Profit Pitstop: Utilizing a Dealer’s Inventory Management System Fully Ensures Sustained Profitability

News
5 min read

In recent years, dealers enjoyed record-high gross margins on new and pre-owned car sales. However, with inventories returning to pre-COVID levels, dealers are facing a marketplace with increasingly compressed sales margins. Salesmanship is important, but dealers recognize the importance of using cutting-edge technology to help sustain profitability.

I am often asked what technology I recommend dealers should add to their tech stack to optimize their sales operation. Generally, my immediate answer is “That depends.” There is no simple answer to the question as it calls for a complete understanding of the dealer’s complete tech stack, but my response is generally presented through a series of questions, including “What system do you have, and how do you use it/them?” Often, dealerships consider adding new technological solutions without evaluating if their current systems meet their needs. Before investing in new tools, dealers should assess the features and functionalities of their existing systems to support their sales and operational efforts effectively. This evaluation can be complex due to the integration with other systems and technologies, coupled with the need to understand the utilization of system features available.

Below, I’ll examine one of the most important dealer systems, specifically Inventory Management Systems (IMS). IMS offers a wide range of features to streamline operations and provide valuable data to help guide its users to increased performance. By fully utilizing features such as data analytics, market conditions, stocking recommendations, mobile access, asset lifecycle management, and performance governance, dealerships can optimize their inventory processes, improve customer satisfaction, and stay competitive.

Gaps in Training

Training can only go so far. Performance Managers for these products are at the mercy of the dealer’s ability to accurately articulate the dealership’s vision. They are trained to share best practices and provide guidance but may not be fully immersed in the culture of each store. This lack of immersion can lead to a misalignment between the training provided and the actual needs of the dealership. Does your dealership have a champion of these tools to help bridge the gap between good and great? This champion can act as a liaison, ensuring that training is not only received but also effectively applied, tailored to the dealership’s specific context, and continuously reinforced.

Execution and Functionality Gaps

Does your staff possess the knowledge to analyze the provided data and how it relates to your platform? Data and systems are like constellations, single dots in the sky until someone shows you how to connect the lines to create a full picture. This requires not just technical know-how but also an understanding of how to interpret data in a way that informs strategic decisions. For instance, understanding how to use data analytics to identify sales trends or market conditions can transform disparate data points into actionable insights. Without this capability, even the most advanced IMS can fall short of its potential, as the full value of its data remains untapped.

User Engagement and Utilization

User engagement is another critical area where gaps are evident. Employees must engage with the IMS regularly to benefit from its capabilities. If the system is perceived as cumbersome or not user-friendly, staff will be less likely to use it effectively. Ensuring that the IMS interface is intuitive and providing ongoing support can help improve user engagement. Additionally, involving staff in selecting and customizing the IMS can lead to higher buy-in and more consistent use.

It’s also critical to avoid shortcuts that aim to simplify or speed up processes. While these may seem beneficial in the short term, they can undermine the accuracy and reliability of performance tracking data. Accurate data is essential for identifying areas of improvement and supporting growth. By diligently following proper procedures and fully engaging with the IMS, staff can ensure that the data collected is comprehensive and reliable. This, in turn, provides a solid foundation for performance analysis, strategic planning, and continuous improvement. Engaging fully with the system and avoiding shortcuts will lead to more accurate tracking and better-informed decisions, driving long-term growth and success.

Knowledge and Application

A deeper understanding of the IMS can significantly enhance its application. For example, features like mobile access can improve efficiency by allowing sales staff to update inventory information in real-time, even when away from their desks. However, if employees are unaware of this capability or how to use it, the benefit is lost. Knowledge sharing and creating a culture of continuous learning can bridge this gap.

Optimizing IMS Features

To fully leverage the IMS, dealers need to focus on the following functionalities:

  • Data Analytics: Utilizing data analytics can provide insights into sales trends, inventory turnover rates, and customer preferences. This information is crucial for making informed stocking decisions and identifying which vehicles are likely to sell quickly.
  • Market Conditions: Monitoring market conditions helps dealers understand the broader economic environment and adjust their strategies accordingly. This includes analyzing competitors’ pricing, regional demand variations, and market saturation levels.
  • Stocking Recommendations: Advanced IMS can offer stocking recommendations based on historical sales data and predictive analytics. This helps ensure that the inventory aligns with anticipated demand, reducing the risk of overstocking or stockouts.
  • Mobile Access: Mobile access allows staff to manage inventory on the go, improving efficiency and response times. This is particularly useful for salespeople who can update the status of vehicles or check inventory while interacting with customers on the lot.
  • Asset Lifecycle Management: Effective asset lifecycle management ensures that vehicles are tracked from acquisition to sale. This includes managing depreciation, maintenance, and reconditioning processes to maximize the vehicle’s value and profitability.
  • Performance Governance: Implementing performance governance involves setting benchmarks and key performance indicators (KPIs) to measure the effectiveness of inventory management strategies. Regularly reviewing these metrics helps identify areas for improvement and ensures that the IMS is contributing to the dealership’s overall goals.

Inventory Management Systems enhance Improvements in Dealer Operations

The underutilization of Inventory Management Systems in automotive dealerships represents a significant and missed opportunity for efficiency and growth. By addressing gaps in training, execution, functionality, user engagement, and knowledge, dealerships can unlock the full potential of their IMS. Fully leveraging these systems can lead to optimized inventory processes, improved customer satisfaction, and sustained profitability, even in a challenging market environment.

Author: Jon Karasek

VP Remarketing, Mach10 Automotive.

Having recently held the position of Regional Director of Digital Strategy and Innovation for the industry’s largest independent auto auction group, Jon’s skills range from mechanical/technical certifications to wholesale and retail sales. Jon was recognized for leadership accomplishments when honored with the 2021 Automotive Remarketing 40 Under 40 Award. He is an accomplished auctioneer with over 20 years of experience in the automotive industry. Jon graduated from the World Wide College of Auctioneering, and then excelled as the GM of one of Southern California’s premier wholesale auto auctions.

Denyn Pysz

Sales Director

Denyn is a dynamic automotive sales leader with over 20 years of experience, recognized for his expertise in technical certifications, retail sales, and service. With a proven record of driving growth, Denyn has excelled in key management roles across dealership operations, equipping him with a comprehensive understanding of dealership needs at every level. Known for his ability to build high-performing teams and deliver revenue growth, his innovation-driven approach and industry insight make him a trusted authority in automotive sales and service. At Mach10, Denyn advises our clients in Sales, Service, F&I, and Operations, guiding them toward optimized performance and success.

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Kathi Kruse

Financial Operations Analyst

Kathi Kruse is a uniquely qualified and accomplished automotive retail advisor. Recognized as a dealership profitability specialist, digital strategist, trainer/coach, podcaster, and author, Kathi is the creator of the Kruse Control Newsletter, and Founder/CEO of Automotive CFO-To-Go, and Kruse Control Inc.  Born in the heart of Los Angeles to a family of “car people”, Kathi’s passion for the car business spans a 25-year automotive retail career, managing wildly successful $100M+ stores in Southern California. Her exceptional experience, combined with her innovative methods, has led to transformational outcomes and increased profits for over 1,000 clients to date.

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Chris Pero

Managing Director

Chris’ automotive experience spans over a decade in both retail and wholesale. Chris has provided support by growing an auction company at the management level in southern California, and most recently, he was a part of the management team at a Ford and Lincoln dealership.Through his unique experience and determination, he has a proven track record of growth and success and understands the unique needs of the dealership at every level.

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George Pero

President & CEO

Extremely accomplished leader in the automotive industry recognized for his success in retail and remarketing. George’s career achievements include successfully launching and running Auctions In Motion (“AIM”), a regional “mobile” auction company that brings the auction to the dealer. George also holds a wealth of knowledge & expertise in mergers & acquisitions in the automotive sector. He recently served as the Vice President of a national brokerage firm where he was one of the top producers. His experience in the M&A industry brings a keen sense of the due diligence process as well as the art of negotiating while representing both seller and buyer.

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Michael Yanke

Vice President Marketing, M&A

Michael has demonstrated success in expanding multimillion-dollar sales and fostering growth while providing sales leadership in highly competitive global markets. Michael brings decades of marketing management with a proven record of achievement. For over 25 years, he has been successful at building new businesses, securing client loyalty and forging strong relationships with external business partners. His extensive knowledge of marketing strategies, channels, and branding has helped companies achieve success through his leadership, communication, and collaboration abilities.

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Jon Karasek

Vice President

Having recently held the position of Regional Director of Digital Strategy and Innovation for the industry’s largest independent auto auction group, Jon’s skills range from mechanical/technical certifications to wholesale and retail sales. Jon was recognized for leadership accomplishments when honored with the 2021 Automotive Remarketing 40 Under 40 Award. He is an accomplished auctioneer with over 20 years of experience in the automotive industry. Jon graduated from the World Wide College of Auctioneering, and then excelled as the GM of one of Southern California’s premier wholesale auto auctions.

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Chris Pero

Director, M&A

Chris’ automotive experience spans over a decade in both retail and wholesale. Chris has provided support by growing an auction company at the management level in southern California, and most recently, he was a part of the management team at a Ford and Lincoln dealership.Through his unique experience and determination, he has a proven track record of growth and success and understands the unique needs of the dealership at every level.

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David Foley

Director, Dealer Operations

David is a seasoned automotive executive with over twenty years of industry experience. As a results-driven Sales Manager, he consistently delivers impressive revenue growth and prioritizes customer satisfaction. Renowned for his ability to build and lead high-performing teams, David’s visionary approach and innovation-driven mindset keep him at the forefront of the automotive sector. His unwavering integrity and keen eye for industry trends position him as a trusted leader actively shaping the future of automotive sales.

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Sam Abergel

Director, Fixed Operations

With over four decades of automotive industry experience, Sam’s impressive career began in sales at a Chrysler Plymouth dealership, where he was promoted to Service Manager within 18 months. Noteworthy achievements include leadership roles as the President of the Parts and Service Managers Guild in Los Angeles and representation on the Porsche North America Round Table. Sam’s extensive experience and track record of performance improvements includes orchestrating successful dealership transitions, managing and growing service and fixed operations as a transformative leader at Chrysler-Dodge, Audi, Lexus, and Porsche dealers. At Mach10, our clients benefit from Sam’s expert knowledge in driving dealership profitability through strategic guidance, coaching, and creating tailored client solutions.

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Shasta Pellegrino

Executive Administrator

Shasta is a dynamic professional who excels at identifying and implementing effective solutions to complex problems. Her dedication to Mach10’s administrative needs and her commitment to excellence make her an invaluable asset. Shasta's passion for working closely with people and ability to collaborate seamlessly with colleagues and stakeholders alike makes her a perfect fit for the Mach10 team. With her blend of administrative expertise, people skills, and proactive approach to problem-solving, Shasta is poised to contribute significantly to the success and growth of our team and our client partners.

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Carsten Preisz

Chief Marketing Officer

Carsten’s extensive achievements includes introducing and establishing Dutch Supercar Spyker in the Americas and holding senior management/executive positions with esteemed and iconic automotive OEMs to include Rolls-Royce, Bentley, Peugeot, and Fisker Automotive. Most recently, Carsten’s contributions with Market Scan Information Systems, Inc., were key to the company being acquired by S&P Global Mobility.

Whether the challenge calls for creating the customer standards for Bentley/Rolls-Royce or being responsible for the Los Angeles Marathon TV-broadcast, which led to an Emmy nomination, Carsten is instinctually entrepreneurial and an out of the box thinker who enjoys solving strategic challenges to elevate the client experience and maximize profitability.

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