Automotive News - October 17, 2016 - Supplement - S36

36 ❙ OCTOBER 17, 2016 K E L LY B M W, C O L U M B U S , O H I O , A N D PA U L M I L L E R B M W, WAY N E , N . J . RIGHT MIX, RIGHT TIME Tight daily inventory control gives dealerships an edge Printed in Automotive News June 13, 2016 Mark Elias autonews@crain.com E Toughness pays off "We frankly don't accept as much inventory as others, and it's a daily management [exercise] for us - a big part of our DNA," said Michael Gruber, general manager of Paul Miller BMW in Wayne, N.J., about 30 miles northwest of Manhattan. Robare, an avid Ohio State Buckeye fan, Paul Miller BMW's general manager assesses stock daily and tweaks intake of vehicles to keep floorplanning costs low. " "As sales manager, I pay close attention to how our in-stock cars are ordered. We put a lot of time and effort into making sure we are ordering the right mix." Eric Robare Kelly BMW " ric Robare thought he knew how to balance supply with demand. Then the Great Recession hit, forcing him to devise a whole new game plan. "We found ourselves in a position after the business downturn that made us realize we really needed to tighten up our processes for inventory management and control," said Robare, sales Ⅲ Careful inventory manager of Kelly BMW in control Columbus, Ohio. improves Robare and many other turn rates dealership managers learned and profits to pay close attention to inventory management during the recession. But then as the economy recovered and new-vehicle sales soared, some got away from that discipline as they became more confident that cars and trucks on their lots would find buyers. Today, even as the pace of volume growth slows, some automakers have continued to crank up production, in some cases creating a glut. When that happens, those factories urge dealers to take more cars, through incentives, strong-arming or both. But for dealers, too much of something isn't Robare: Inspired always a good thing. So by football smart dealership managers are remembering the lessons they learned. For them, stocking the right vehicles at the right time allows their stores to turn inventory quickly and profitably. turned to football for inspiration on inventory management fundamentals. He cites a quote seen in locker rooms across the country: "Tough times don't last ... tough people do." During the recession, Kelly BMW was forced to get tough with expenses at every level, including inventory control. That toughness has helped to carry the retailer into the good times. The dealership sells about 900 new and used vehicles a year and has increased its inventory turn rate, or the number of times within a year that the dealership depletes its inventory. Robare's store has a lease penetration rate of 62 percent. For that reason, the dealership is able to manage some inventory by early contact with its loyal customer base. The dealership starts contacting those customers about 120 days before their lease expires to get a sense of how many replacement vehicles to order. "As sales manager, I pay close attention to how our in-stock cars are ordered," said Ro- bare. "We put a lot of time and effort into making sure we are ordering the right mix of cars." Priority ranking He actively uses BMW's inventory priority ranking system. Say a dealer has a dozen 3 series in stock and 10 more on the way, and knows that is too many. That dealer can rerank those en route to slow their delivery for up to 60 days. From there, adjustments can be made to dealer stock so that BMW knows whether to ship vehicles immediately or delay them. Robare uses that system to divert, delay or put vehicles into what BMW calls its allocation risk pool. Dealers around the country can pull from that risk pool. The advantage to Robare in managing his stock with BMW's system is that if a certain model starts to stack up, BMW may throw incentives on it. "Guys like me get those cars knowing they might be a better deal than some other models," said Robare. But there are still cars he shies away from, say a rear-wheel-drive hybrid, which is in low demand in the four-season Midwest. "A rear-driver like that could sit for six to nine months," Robare said. "We'll opt to put it back into the risk pool. The last thing I want is 250 cars on the ground and more coming in that we can't manage." Paul Miller BMW averages a lean 46.2-day supply of new car inventory, well below the industry norm of 60 days. As of June 1, BMW brand dealerships' inventory across the U.S. continued on next page

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