Digital Dealer - July 2018 - 24

D E A L E R OP S & M ANAGEM ENT: Su p p lier M anagement

By Doug Austin
Founder and President of
Strategic Source, Inc

Your Supplier
Base Is Costing
You Big Money
Dealers that are
preparing for future
tough or leaner times are
looking at all options to dial
down their cost structure.
They are looking at headcount, floor plan, compensation structures...the usual
approaches.
While I am a big proponent of managing your
spend effectively, one of the
areas we don't address very
often is the cost of your supplier base. We've had the
good fortune to be engaged
by dealer groups of all sizes...small single points, to
small groups to large groups
to mega groups. In these engagements, there are a few
common denominators that I
would like to call out:
„ There are roughly 130
different expense categories
in a dealership - a finite
number
„ Dealerships can
have an infinite number of
suppliers supporting their
dealerships
„ Less than 10% of the
dealerships manage their
supply base well...250 -
325 suppliers on average
„ 90% of the dealerships
manage their supply base
poorly - 325 suppliers to
6,000 suppliers across a big
group
24

J U LY 2 0 1 8

STRUCTURE - too many
buyers or decision-makers
making supplier decisions.
2. LACK OF
PURCHASING POLICIES
- No standard supplier

selection process, lack of
internal controls

3. LACK OF STRATEGIC
PERSPECTIVE - Tactical

approach to purchasing -
get-it-done mentality

4. CONTINUOUS PRICE
SHOPPING - Tactical

approach to purchasing, constant internet shopping for
the cheapest item regardless
of how many suppliers and
cost is added
5. MANAGEMENT
TURNOVER - New

management brings new
suppliers aboard resulting in
further dilution of the spend
and loss of leverage.
WHO IS IN CHARGE?

Suppliers are a necessary
part of doing business. We
hire those suppliers that
can perform certain tasks
more efficiently and more
effectively than we can. We
hire those suppliers that can
provide the supplies and capabilities we need. But how
many suppliers are enough?

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

What does the optimal supply base look like?
What are the costs of a
large supply base? Who
makes these decisions?

TOP FIVE REASONS
FOR LARGE SUPPLIER
BASES
1. DECENTRALIZED
PURCHASING

"When everyone is in
charge...nobody is in
charge." This is particularly
true in spend management
and the purchasing space. If
you allow your managers to
shop continuously and bring
every new supplier on because they have a killer deal
on brake clean or paper or
wheel weights...your supply
base will grow. If every new
marketing company can visit
your sales department and
sell them a new service, that
you might already have and
are already paying for, your
supply base will grow. If you
have management turnover,
as all companies do, rest assured the new management
will bring on their supplier
friends...and your supplier
base will grow.
Unless your organization
has a well thought out pro-


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Table of Contents for the Digital Edition of Digital Dealer - July 2018

Digital Dealer - July 2018
Contents
Message from the Show Director
Learning Leadership From Coach John Wooden
Anatomy of a Dealership That Gets Superior Results
Internal vs. External Buy-Sell?
FOMO (Fixed Ops Manager’s Objectives)
So Many Used Cars, so Little Time
Dealership Real Estate – to Invest or Not?
Commentary: Online-Only Car Sales Are Hurting the Industry
Your Supplier Base Is Costing You Big Money
Interview With Kevin Frye of Jeff Wyler Automotive Family
To Text or Not to Text?
Figuring out What F&I Products Your Customers Need
Bridge the Gap Between Offline Car Sales and Online Actions With Facebook's Offline Conversions
The ‘BIG 5’ of Marketing Success!
10 Reasons Why Your Facebook Page Is Failing
Why Digital Retail Is Great News for Automotive
How to Drive Automotive Leads With Facebook
Digital Dealer - July 2018 - CT1
Digital Dealer - July 2018 - CT2
Digital Dealer - July 2018 - Digital Dealer - July 2018
Digital Dealer - July 2018 - Cover2
Digital Dealer - July 2018 - 1
Digital Dealer - July 2018 - Contents
Digital Dealer - July 2018 - 3
Digital Dealer - July 2018 - Message from the Show Director
Digital Dealer - July 2018 - 5
Digital Dealer - July 2018 - Learning Leadership From Coach John Wooden
Digital Dealer - July 2018 - 7
Digital Dealer - July 2018 - Anatomy of a Dealership That Gets Superior Results
Digital Dealer - July 2018 - 9
Digital Dealer - July 2018 - 10
Digital Dealer - July 2018 - 11
Digital Dealer - July 2018 - Internal vs. External Buy-Sell?
Digital Dealer - July 2018 - 13
Digital Dealer - July 2018 - FOMO (Fixed Ops Manager’s Objectives)
Digital Dealer - July 2018 - 15
Digital Dealer - July 2018 - So Many Used Cars, so Little Time
Digital Dealer - July 2018 - 17
Digital Dealer - July 2018 - Dealership Real Estate – to Invest or Not?
Digital Dealer - July 2018 - 19
Digital Dealer - July 2018 - 20
Digital Dealer - July 2018 - 21
Digital Dealer - July 2018 - Commentary: Online-Only Car Sales Are Hurting the Industry
Digital Dealer - July 2018 - 23
Digital Dealer - July 2018 - Your Supplier Base Is Costing You Big Money
Digital Dealer - July 2018 - 25
Digital Dealer - July 2018 - Interview With Kevin Frye of Jeff Wyler Automotive Family
Digital Dealer - July 2018 - 27
Digital Dealer - July 2018 - 28
Digital Dealer - July 2018 - 29
Digital Dealer - July 2018 - 30
Digital Dealer - July 2018 - 31
Digital Dealer - July 2018 - To Text or Not to Text?
Digital Dealer - July 2018 - 33
Digital Dealer - July 2018 - Figuring out What F&I Products Your Customers Need
Digital Dealer - July 2018 - 35
Digital Dealer - July 2018 - Bridge the Gap Between Offline Car Sales and Online Actions With Facebook's Offline Conversions
Digital Dealer - July 2018 - 37
Digital Dealer - July 2018 - The ‘BIG 5’ of Marketing Success!
Digital Dealer - July 2018 - 39
Digital Dealer - July 2018 - 40
Digital Dealer - July 2018 - 41
Digital Dealer - July 2018 - 10 Reasons Why Your Facebook Page Is Failing
Digital Dealer - July 2018 - 43
Digital Dealer - July 2018 - Why Digital Retail Is Great News for Automotive
Digital Dealer - July 2018 - 45
Digital Dealer - July 2018 - How to Drive Automotive Leads With Facebook
Digital Dealer - July 2018 - 47
Digital Dealer - July 2018 - 48
Digital Dealer - July 2018 - Cover3
Digital Dealer - July 2018 - Cover4
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