Once dealers own used vehicles, time is of the essence. But the recon process at most retail centers isn’t built for speed.
By Ronnie Wendt, Auto Dealer Today
Automotive reconditioning gets a used vehicle ready for market. A dealership might repair and restore body and mechanical repairs, interior damage and more. The quicker a dealership completes this process, the quicker a vehicle can be sold.
The need for speed has become more acute in recon since the pandemic, as consumer demand skyrocketed while auto inventories dwindled. Many dealers drove pre-owned sales to sustain their profitability.
But to get top dollar from used vehicles, dealers must recondition. Vehicles that are properly refurbished command higher prices. However, there’s a side to this coin that isn't as bright. When it takes too long to recondition a vehicle, the return on investment drops.
Dennis McGinn, founder and CEO of Rapid Recon, says most dealerships don't have a seamless recon process. He maintains no one knows who has the vehicle, what has been done, what tasks remain, and if work is being performed in the correct order.
“Cars are in various stages of recon at every dealership. They also have demand for specific cars coming in the front door and online, so there is some jumping around,” McGinn says. “But dealers need an organized process so they can react to changes, project when vehicles will be finished, and remove the reactive part of recon.”
The Need for Speed
A Cox Automotive Report noted, “Once you own the vehicles, speed is of the essence to make the most out of every investment. Ideally, you want to retail at least 55% of your inventory in under 30 days of age to ensure sufficient sales velocity and profitability.”
Cox made this statement in 2017, but these facts ring true today. Demand for used vehicles has picked up as supply chain challenges drove a shortage of new cars and trucks. Dealers needed to purchase used vehicles to satisfy demand and get those vehicles on the market as soon as possible.
McGinn says most dealerships don't have a handle on vehicle reconditioning once they purchase a used vehicle. “They think recon takes two to three days. Realistically, it takes most dealerships 15 to 18 days,” he says.
He frequently attends 20 Groups and hears the same thing over and over. “We don’t have a problem. We recon vehicles in a few days.” “But their information is often incorrect,” he says. “They have a lot of information but no communication. Everything is on a whiteboard or spreadsheet.”
And often dealers don’t count all the cars when calculating their recon rates, according to McGinn. “Dealers only count the ones they remember and the recons that were not too difficult,” he says. “They cannot do that. Every car counts. All of them cost you money. If you still use a whiteboard and pass papers around, there will be a lot of inefficiency. But dealers can get the process down to four days when they organize it.”
He stresses every day of delay costs dealers money. A dealership will usually put $1,000 in labor and parts into a vehicle. It may cost them $5,000 to get a BMW or Mercedes up to snuff and ready to sell.
The average cost per day for a vehicle that sits unmarketed is $40. It goes up to $75-$80 a day for a luxury vehicle. For the sake of calculations, he says every vehicle that spends 30 days in reconditioning can cost a dealer $1,200-$2,400.
Know What’s Being Done
Tracking work that will be done is the first step to greater efficiency, according to McGinn.
Recon involves reconditioning and detailing. There are a variety of automotive repairs, including mechanical repairs; headlight restoration; interior repairs; odor removal; and paint, chip, and ding repairs. Full interior cleaning, wheel and tire cleaning, and exterior washing and waxing are all part of auto detailing.
“The reason it takes so long is you’re doing everything from mechanical work to cosmetic and safety work and getting the car into the merchandising lineup to get it online,” he says. “Before the vehicle can be photographed, all this stuff has to happen.”
McGinn suggests dealers follow the same process for every vehicle. It’s not enough to eyeball a vehicle and write on a whiteboard what needs to be fixed, adjusted, or replaced. A consistent process, he says, maintains a standard of efficiency and quality from vehicle to vehicle.
The Rapid Recon whitepaper, “How to Establish a Time-to-Line Recon Culture: You Can’t Improve What You Can’t Measure,” outlines seven steps to help dealers boost their time to line:
Speed repair approvals. Improve communication between recon and the used car manager to reduce bottlenecks and get work orders approved in minutes instead of hours.
Set spend pre-approvals. Give recon authority to go ahead with some needed work without approvals to keep work flowing uninterrupted. To aid this process, McGinn suggests assigning repair “dollar” buckets for vehicles of varying mileage (low, medium and high).
Structure timelines. Set timelines for when specific types of work must be complete. Vary timelines based on the condition of the vehicle. Monitor times and hold staff accountable for holding to them.
Compensate technicians for vehicle completion time, rather than on a per vehicle basis. Set KPIs to monitor production and pay accordingly. When technicians meet their goals, they receive greater compensation.
Equip for quality and manage by the clock. Don't give allowances for lower quality work but be careful not to over-condition vehicles. Excessive recon costs will not be recouped.
Get training. Train on the reconditioning software you use and apply best practices. An experienced recon performance manager can do this training on site.
Use report data. Measure each step within the recon process and establish new targets to always improve.
Some KPIs to consider when revamping the process include average days in recon and time to line. How long is it from the time you buy the car to the time you finished recon? How long before the vehicle is ready to sell?
“Those things are well defined. It’s both mechanical and cosmetic and includes the acquisition and transportation of getting the vehicle into the system,” he says. “The difference between the two is important because general managers can kind of ignore the average days in recon. These things determine the return you get on your inventory. That’s where your money is. If you’re not turning over cars fast enough, you’re losing money. You lose money when you don't know where things are.”
He adds the recon process also needs accountability. “Most dealerships need to move from people not being accountable to where everything comes together and the general manager says this is where the buck stops,” he says. “That requires a culture change.”
Culture changes occur when dealers add a recon tool to monitor the process from start to finish.
“Dealerships need a system that provides an orderly view of what happens to a vehicle from the time they purchase it to the time all steps are complete,” he says. “The general manager needs to know how long each vehicle spends in reconditioning.”
Automating the Process
A tool like Rapid Recon automates the recon process and puts data at everyone’s fingertips.
With Rapid Recon, all technicians and employees involved in the recon process have access to recon data on their smartphones. “This allows them to do their part, anytime, anywhere,” he says.
So, for instance, a technician examines the vehicle and recommends all possible repairs to bring the vehicle to like-new condition. Someone has to sign off on that, usually the car manager. “But the car manager is busy chasing deals or at auctions trying to buy cars,” says McGinn. “With Rapid Recon, he can approve the repairs from wherever he is at. That step eliminates the problem of cars sitting, waiting for someone to approve the work. It keeps recon moving as smoothly as possible.”
A dashboard screen shows all parties in the recon process and where each vehicle is at. “There’s also a scoreboard that shows the average recon time and time to line,” he says. “Everyone is tied into that so they can see everyone’s contribution or lack thereof on every car.”
When each step is complete, the technician or vendor performing the work simply clicks “done” and the vehicle moves onto the next step. “Everyone gets notified of the change,” he says.
A visual progression tool shows where cars are in the recon progression and when they will be sales ready. “This tool tells you exactly who has the car,” he says. “It can be technicians or vendors, like Dent Wizard, for example. Dealerships don’t do all the work. They have vendors who can do things more efficiently, like cleaning wheels or removing dents from bumpers. The vendors are part of the process, too.”
Dealers who standardize and automate their workflows see positive results. McGinn says most take recon time down from 16 to 18 days to less than five days. He adds that every 2.5 days of taking that number down translates into another inventory turn.
“That’s a substantial number when you consider they expect to make $2,000 on the average car. If they speed up inventory turns for 100 cars, that’s $2,000 a car times 100,” he says. “That’s a big number! Organizing recon adds a lot to their bottom line. But first they need to get everybody on the same page.”
About Rapid Recon
Reconditioning workflow automation from Rapid Reconis the industry standard in time-to-line inventory turn and speed-to-sale vehicle revenue enhancement for automotive retailers. Benchmarking data based on 13 million vehicles processed uniquely positions Rapid Recon to advise dealers on how to improve their store’s profitability. Used by more than 2,000 dealerships, Rapid Recon ensures the accountability of processes, property, and people. Hence, dealers know answers quickly, find assets anywhere, and sell vehicles promptly to grow dealership profitability. www.rapidrecon.com CALL US: +650-999-0497
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OUR EASY-TO-USE CLOUD-BASED APPLICATION CAN BE CUSTOMIZED TO ACCOMMODATE AND IMPROVE YOUR CURRENT WORKFLOW PROCESSES. THIS INCLUDES QUICK UPDATING TO MEET YOUR CHANGING NEEDS. FROM THE VERY FIRST DAY, YOUR PROCESS PERFORMANCE CONSULTANT WORKS WITH YOUR STAFF TO MAKE SURE YOUR SYSTEM DESIGN MEETS YOUR DEALERSHIP'S SPECIFIC REQUIREMENTS. WE THEN PROVIDE ONGOING TRAINING AND FEEDBACK TO HELP YOU REACH YOUR TARGET TIME-TO-LINE (T2L®) PERFORMANCE GOALS.