Digital Dealer - November 2019 - 9

efficiently and most cost-effectively than your own
staff can at some levels.
Human resources, information technology, marketing,
procurement, compliance
management, and selected
consultants can bring significant value at a fraction
of the cost. If you excel in
marketing, sales, service,
and customer support, it
might make sense to focus
on those areas, and leverage the expertise of outside
professionals to help you
achieve best-in-class status
in other functional areas.
 Comprehensive Cost
Reductions - five percent
of total revenues are spent
on services and supplies.
Research says (and has
been borne out by our
practice) that a thorough
review and implementation
of new solutions of the 130
expense categories can
throw off up to 25 percent
of that spend number. Will
all categories generate big
savings? Hopefully not,
but there will be enough
savings opportunities to
average 25 percent for most
groups if you approach this
correctly.
Employees like to buy
and interact with suppliers
for some obvious reasons.
Executive management
needs to insist on optimizing (reducing) the supplier
base to maximize leverage,
reduce pricing, costs, and
inefficiency. Pushback
from internal employees
against these changes are
often simply a reluctance to
change and unwillingness
to give up tasks they enjoy...and sometimes benefit

from.
 Improved Operational
Performance - These operational improvements can
come from many areas of a
business and is often driven
by the employees themselves. A simple process of
soliciting new ideas from
employees to drive waste
out of the organization can
yield significant opportunities. Top that process off
with a financial reward to
the employees, and you
will have a way to improve
morale, drive employee
engagement, and reduce
costs as well. Your suppliers

as a short-term project, but
rather they organize around
and build competencies to
manage costs and expenses routinely.
Large organizations
tend to centralize to realize
economies of scale. They
leverage their suppliers,
partner with their suppliers
to manage costs. They
know that having too many
suppliers increases costs,
complexity, and drives inefficiencies. Dealerships do a
lot of things right - managing by metrics and sharing
best practices among similar businesses, but decen-

A SIMPLE PROCESS
OF SOLICITING NEW
IDEAS FROM EMPLOYEES
TO DRIVE WASTE OUT
OF THE ORGANIZATION
CAN YIELD SIGNIFICANT
OPPORTUNITIES."
and consultants know your
business well, so tap into
them before year-end, and
ask them for their suggestions on how to drive costs
out, and bring new profits
into the business.
EXPENSE MANAGEMENT IS A DISCIPLINE,
A FUNCTION, NOT
A PROJECT

Look at Fortune 500/
Fortune 1000 organizations
that have staying power
and operate at high levels
of efficiency. These organizations don't approach
expense management
only when times are bad
or when economic times
are challenging. They don't
view expense management

tralized operations provide
diseconomies of scale and
costs the dealership money
and profitability. Consider
the development of a spend
management group in 2020
or look at outsourcing that
role for efficient and effective expense management.
A Spend management function could reside in operations or report to the dealer
principal as it will cross
many functional lines within
a business and has to have
the freedom to uncover
waste, regardless of the silo
they are looking at.
SUMMARY

Dealers do a great job
squeezing a small profit out
of large operations. The job

D I G I TA L D E A L E R . C O M

is becoming more challenging, not less challenging. As
a result, the dealer has to
arm themselves with new
options, a larger arsenal
of strategies and tactics to
drive to the desired profit
level. Many factors influencing profitability are outside
of a dealer's control. But
the dealer still has almost
a dozen levers that he/she
can pull to drive new profit
levels. The choices are not
an either-or, but most of
them can (and should) get
implemented simultaneously.
Is now the time to begin
thinking about your 2020
profitability strategy? Starting your planning process
now is a good idea so that
you can stay ahead of
events and in control, rather
than reactive later.
If your dealership is
interested in an updated
expense management planning tool for 2020, email
daustin@strategic
source.com.
DOUG AUSTIN is the
founder and president of
StrategicSource, Inc., the
leading provider of spend
management services for
the automotive and truck
dealerships, and various
other vertical markets. Doug
is a veteran of the U.S.
Marine Corps, a graduate
of the University of St.
Thomas, and a speaker
at various conferences,
20 Groups, seminars
and webinars. Doug has
acquired 30+ years of
line, staff, and executive
experience in spend
management and supply
chain management in
various vertical markets.

NOVEMBER 2019

9
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Digital Dealer - November 2019

Table of Contents for the Digital Edition of Digital Dealer - November 2019
