Who Does the Shopping for Your Dealership?

There is always that special person in your family who merits the ‘outstanding shopper award’. This is the individual who knows when the specials are being offered and where to get coupons, and who is a master in the art of negotiation. When I was working in RV manufacturing, there was one key employee who knew every vendor in the county. He knew how to get discounts, he was able to return almost anything to vendors, and he knew how to control manufacturing purchasing cost. The RV dealership world, on the other hand, is a very different animal! Joe is in charge of purchasing new vehicles, Mary buys all used vehicles, Tom is in charge of wholesale purchases, Nancy buys all office supplies, Paul buys all office furniture, James purchases parts, Angela buys all computer equipment, and Bill is responsible for the sublet purchases. Now the situation grows even more complicated at multi-store dealerships, because they increase the cast of players. At times, it is necessary to have several people involved in purchasing, but RV dealers have a tendency to go overboard. The value of one or two individuals serving in the area of   purchasing   cannot   be   overestimated.   It   takes   talented individuals to hunt for the best quality products at the best price. We believe dealerships should appoint a specific person (plus one alternate) to serve as the dealer’s purchasing agent. If you have a small dealership, the selected person can do the job as an additional duty; in other words, if he is the F & I Manager, he continues doing his normal duties but is also responsible for purchasing. If you are a dealer who purchases $10,000,000 or more in parts, vehicle inventory, and office supplies, you really need to create an official position for a purchasing agent. Let’s do some math at this point, because the argument will always be that you can’t afford yet another job position at your dealership. If you purchase $50,000,000 annually in goods and you hire a talented purchasing agent who works on a base salary plus a bonus based on savings, how much value would this person add to the company if he or she was able to save you 2% annually? The answer is one million dollars minus their salary for the year. I am convinced that a two percent savings is attainable, and this savings could be sent straight to the bottom line through an organized purchasing program.

Benefits of Organizing Your Purchasing Practices

We would like to list a few benefits that may be attained through an organized purchasing program.

1. A purchasing system could be organized so that the Accounting Office will have a clear picture of the dollar value and description of items on orders. Vendors are notorious for selling merchandise to anyone at the dealership who will say “yes, I’ll take it.” When vendors recognize that all purchases require a purchase order (PO) to be issued by the purchasing agent, needless purchases are eliminated. When the end of the month arrives, the dollar commitment for new purchases becomes clear to management. Then they can establish an accrual account to cover these outstanding liabilities, or cancel orders to reduce liabilities. Keep in mind, if you have $200,000 in parts inventory at the end of the month plus $50,000 in parts on order, the end result will be that you will have

$250,000 in parts assets and a new $50,000 debt.