By Doug Austin Founder and President, StrategicSource, Inc. // Ownership Save Today... Gone Tomorrow There is no question that dealerships are focused on cutting costs in 2018. We see it in our business, we heard it at NADA, and we talked with suppliers who were honing in on that message as well. Cut costs and track the reductions...a great objective for any business or nonprofit. So how are dealerships going after cost reductions? What is the prevailing cost reduction strategy used by dealerships? And is the strategy effective? MOST COMMON DEALERSHIP COST REDUCTION STRATEGIES The dealership approach to cost reduction initiatives is often informal and not very organized. This is probably due to the fact that they are operating with little infor- mation and the resources they have are already taxed. The approaches we see most often include the following: 1. Senior management will advise managers that costs are too high and give them the freedom to figure out how best to approach the problem. CUT COSTS AND TRACK THE REDUCTIONS...A GREAT OBJECTIVE FOR ANY BUSINESS OR NONPROFIT." 2. Management will encourage managers to call in the largest suppliers for new negotiation session and new pricing 3. Aggressive managers will call in other suppliers to "Grind them down" for new price concessions 4. Hope...hope that someone in the organization will make a dent in expenses because they are paid on profitability 5. Increase Sales - Increasing sales can hide a lot of operational sins (expenses) TOP 5 REASONS MANY COST REDUCTION STRATEGIES FAIL Some cost reduction efforts succeed and move the needle on expenses. Others never really get off the ground and can fail for the following reasons: 1. LACK OF ORGANIZED EFFORT - purely tactical approach going after a few select categories 2. LACK OF TIME/ PATIENCE - nobody has the time or desire to organize the effort and/or they lack the patience to see it through if an effort is created 3. LACK OF EXPERTISE - even if they did have the time, most management teams don't know where to start with an effective cost reduction strategy 4. WRONG PHILOSOPHY - If the objective is to obtain a 22 M AY 2 0 1 8 D I G I TA L D E A L E R . C O Mhttp://www.DIGITALDEALER.COM