Digital Dealer - December 2019 - 13

important than purchasing
spend management "process" expertise. Look for
a disciplined purchasing
manager that believes in a
comprehensive quote process and has experience
executing that process
with positive results.
2. Hire a Workhorse.
To get through up to 25
expense categories each
year (two a month) you will
need someone with high
energy.
3. Establish Purchasing Policies. Take away
all commitment authority
from anyone in the organization for purchase orders,
contracts, and invoice approvals. Limit that authority
to the dealer, CFO, GM,
and purchasing manager.
4. Set Aggressive
Objectives. Purchasing
is one of the few groups
where you can prove the
results through audits.
Granted, the way P&L
statements are formed, it
can be difficult to see cost
savings on a statement as
too many expense lines
are combined to make that
reduction obvious. Dealer
principals should set
annual objectives of $500K
or $1MM for this first-year
plan.
5. Communicate the
Plan. Your staff will be
upset that they may lose
complete decision-making
authority in a category. It is
incumbent that executive
management communicates the objectives and
back up their new purchasing team.
6. Enlist Management
& Employee Help. A

COST ANALYSIS
The chart below shows estimated cost savings you can expect when moving towards a
centralized purchasing approach. These figures assume you have two or three full-time employees at those salaries, not including benefits. But even if you have a three-person or four-person
purchasing team, you are still in positive ROI territory given the potential returns. This analysis
does not include the following savings and efficiencies that occur with a smaller supplier base:
„ Fewer suppliers to manage
„ Fewer invoices to approve
„ Fewer checks to cut, sign, and send

„ Fewer suppliers to have meetings with
„ Pricing data will allow for periodic supplier
compliance audits

Annual Sales

$50MM

$100MM

$500MM

$1B

% of Spend for Services -Supplies

5%

5%

5%

4%

Annual Spend $

$2.5MM

$5.0MM

$25MM

$40MM

Conservative Profit Opportunity

20%

20%

20%

20%

New Potential Profit

$500,000

$1,000,000

$5,000,000

$8,000,000

Cost of 2 - 3 Purchasing FTE's

$150,000

$150,000

$175,000

$200,000

New Profit Impact to Dealership

$350,000

$850,000

$4,825,000

$7,800,000

new purchasing manager
or director worth their salt
will know enough to seek
out the category experts
and build a process around
requirements and suppliers
that the users need and can
work with.
The purchasing manager controls the process,
suggests alternatives for internal customers to consider
and will make a business-focused recommendation. Internal customers will surely
weigh in and have a say,
but your organization should
get an objective review with
multiple options that could
potentially break up supplier
monopolies.
7. Expect Pushback.
Change is hard for some -
and with pride, arrogance,
laziness, supplier gifts,
and gratuities, running into
challenges is likely, but the
louder people get pushing back on change in the

face of rational arguments,
chances are that changes
need to be made, and you
are on the right track.
EXPENSE REDUCTION:
A LONG-TERM FUNCTION
- NOT A PROJECT

If you want to achieve
excellence in the management of your organization,
you need to get expenses
under control, and that will
only happen effectively,
through centralization.
You are always going to
need suppliers to support
your business. You are always going to have expenses to manage and profits to
generate, so a high performing purchasing group will be
a great investment.
Centralized purchasing
groups, if managed properly, are much more efficient
and effective than a decentralized purchasing approach. As business starts
to weaken, as margins

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

continue to shrink, there has
never been a better time to
approach expense management through a purchasing
department.
While that strategy requires an investment, when
executed properly, you can
expect large ROI - a benefit
stream yielding anywhere
from thousands to even
millions in new profitability.
If executive management
sets aggressive objectives
and is prepared to deal
with pushback from those
afraid of change, a centralized purchasing approach
will generate more fits and
long-lasting benefits for the
business.
DOUG AUSTIN is the founder
and president of StrategicSource,
Inc., the leading provider of
spend management services for
automotive and truck dealerships,
and other vertical markets. Doug
is a veteran of the U.S.

DECEMEBER 2019

13


http://www.DIGITALDEALER.COM

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
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