It’s no real secret anymore that the principles of velocity-based inventory management — where a store turns and earns — is a must to survive in today’s volatile marketplace.

There are ample success stories across our industry where dealers and used car managers have doubled or even tripled their annual inventory turn rates and relied on the profits that derive from velocity principles to keep their stores afloat as new vehicle sales have stalled or disappeared altogether.

Core components of these principles follow a simple premise: You need to know how much a used vehicle is worth at retail and set your gross profit expectations before you determine what you should offer for a trade-in or wholesale purchase price. Put another way, successful used vehicle inventory management flows from a keen understanding of both wholesale and retail markets and their respective pricing trends.

Of course, the fly in this ointment for dealers lately has been how to find vehicles that fit the pricing and profit parameters they’ve set for their store’s success. It’s one thing to know the type and price of a vehicle that’s a “sure-fire winner” for your store; it’s quite another to quickly and efficiently acquire this vehicle so you can take advantage of the opportunity the market presents to you.

Thankfully, our industry now has a solution — one that’s been brought about by convergence among key dealer vendors (e.g., the acquisition of my company, vAuto, by and advances in technology.

Imagine, if you will, a used vehicle inventory management dashboard that tells you what vehicles you should stock, the wholesale prices you should pay, the profit potential you might expect, the time it should take to retail the vehicle and a one-click-to-purchase option that lets you buy the vehicle from a host of auction and other wholesale sources across the country.

What’s more, the click-to-purchase function also triggers the instant posting of this vehicle and its description to your dealership Website and other online retail sites, as well as initiating the transportation of the vehicle to your store for reconditioning and retailing.

This used vehicle inventory management solution will effectively conjoin a variety of different technologies, data sets and vendor capabilities to drive more efficiency to dealers and used car managers. I believe this solution will be a game-changer for our industry on several fronts:

  • Stocking vehicles. The robust and holistic nature of this new tool goes well beyond stocking. In fact, it’s more like provisioning — or the gathering, planning and deployment of necessary resources and market intelligence to supply or “fit out” a dealership’s used vehicle inventory for profitability. In this way, the tool is very much like a Navy Seal commander whose careful planning and provisioning of supplies ensures every team member can survive the mission.
  • Process efficiency. Savvy dealers have already recognized that the more time they eliminate between acquiring and retailing a vehicle, the greater their opportunity for higher turn rates and profitability. The new tool will eliminate several time-killers that continue to pose challenges for even the most efficiency-minded dealers — from transporting the vehicle to touting it online for potential buyers.
  • People efficiency. It’s not uncommon for used car managers to spend three or four hours a day figuring out where to find vehicles that are “right” for their store and then working the phones, the Internet and physical auctions to acquire them. The new inventory management tool will virtually eliminate this time drag, freeing these managers to focus on other important — and oft-neglected — aspects of running their departments, such as ensuring efficiency in reconditioning, closing deals and managing online marketing.

From my perspective, the advent of this new tool could not have come at a better time. First, the industry needs it, as evidenced by the feedback I hear from dealers and used car managers everyday. Second, the market requires it, due to the compression between wholesale and retail used vehicle prices that effectively reduce the “cushion” or margin of error that has historically masked used vehicle acquisition mistakes. Put another way, this new tool gives a competitive advantage in an increasingly unforgiving marketplace.

To be sure, this new tool will be disruptive and challenging for a lot of dealerships — even those who have adopted and seen success with velocity management principles. Why? Because it means more “change” for dealers and used vehicle departments and, in some instances, obsolescence for people who resist change and the advantages this new technology offers.

Let’s remember this: You’re in a business that is continually evolving — you must either embrace this evolution or get left behind.

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