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Which opportunities arise when the preparation time is reduced? In short, it means reduced inventory costs. But have you considered what other benefits this could bring to your business?

Let’s start with a scenario:

A car dealership currently has 100 used vehicles in stock, delivers 75 vehicles per month, and the average selling price per vehicle is €22,500. With a depreciation of €1,000, an average profit of €1,500 per vehicle, and an interest cost of €500 for the total days of inventory, we can calculate:

– Stock turn: 9.0

– Average days in stock: 40.6 days

– A minimum inventory day cost per vehicle per day: €36,98

Now, let’s assume that the preparation time, the time from when the car is purchased until it is ready for sale, is 12 days. What happens if we manage to reduce this time to eight days? In this case, the preparation time decreases from 29.55% to 19.70% of the average inventory time.

The results:

1.      Reduced inventory day cost: The cost per vehicle during the preparation time drops significantly.

2.      Opportunity for more sales: inventory time is reduced from 40.6 days to 36.6 days, freeing up resources to handle more vehicles.

To give you a clear picture: by reducing the preparation time by 33.33% (from 12 to 8 days), you can make a total annual inventory cost saving of €133 000. In addition, an added earning opportunity of €145 200 is created, which corresponds to seven extra vehicles sold per month with kickback on finance and insurance. So, a time gain of 9.85% is equivalent to €278 400. Do the maths and see if you were to sell 5,000 or 10,000 used cars a year, what would your profit be?

Realising these opportunities requires close cooperation between the purchasing and sales teams. If the purchasing team fails to secure the right vehicle volumes, inventory is at risk. If the sales team fails to meet its targets, inventory increases and inventory day costs skyrocket.

A structured and well-coordinated collaboration is therefore crucial. By synchronising processes and working towards common goals, teams can ensure that the right vehicles are bought and sold at the right time. Those who succeed in creating this harmony not only achieve the extra sales, but also build a long-term, profitable business model.

Enabling collaboration also requires data authenticity and access to insights that are both relevant and actionable. With accurate data as a base, departments can act efficiently, make better decisions and pave the way for success.

Finally, reducing preparation time is not just about reducing costs – it’s a strategy to unlock potential and create growth.

If you would like to discuss this further how two find common key strategies for co-operation between departments, you are welcome to book an appointment here or visit carcare.io