Optimising car prep process to maximise used car stock turnover

Optimising car prep process to maximise used car stock turnover

  • Post category:Automotive

You can tell a great deal about a dealership’s operational performance by looking at their stock turnover ratio.  It is a well-known formula, which indicates just how efficient a car dealership is, at converting the money it has invested in car stock, into sales and profits.

Once calculated, many dealers will consider and go on to calculate their stock turnover period, commonly known as Days Sales in Inventory (DSI).

Stock Turnover Ratio

Although every dealership will have a different number, depending on their cars specialty and volume, 12 turns or holding 30 days of inventory is the gold standard.

Striving to improve on the speed in which car dealers rotate their stock is one of the major challenges that keep many of them awake at night. Over the past 12 months many dealerships have been forced to shift their business models and adapt to the ‘new normal’ at an incredible pace to sustain their already tight profit margins.

Due to the recent COVID-19 restrictions and national lockdowns, many dealerships have had to take advantage of the available furlough scheme and operate on skeleton staff. For many motor retailers that meant accelerating their online capabilities and streamlining their sales process to attract digital consumers and maintain their sales turnover.

With click and collect, delivery services and aftersales remaining open, dealerships have been focusing solemnly on improving their front-end operations. However, there’s a significant amount of money to be made from optimizing back-end operations, particularly when it comes to used car dealerships.

Optimising the Car Preparation Process

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Effective management of vehicle preparation process starts with being able to answer the following questions in real time:

  • How long does it take to prepare a car for resale?
  • How long does each step of the process take?
  • How long does it take for you to learn how many cars are at a particular stage within the process?
  • How much does keeping a car in the preparation process cost your dealership a day?
  • How much less is that same car worth everyday you have not sold it?

From the Operational Director or Managers point of view, having instant access to each and every car’s location and progress update helps to answer the above questions and therefore identify performance bottlenecks easily and quickly.

For example, you might learn that there’s a lot of wait time taking place at your car prep centre, which impact profit margins on individual cars and their financing costs. (Read more about the true cost of wait time and how best to reduce it here).

Driving operational efficiency across departments that are responsible for preparing newly acquired stock for re-sale is just as important as turning it over.

As your dealership continues to embark the path to digitization, don’t let your back-end operations fall behind; adopt tools that support your business performance throughout. Working with a reduced number of staff should not be a factor that stops you from implementing solutions that would in fact help your skeleton team work smarter.

Maximum Profits with Minimal Staff

Here are 3 quick wins that will enable your car prep department to play its role in maximising your used car stock turnover:

  • Introduce automated progress reporting to keep a live track of every vehicle’s location and progress update as it’s being prepared for resale. This will play a huge role in improving the speed of your internal communications, reducing human error in data entry and even save you file cabinet space.
  • Prioritize your cars in prep. Having a clear bird view of your stock in prep will enable you to manage your staff more effectively, reduce any spare wait time and make it easier for you to support and co-operate with the sales department.
  • Run an entire stock check in seconds. Save time on doing a physical stock audit for your financiers using off the shelf digital tools that collect data instantly and most accurately.

Click here if you’re interested in achieving the above quick wins and successfully reduce your number of days in prep.