Digital Dealer - December 2019 - 12

D E A L E R OP S & M ANAGEM ENT: Sp e n d M anagement

By Doug Austin
Founder & President,
StrategicSource, Inc.

For Sustainable
Profit - Build
a Purchasing
Department
95 percent of auto
dealerships in the U.S.
and Canada are decentralized in their purchasing
approach - meaning various
personnel are tasked with
managing selected expenses, including the periodic
shopping, quoting, benchmarking and negotiation
with suppliers. In contrast
with businesses from other
industries, you will probably
find that 95 percent of those
groups do have a purchasing department to manage
suppliers, pricing, contracts,
service levels, and more.
Dealership personnel are
often involved in the following purchasing areas:
„ Dealer Principal: Insurance products, warranty
products, DMS, uniforms
„ CFO/Controllers: Merchant services, insurance,
small package transportation, DMS
„ GMs: Marketing products & services, uniforms
„ GSMs: Printed items,
marketing services and
products
„ Fixed Operations/Service Managers: Uniforms,
facilities expenses, shop
supplies, lubricants
12

DECEMEBER 2019

„ Office Manager/
Payables Clerks: Office
supplies, copiers, postage
machines, printed items
KEY QUESTIONS FOR
DEALERS/EXECUTIVE
MANAGEMENT

Do the above-mentioned
positions and staff...
1. Have time to seek out
other qualified suppliers to
quote in the categories?

6. Do they quote and
negotiate business terms,
credit card payment terms,
and service levels?
7. Have they made it
through the majority of the
100+ expense categories
each year or so?
8. Are they reluctant to
change suppliers and just
find it easier to continue
working with the same sup-

NEGOTIATING PRICES
BASED ON GUT RATHER
THAN DATA, COSTS
COMPANIES UP TO 25
PERCENT ON AVERAGE."
2. Quote a few items
(15 high usage shop supply
items) or all of the frequently used (400 items) in the
category?
3. Do they even quote
at all - or just continually
shop for items on the web or
Amazon?
4. Does your team use
benchmarks to validate pricing before they finalize an
agreement with a supplier?
5. Have they achieved
"locked pricing" for the products and services for 12, 24,
36 months?

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

pliers?
9. Is your team throwing
off cost savings or new profitability of up to 25 percent
of your spend when they
complete the projects?
DECENTRALIZED
PURCHASING
CHALENGES

Decentralized purchasing functions result in
inefficiencies, lost profit, and
often the following challenges:
1. No Benchmarks.
Staff performing purchasing
tasks have no price bench-

marks and instead rely on
their "negotiating skills,"
which has little correlation to
competitive pricing.
2. Non-Competitive
Pricing. Negotiating prices
based on gut rather than
data, costs companies up to
25 percent on average.
3. Narrow Scope.
Decentralized groups don't
work from a financial plan
of all expense categories
but focus on a few lines and
categories that clearly jump
out on the P&L - leaving
many categories and suppliers totally alone and free to
do what they want.
4. Little Management
Direction. Decentralized
groups don't think in terms
of leveraging all of their
spend but instead allow
department heads to make
the best local decisions.
This results in larger supplier bases than necessary
and built-in diseconomies of
scale.
5. Easy to Decentralize - Hard to Manage. Let's
face it, people are busy...
too busy to centralize so
they just allow the same
thing to occur year after
year. Leading and managing
takes time, can be hard to
do, and just isn't worth it to
many.
6. Change Management. Refusal to change,
unwillingness to look at
serious alternatives, fear,
and arrogance will stop
centralization in its tracks.
HOW TO CENTRALIZE YOUR PURCHASING
ACTIVITIES OR BUILD A
PURCHASING DEPT.

1. Recruit a Player.
Category expertise is less


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Digital Dealer - December 2019

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

Digital Dealer - December 2019
Online Extras
Four Keys to Build a Better YOU
9 Areas That Build Value in Your Dealership
From Speculating to Selling: Overcoming Sales Challenges with Technology
For Sustainable Profit – Build a Purchasing Department
Meet the Marketing Mastermind Speaking at Digital Dealer Orlando
Get a Jump on Making It a Great New Year
Job Management Makes or Breaks Your Bank
Interview with Derek DeBoer of TC Chevy
Elevate Your Year-End Sales Event with Immersive Instagram & Facebook Stories
It’s Time to Move Beyond the Chaotic Dealer Website Experience
The Power of Used Car Marketing
9 Benefits of Doing a Year-End Social Media Audit
Auto Brands and Dealers Need to Move Toward a ‘Tierless’ Marketing
A Case for an Efficient 2020 Dealership Advertising Budget
4 Critical Components of Effective Sales Training
Five Tips to Improve the Sales to Service Handoff
Seasons of Opportunities
Digital Dealer - December 2019 - Digital Dealer - December 2019
Digital Dealer - December 2019 - Cover2
Digital Dealer - December 2019 - 1
Digital Dealer - December 2019 - Online Extras
Digital Dealer - December 2019 - 3
Digital Dealer - December 2019 - Four Keys to Build a Better YOU
Digital Dealer - December 2019 - 5
Digital Dealer - December 2019 - 9 Areas That Build Value in Your Dealership
Digital Dealer - December 2019 - 7
Digital Dealer - December 2019 - 8
Digital Dealer - December 2019 - 9
Digital Dealer - December 2019 - From Speculating to Selling: Overcoming Sales Challenges with Technology
Digital Dealer - December 2019 - 11
Digital Dealer - December 2019 - For Sustainable Profit – Build a Purchasing Department
Digital Dealer - December 2019 - 13
Digital Dealer - December 2019 - Meet the Marketing Mastermind Speaking at Digital Dealer Orlando
Digital Dealer - December 2019 - 15
Digital Dealer - December 2019 - Get a Jump on Making It a Great New Year
Digital Dealer - December 2019 - 17
Digital Dealer - December 2019 - Job Management Makes or Breaks Your Bank
Digital Dealer - December 2019 - 19
Digital Dealer - December 2019 - Interview with Derek DeBoer of TC Chevy
Digital Dealer - December 2019 - 21
Digital Dealer - December 2019 - 22
Digital Dealer - December 2019 - 23
Digital Dealer - December 2019 - 24
Digital Dealer - December 2019 - 25
Digital Dealer - December 2019 - 26
Digital Dealer - December 2019 - 27
Digital Dealer - December 2019 - Elevate Your Year-End Sales Event with Immersive Instagram & Facebook Stories
Digital Dealer - December 2019 - 29
Digital Dealer - December 2019 - It’s Time to Move Beyond the Chaotic Dealer Website Experience
Digital Dealer - December 2019 - 31
Digital Dealer - December 2019 - 32
Digital Dealer - December 2019 - 33
Digital Dealer - December 2019 - The Power of Used Car Marketing
Digital Dealer - December 2019 - 35
Digital Dealer - December 2019 - 9 Benefits of Doing a Year-End Social Media Audit
Digital Dealer - December 2019 - 37
Digital Dealer - December 2019 - Auto Brands and Dealers Need to Move Toward a ‘Tierless’ Marketing
Digital Dealer - December 2019 - 39
Digital Dealer - December 2019 - 40
Digital Dealer - December 2019 - 41
Digital Dealer - December 2019 - A Case for an Efficient 2020 Dealership Advertising Budget
Digital Dealer - December 2019 - 4 Critical Components of Effective Sales Training
Digital Dealer - December 2019 - 44
Digital Dealer - December 2019 - Five Tips to Improve the Sales to Service Handoff
Digital Dealer - December 2019 - 46
Digital Dealer - December 2019 - Seasons of Opportunities
Digital Dealer - December 2019 - 48
Digital Dealer - December 2019 - Cover3
Digital Dealer - December 2019 - Cover4
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