I mentioned a few Zingers ago that you were going to hear a lot about "Life Cycle Management" during the course of this year. With gas prices and the national debt going through the roof; inflation starting to creep in and ultimately interest rates rising, your ability to manage your inventory will be one of the most important areas for you to refine and attack.
Recently I’ve introduced to my readers and clients EWR, "Early Warning Radar." Today I want to explain it in more detail and share with you a very important element to make it even more effective for you.
EWR starts off with a "Trade Walk" every morning right after your save-a-deal meeting. (If you are not doing a save-a-deal meeting you are already a step behind.) All members of the management team, including the service manager go on the "Trade Walk." There is only one definition for the word all.
All trades as well as all "purchase units" are parked in a staging area and are part of the "Trade Walk." During the "Trade Walk" a decision will be made as to what you will do with those vehicles. For the most part your choices will be to wholesale, retail, or possibly to run them through the shop for further determination, etc.
You never, ever want one person to be the decision maker on these cars. The more managers you get involved on the trade walk the better. Two heads are better than one may be a theory you can get your head around.
There must be an Expiration Date or "ED" set on each vehicle. A good starting point is some cars get 20, some 30 and some get 45 days. You can come up with your own criteria. In my little world purchase cars as a rule get 30 days and trades get 45 days.
All three Expiration Dates are important but the most important one is the 20 day or EWR units. During the trade walk you want to establish if any of the following are present about each unit:
1. Equity position (the lack thereof.)
2. Make-a-Deal Car (Did you step up on something to make another car go away?)
3. Odd Equipment (Maybe it needs leather and/or sunroof?)
4. Previous Sales History (You’ve just not done well with it in the past.)
5. Bad Color
6. No Experience (You just don’t know much about it.)
7. Service History (Been in and out of your shop a lot.)
8. Potentially Large Repair Bill (going to cost a lot to get it on line.)
9. High Miles
10. CarFax Report (Somewhat suspicious.)
11. Gut Feeling
If a car has any of these or especially more than one, then it’s an EWR car. We have developed EWR stickers (Click Here To View) The sticker goes on the windshield and stays there until it’s sold. There is a place on the sticker for you to write the "ED" date.
"ED" date is 20 days from the date the car has come into your inventory. This sticker will serve as a reminder every time you walk by the car that the clock is ticking and you can clearly see when it has to be gone by.
Now, I’m going to give you the piece of the puzzle that makes "Life Cycle Management" really work for you. It’s the part I believe we have had wrong for years. Most dealers produce an age report that shows how many days they have had a car in inventory. Stop it.
Start doing this; each car should be tracked based on how many days it has "left to go," or its expiration date, better known as "ED." Not how many days it has been in stock. Of course your tracking will be a minus number of days if you allow a car to go past its "drop dead" date.
If you set the "time lines" during the "trade walk," and track them the way I’ve suggested you will be amazed at how your intensity will improve towards turning your inventory.
My time is up. That’s all I’m gonna say.