By Dennis McGinn
What is the right goal for your Average Days in Recon (ADR) – is it two days or is it 10? Somewhere in this range is the right answer for your store, your market, and your team. Determining your best ADR requires knowing where cars are in your reconditioning flow – and how long it takes to recon them to sale-ready.
As the saying goes, “You cannot manage what you do not measure,” and now that EVERYONE has a smartphone, one click stops the clock and the finger pointing for every car completing a step.
For an Ohio volume-based dealer retailing more than 300 used units a month, accurate measurement of its recon workflow was 18 days. New processes and staff changes helped reduce ADR to seven. This gain added three inventory turns and as ADR leveled out the dealer decided a seven-day ADR was right for them.
A Toyota Dealer in Utah using workflow wanted to double their volume in an already competitive market without adding inventory. They decided the right approach was to get their cars online first even before anything else. They were running eight days ADR at the start and knew they must get to five days to make that plan work; to do that, they needed to have dedicated capacity in the shop and detail. They started with an efficiency analysis and as a result dedicated five techs to recon. Their volume quickly increased by 50%, and now it is at 200%.
A Colorado BMW dealer with a volume used car operation applying the same logic to its recon process proved even a premium high-line store could achieve a consistent three-day ADR.
Therefore, it is safe to say that a three-day ADR is attainable and being delivered by some dealers, but, for others, that is just not optimal for their needs. Only the GM can decide on the optimal balance and the associated trade offs.
When discussing lower ADR, we have to allow that some situations affecting recon outcomes are out of the department’s control. Therefore, continuing to strive toward a result consistently thwarted by external complications that recon cannot control is like banging your head against truck fenders. Such is the life of many reconditioning managers who want more productive shops. They know that bottlenecks run up vehicle depreciation holding costs, erode gross, and limit inventory turn. A three-day ADR remains elusive.
If this is you, relax; continue to get faster, more streamlined, and more profitable in recon, but don’t stress that a three-day ADR remains a stretch – yet don’t use the gap as an excuse to stop trying, either.
Progress, not perfection
Never thought I would say this – driven by numbers, accountability, and ever-reaching perfection that I am – but the ideal in contemporary recon is progress, not perfection. However, to progress you must know the facts as they relate to your operation – and how you operate.
For example, using a spreadsheet or whiteboard to track and monitor cars through recon gives you at best a good guess.
But you want to know a real number – reality, not someone’s opinion or CYA. Get staff together in a room and figure it out. Time a sample of cars from when logged into recon until they are placed on the retail lot.
The ADR clock starts when units are onboarded from finance or off the transports and moved into recon and stops when completed vehicles are placed on the retail lot. You measure this.
No two dealers include the same steps in their ADR. So, when comparing your outcome versus a three-day goal, measure against similar operations. Some dealers put cars on the sales line right from mechanical and handle detail and cosmetics once on the lot. Others do a greater volume of higher mileage units, which will probably need more attention and time. Some organizations may not staff the appropriate number of technicians for the volume to be reconditioned, due to subjective decisions or the labor pool, for instance, to meet a three-day ADR outcome.
First things first
The magic of reconditioning workflow software is it enables dealership staff to employ it for bumper-to-bumper recon – or for individual pieces of the entire process. Be sure it helps you structure recon’s many steps and processes and accurately monitors what’s happening and gives you real-time accountability reporting – by store, group, or stores within groups.
As a reminder, every day saved in recon flows right to the bottom line. Here is how:
- It reduces daily per vehicle holding cost depreciation. NCM Associates pegs that at $36 for non-brand luxury cars. This depreciation erodes sale gross. A holding cost for a seven-day ADR is $252, $360 for a 10-day cycle – and $108 for a three-day ADR. Your holding cost erodes actual sale gross by that amount.
- Cars that get to the front line sooner give you more opportunity to sell during their first 30 days you own them. A three-day ADR leaves 27 days for this; a 10-day ADR leaves 20.
- Every 2.5 days cut from your current recon cycle will increase inventory turn by one.
Some things in life have to be perfectly done: timing for al dente pasta; a USDA Choice steak on the grill – and a dry martini. Three-day ADR is perfection in reconditioning, but it is not an absolute. The goal is steady improvement in reconditioning practices that result in greater efficiency and fewer delays for your particular style and operation.
About the author:
Dennis McGinn is founder and CEO of Rapid Recon, (www.rapidrecon.com) the industry’s most advanced time-to-market workflow tool for auto dealership reconditioning and used car departments. www.rapidrecon.com