Place Your Bets

“Come one, come all, place your bets, try your luck”. This is something you might have heard before and is exactly what all casino games are trying to get you to do. We have all heard the phrase, “ you can’t win if you don’t bet” and to some extent, that is true. Some of us have also learned over time that you can also increase your odds of winning by “hedging” your bets, and not betting (or at the very least, limiting your bets) on the games that have the greatest “house advantage”. How would you like it if you could develop and implement a strategy that would enable you to win a greater percentage of the time? A no brainer, right? If you are serious about increasing your odds, read on. If not, turn the page.

We are now well into the 2013 Model selling season and each month most of us are asked to make New Vehicle purchase decisions that will carry us into the foreseeable future. In other words, “place your bets” by ordering new vehicle inventory. While none of us have that proverbial “crystal ball”, we all do have access to data that will allow you to “hedge” your bets. I gave a lot of thought to the gambling analogy when considering this article and I finally came to the conclusion that all of us in this Retail Automobile Business are gamblers, whether we like to admit it or not. We make “bets” (inventory decisions) every day. Some of our bets win, and some do not. The entire premise of precise new vehicle inventory management helps to allow us to increase our “winning percentage”.

Today’s technology gives us all the opportunity to make more intelligent decisions, more accurately and faster than ever before. Literally, with a few clicks of your mouse in the right program, you can get all of the information you would need to make a better inventory decision. While it is impossible to predict economic swings, natural disasters, terrorist activities or wild fuel price fluctuations, you can phase in a “more active” inventory. Ask yourself this question. Am I confident that my managers are using all of the tools and data available to them to make the very best possible inventory purchase decisions? If not, why not?

Many of the previous articles I have written have talked about the key indicators that are the backbone of precise vehicle inventory management These include, but are not limited to; specific model number, option packages, color, trim, individual options, average age to retail, average gross per unit, average age of inventory, seasonality, and special events. . I included the formulas, displayed examples and talked about how to assemble the information in a format that your managers could use. In many cases, I also made available various worksheets that I would send via E mail upon request.

The proverbial bottom line is this. If you want to increase your bottom line, (and who doesn’t) it can be done by re-examining and re-structuring the way you make New and used vehicle purchasing decisions.

The idea of any good vehicle inventory management system is to quickly give information to management that will help accomplish the following: 1. To continually phase in what we need and phase out what we do not. 2. Make it easy to read, use and understand. 3. Recommend some specific action that needs to be taken. 4. Make decisions based on actual data, not “gut feel”.

As mentioned at the beginning of this series, there is tremendous upside potential to implementing an inventory management system for both your new and used vehicle departments. By increasing your “winning percentage” the following is a partial list of benefits that you can enjoy.

Earn a 5% Bottom Line
“Release” frozen capital
Increase GP PVR
Enjoy month after month floor plan interest credits
60 day supply of new vehicles
Painlessly reduce Variable selling expense
Continuous training and system implementation
Feedback and accountability
Significantly improve market penetration
Easily increase closing ratios
Group Reports for multiple locations with different demographics
Reduce advertising expense
Significantly impact Return on Investment
Improve CSI
Deliver more units at higher grosses
Complete inventory turn 6+ times per year-New
Know your highest producing color, package code, engine, etc
Use science and technology to manage inventory
Have an inventory stocking guide by specific model#
Eliminate “gut feel” in inventory decisions
Inventory decisions totally objective
Eliminate Inventory being “pushed on you
Know exactly what to advertise and when
Acquire Inventory to match current market demands

I know that building an inventory management system can be a daunting task. It may seem insurmountable at first. I have been working at refining vehicle inventory management systems for over 20 years and am always finding ways to improve the process. It will take time and work to get it up and running. Be patient. It will be worth the effort. If all else fails, there are a few good vehicle inventory management systems available from which to choose. I can’t name them here but if you would like to talk about it, simply send me an E mail. Additionally, I have developed a “Revenue Impact Calculator” that will allow you to plug in your own real numbers and will give you an idea of how much money is “on the table” for you to pick up by using a precise vehicle inventory management system. I will send you the link upon request. Simply drop me an E mail requesting the Revenue Impact Calculator. I wish you the best…Good Luck!!