Maximising dealership profits by reducing preparation process wait times

Maximising dealership profits by reducing preparation process wait times

  • Post category:Automotive

When delivery expectations are set, car dealers tend to focus their attention on lead time metrics to get a predictable answer. Lead time, which is measured in elapsed time (minutes, hours, etc) refers to the total time it takes for work to move through the value stream. In this scenario, that’s the total time it takes to prepare a car for resale, from the moment it enters the preparation process all the way until it’s ready to be moved onto the forecourt. 

Then, when trying to improve those lead times, many car dealers look to optimise their active work time, in other words, the time in which their staff physically attends to their tasks and work on individual cars. 

There is however, one other factor that car dealers should be considering when trying to improve their current processes: the wait time. It it the time that cars spend waiting to be moved onto the next stage in the preparation process, for example, when being parked up. 

Having any ‘spare’ wait time in the preparation process makes the entire operation inefficient and prevents car dealers from maximising their return on investment. So why does wait time happen? 

KEY REASONS FOR WAIT TIME:

The frequency and length of car dealerships wait time can be down to 3 major factors: 

  • DEPENDENCIES – specialists or micro groups such as vehicle inspectors, painters, valeters, etc, responsible for single stages within the preparation process who fail to communicate effectively with the rest of the staff involved in preparing a car for retail.

  • VARIATIONS IN THE NATURE OF WORK – individual car scenarios where more or less activities must be  performed to prepare it for retail. Inevitable to occur, those might include body work repairs, MOT checks or delivery of different car parts.
  • STAFFING – lack of employees that are right for the job, present at the right time and in the right place to ensure a smooth flow of production. 

WHAT IS THE TRUE COST OF WAIT TIME?

To really understand the implications of having long or frequent wait time, car dealers should try and answer the following question: How does wait time impact profit margins on individual cars or their financing costs? 

Unnecessary wait time drills holes in dealership profits and rightfully makes car dealers debate over what they should be spending their money on. For example, how does the cost of having a car waiting to be collected from an auction compare to the cost of organising immediate transport once the hammer has gone down? Or, how does the cost of 3-5 working day car part delivery compare to the cost of same-day delivery? 

In any case, car dealers should aim to utilise every minute available to get the cars out to the forecourt in the quickest possible time to maximise chassis profits. Every minute their stock sits around waiting to be prepared for resale triggers a cost that starts to chip away from the already tight margins. So how can dealerships reduce their wait time in car prep? 

HOW TO REDUCE WAIT TIME?

To get started, let’s looks at the flow efficiency metric, which examines the two ares that make up lead time and enable dealerships to understand how often work-in-progress actually happens. Here’s how its calculated:

The higher the flow efficiency rate the better. It means that your vehicle preparation centre has high active work time and low wait time. However, if the flow efficiency rate is low, then the cause of the unnecessary wait time must be identified and subsequently removed from the process. 

Reducing the wait time should be understood as ‘working smarter not harder’. However, it’s often interpreted as ‘reducing down time and putting extra effort on getting more work done’. That is why increasing the flow efficiency isn’t particularly easy to achieve. It is as much an optimisation exercise, as it is a shift in employee perception to utilise their time and resources better. 

Given the right tool, identifying performance bottlenecks and optimising the car preparation process can be easily achieved. We recommend the Car Prep Accelerator tool. It is designed to create immediacy and streamline existing processes by simplifying internal communications and keeping a live account of where each car is located along with its progress status.