and are able to be proactive whenever the numbers are going in the wrong direction. The fact that TTM can now be measured and managed has the attention of dealer principals. As a result, we are seeing more group-level managers taking the lead for multiple stores in the form of a “group fixed-ops manager” or “group used car manager.” The above private dealer group installed several pilot stores before including all stores. Approaching TTM from a group perspective provides all stores, even those with different processes, the ability to adopt best practices and compare the results across stores. What also applies is multiplying $230,000 in added gross by the number of stores. So, in a dealership group, the financial rewards get into the millions with only the first few stores. Such significant profit impact warrants the on-going attention of dealer principals and GMs.

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AutoSuccess November 2015