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NADA 2008 Highlights: Should I change my DMS? (Part 2)

If you missed NADA 2008, the world's premier event for auto dealers, read this series of articles that recap the major issues covered at this year's event.

This year's event was in beautiful San Francisco and spanned 80,000 m2 (700,000 square feet), included 700 exhibitors and 36 workshops, and received 24,000 attendees from all over the world.

Should I change my DMS? (Part 2 of 2)

Renowned DMS expert Sandi Jerome held of one of the more interesting workshops at NADA 2008, focusing on how to dealers can validate the change to a new and better dealer management system.

In part one we talked about why technology typically fails, reasons why a dealer should look at changing their DMS system, and how to know if a new DMS system pays for itself.

The top five issues dealers look at in a DMS

Reason 1: Cost

In general DMS systems are going up 5-10% every year.

But newer DMS systems are beating out the older DMS systems not only with lower monthly software charges, but also because they include many of the services and extras that the older players charge for.

Newer DMS systems don't charge for proprietary hardware or supplies, as they run on off-the-shelf PCs, servers and printers that most dealers already own. Nor do they have “click” charges for laser printing. In the examples analyzed, a new DMS system can cost up to 65% less than an older system.

A note: One of the big differences with how dealers are staffing their stores is that not too long ago they had no IT staff, whereas today that is not the case anymore, and larger dealers even find the need for an entire IT department.

Reason 2: Manufacturer integration

Dealers need to understand how integrated they really need to be. There are up to fifteen different points of integration between a dealer’s DMS and the manufacturer, depending on the OEM. These include financial statements, parts orders, warranty submissions, recalls, delivery reporting. Manufacturers are working with smaller DMS providers, not just the big two.

Reason 3: All the modules you need

Along with the traditional Parts, Service, Sales, and Accounting/Financials, dealers need a good CRM module as well as F&I. Regarding Payroll, it might be better to look for a third-party solution as you get many more features. And of course, all modules in a DMS need to be integrated.

Reason 4: Multi-company

This is a feature not found in all DMS solutions. A good DMS system will have multi-company functionality in order to allow:

• Individualized and consolidated reporting across all departments

• Individualized and consolidated views of parts, vehicle and customer information

• Parts transfers

Reason 5: Third-party integration

Dealers using third-party add-ons should make sure they can “speak” with their core DMS software.

Dealers have low technology budgets

In general, auto dealers spend much less on technology than other industries. For example, the tech budget of a 200 unit per month, eighty employee dealership will be one third the budget that other industries assign to this area.

Other NADA Highlight posts:

• DMS Panel
• Should I change my DMS? (Part 1)
• Should I change my DMS? (Part 2)
• What makes a great leader? (Part 1)
• What makes a great leader? (Part 2)
• What makes a great leader? (Part 3)

Tags: DMS, dealer management systems, auto dealer software, NADA, NADA 2008

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NADA 2008 Highlights: Should I change my DMS? (Part 1)

If you missed NADA 2008, read this series of articles that recap the major issues covered at this year's event.

The National Automobile Dealers Association represents 19,700 new car and truck dealers. Every year, NADA organizes the world's largest convention for auto dealers, where thousands gather to see the latest products and services geared to dealerships, attend workshops on best practices, and hear industry leaders. 

This year's event was in beautiful San Francisco and spanned 80,000 m2 (700,000 square feet), included 700 exhibitors and 36 workshops, and received 24,000 attendees from all over the world.

Should I change my DMS?

Renowned DMS expert Sandi Jerome held of one of the more interesting workshops at NADA 2008, focusing on how to dealers can validate the change to a new and better dealer management system through a simple step-by-step process:

1. Evaluate current technology
2. Create a technology budget and calculate ROI
3. Understand available technology, mainly newer DMS systems and CRM tools
4. Reduce costs with technology budgets and by avoiding mistakes

Why technology fails

The main reasons surrounding DMS system letdowns at dealerships are staff talent and training, the inability (or perceived inability) to afford a new system, the lack of goals when deploying a new system, and problems with the technology itself.

When a new DMS software solution is deployed, everyone needs to be on board. If just one key manager is not on the same page, the project will fail.

Some of the main drawbacks with traditional DMS systems are their slowness, mainly caused by Windows interfaces grafted on top of old systems, and overall lower productivity compounded by the fact that dealers have more employees than before.

Why a new DMS system?

In addition to today’s imperative of reducing monthly costs, there are many reasons dealers invest in a new dealer management system.

But before making any decisions, dealers should be very clear about what they would like out of their new system. They may want to increase vehicle sales, increase service business, improve customer service and satisfaction, increase staff productivity, and improve collections.

A list should be made, and DMS alternatives graded accordingly in order to find the best fit for the dealership

Special care needs to be taken with staff training as each member has their own unique knowledge and special needs based on their experience. Hands-on on-site training, that is sitting next to the user as they use the system themselves, looks to be the best way to train users. Class training is a less effective method.

Most DMS providers are currently focusing on improving and diversifying their training initiatives.

A new (and good) DMS system pays for itself

Dealers need to learn two vital things:

How to budget for a new IT investment

A new DMS system has initial software costs (licenses and training) plus several associated costs such as hardware upgrades, increased Internet bandwidth. DMS monthly costs include software support; new staff needed to fully leverage the DMS, such as a CRM Manager; and increased printing and phone costs related to increased marketing activities.

How to calculate the ROI on a technology investment

Ms. Jerome provided a blueprint to help dealers understand in what areas they could expect increased revenue thanks to a new and better DMS system, in order to compare against the fixed and initial costs discussed before, and thus calculate the estimated return on investment. The speed with which a dealership can recoup its investment in a new DMS system was eye-opening.

Next: The top five issues dealers look at in a DMS

Other NADA Highlight posts:

• DMS Panel
• Should I change my DMS? (Part 1)
• Should I change my DMS? (Part 2)
• What makes a great leader? (Part 1)
• What makes a great leader? (Part 2)
• What makes a great leader? (Part 3)

Tags: DMS, dealer management systems, auto dealer software, NADA, NADA 2008

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NADA 2008 Highlights: DMS Panel

This post is part of a series that will present a brief recap of the major issues highlighted at this year's NADA (National Automobile Dealers Association) Convention and Expo, held February 9-12 in beautiful San Francisco. This is the largest event in the world held specifically for automotive dealers.

The day before the event, accounting and advisory firm Dixon Hughes and industry magazine Ward's Dealer Business hosted a panel titled "Choosing your DMS: What You Need to Know", where the major North American DMS providers answered predefined questions, and even a few from the audience (which put a couple of providers on the spot).

In a nutshell, the DMS scenario in North America looks like this: on the one hand you have Reynolds & Reynolds (recently merged with ex-#3 UCS) and ADP as the clear and historical leaders. On the other you have all other DMS providers, though some seem to be a bit ahead of the pack, like AS/400 based Arkona (now owned by DealerTrack) and ACS (current #1 in customer satisfaction). 

Reynolds (some 10,000 clients) and ADP (around for 35 years) are enormous companies with systems that have been around for a while, which is to their advantage regarding stability and acceptance. But their systems are not Windows-based, and there are some database issues that work to their disadvantage.

The newer players, in my opinion, have a hard time differentiating among themselves: it's not very clear why (if) one is better than the other, or how they position themselves against each other.

Major issues discussed in the DMS Panel

Third party access to data.

The issue can be reduced to a simple question: to whom does a dealer's data belong? Some DMS providers are seen as not very cooperative when it comes to letting a dealer give access to data to third parties. DMS firms who do this say they are just protecting data integrity, and reminded that they have paid third-party certification processes in place to address this issue and safeguard dealer data. Pull vs. push strategies were discussed.

Contract terms.

Reynolds and ADP typically have long (60 month and more) term contracts. Some of the newer players have zero month obligations. Of course both sides defend their position on this issue: the former cite client preference for longer terms, better terms, and the "stability" factor; the latter highlight flexibility and confidence in their product that allows them to provide shorter contracts.

Pricing.

Everyone was put on the spot by the panel moderators to cite pricing for a "typical" dealership (200 units a month), though somehow ADP suavely managed to sidestep the issue :).

There is a marked difference between the top two (Reynolds & Reynolds, ADP) which can reach $10,000-15,000 per month , while for the rest it was mostly in the $1500-2000 range. As was expected, all sides cited the justifications and benefits of their pricing models.

DMS contract disputes.

What happens when a dispute between a DMS provider and a dealer reaches an impasse? Some providers cut off the system. Some smaller providers took the opportunity to state that they do not.

Dealers are not taking advantage of their DMS system.

This is an extremely important issue, though it was not addressed at length as it was not really the focus of the panel.

The Dixon-Hughes moderator, Wayne Fortier, stated that dealers on average feel they use about fifty percent of what their DMS has to offer. From our own experience, this problem holds true all around the world, though I'd say dealers probably take even less advantage of their DMS system outside North America.

Reynolds and ADP stressed their training capabilities via CBT (computer based training) and virtual classrooms, plus their armies of people in the field.

The Windows-based DMS providers focused on their ease of use and thus shorter learning curves (which I think is in many ways true, but can be argued both ways), and some mentioned specific measures they take to improve utilization, such as annual or bi-annual visits to each dealership, plus online help tools.

Final comments.

Each DMS supplier was asked to close out the panel with their final thoughts, prompting a marked difference between how the old and the new players feel about their position, and how they position themselves in the marketplace.

As expected, Reynolds and Reynolds and ADP's closing remarks were based on their longevity and stability. "Customers have been with us for 20 years," said ADP's Robert Karp.

Meanwhile, the common thread that ran through the other DMS's final comments was "There are alternatives."

Other NADA Highlight posts:

• DMS Panel
• Should I change my DMS? (Part 1)
• Should I change my DMS? (Part 2)
• What makes a great leader? (Part 1)
• What makes a great leader? (Part 2)
• What makes a great leader? (Part 3)

Tags: DMS, dealer management systems, auto dealer software, ADP, Reynolds and Reynolds, Reynolds, UCS, ACS, Arkona, DealerTrack, Dixon-Hughes, NADA, NADA 2008

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Eleven rules of choosing business management software: Rule 10

Continuing with our suggested list of eleven "rules" to help guide small and medium sized companies when they evaluate potential suppliers of business management software...

Rule 10: Be cautious of hidden costs

The deployment of a new DMS solution at your dealership will include a significant investment in effort, time and money.

In addition to the charges you will pay your supplier for software licenses and the deployment itself, there are other types of costs that will influence the system’s total cost of ownership throughout its life-cycle within the dealership.

These “hidden” costs can be significant in the short and long term, and it is smart to analyze them before committing to a software supplier.

Here are the main hidden costs that you need to look at:

Hardware
Modern systems are Microsoft Windows®-based and thus work with standard, off-the-shelf hardware that you can buy at any computer shop.

This includes user PCs, servers and printers.

Some suppliers require their customers to purchase proprietary hardware, which is sometimes leased by the supplier themselves. This type of equipment is more expensive than off-the-shelf hardware.

Training
A software system developed for the Windows platform offers a simple and user-friendly interface, one that users are already familiar with.

This not only makes training simpler, but also means a faster learning curve for new employees. In today’s world any new employee you hire will most likely already know how to use Windows.

Extra charges for using the system
Some suppliers charge extra fees the more you use the system, such as transaction or printing charges. Be sure to ask your supplier about this.

Posts in this series:

• Rule 1: Make sure the new system can accompany your company’s growth

• Rule 2: Does the system stay up-to-date regarding fiscal compliance?

• Rule 3: Attend a demo

• Rule 4: The system should be flexible

• Rule 5: Training is essential

• Rule 6: Choose a supplier that provides more than just a system

• Rule 7: Ask how technical support is handled

• Rule 8: Be wary if the system is too simple

• Rule 9: Discounts can be pyrrhic victories

Tags: Autologica, DMS, ERP, SMB, SMBs, dealer management systems, auto dealer software, automotive, auto industry, automotive industry, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers

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Service improvements (Part 2): Key indicators

Here's part two of a conversation I recently had with expert Peter Daniel of ADC-Automotive Dealer Consulting about the importance of the Service Advisor, and key indicators to measure his/her performance.

In the first part of the interview, Peter and I talked about the key indicators for measuring service shop sales, and we went into detail regarding Hours per Repair Order.

Today we'll discuss other indicators that can tell us if the Service Advisor is doing a good job…

ADC, a consultancy with offices in the U.S. and in Puerto Rico, provides consulting and training services to auto manufactures and dealers, focusing mainly on process and profit improvement for service, parts and body shops.

Peter Daniel: There are other factors that could be underlying or behind the scenes...

It can be an indicator that maybe there are process and procedures problems.

For example, maybe there are ten customers that show up at one time at 7:30 in the morning and there’s only one Advisor there. So you can imagine what would happen, the Advisor is more like an order taker than really being a Service Advisor or service consultant, as we like to call them sometimes.

So what would happen in that instance, the dealer would not be staffed correctly at the peak times of their business, so therefore the Service Advisor really can’t be at fault because he really has not been provided the process and procedure support to really do his job and do a correct sales presentation, consulting with the customer on their maintenance needs or their repair needs.

I think another factor when you look at Hours per Repair Order, if they are low, if they are under 2 hours per repair order, could be a lack of selling tools.

I think the two main tools any Advisor in any country needs to have is a printed maintenance schedule according to what the factory requirements are for severe service.

Besides that printed maintenance schedule they should also be using what’s called an inspection form, whether it is a 20 point, or 25 point, or 15 point general visual inspection that would be performed on every vehicle that comes in the shop free of charge for each customer.

And these two tools used by the Advisor, presenting the maintenance menu at time of write up and the technicians performing a visual inspection of these 20 items in the shop, give the customer a chance to buy, and this also informs the customer of the condition of the car, it gives the customer an opportunity to get it repaired while the vehicle is in the shop.

What we find is probably, and I hate to use numbers, but I’m going to say that probably nine out of ten dealers in the world do not have this combination of a correct printed maintenance schedule along with an inspection form.

Al McClymont: 90%, that’s a terribly high number.

Peter Daniel: You know, everybody I think in every position, as well as your company and ours, we all have a benchmark or job expectations, job requirements. So the Service Advisor certainly is the key issue and I think in numbers it is great to say 2 hours per repair order but I think every dealer has to look at the big picture.

(to be continued...)

Related links:

• Podcast of the full interview
• Service improvements (Part 1): Key indicators
• Service improvements (Part 2): Key indicators

Tags: ADC, Autologica, Peter Daniel, Al McClymont, DMS, dealer management systems, Autologica, Service Advisor, after-sales, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers, automotive, auto industry, automotive industry, auto service, best practices

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Service improvements: Podcast

Here's our latest podcast where I speak with expert Peter Daniel of ADC-Automotive Dealer Consulting about the importance of the Service Advisor, and look at some key indicators to measure his or her performance.

(ADC, a consultancy with offices in the U.S. and in Puerto Rico, provides consulting and training services to auto manufactures and dealers, focusing mainly on process and profit improvement for service, parts and body shops).

The podcast runs about 15 minutes (available in English for now).

	To listen: click here once.
	To download: right-click and choose Save Target As.

Or go to the Autologica website.

Tags: auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers, automotive, auto industry, automotive industry, auto service, best practices, DMS, dealer management systems, auto dealer software, Autologica, Al McClymont, Peter Daniel

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Eleven rules of choosing business management software: Rule 9

Continuing with our suggested list of eleven "rules" to help guide small and medium sized companies when they evaluate potential suppliers of business management software...

Rule 9: Discounts can be pyrrhic victories

In general, a sale will always include some space for negotiation, and it is normal that the dealer will want to press the supplier with the hope of receiving a better deal.

But basic economic rules impose limits.

You can be sure that every concession extracted from the DMS supplier will be balanced by a reduction in the services that they provide.

So although a big discount may initially look like a victory for the dealer, it will most likely be detrimental to the overall success of the project.

If we think as the new DMS system as the dealership’s main instrument for recording, managing, controlling and planning business activities, then expect to invest a whole lot of time and effort in this project… not just money.

So surely we can agree that this is a strategic investment.

A quality implementation will have a direct effect on your business, so it is preferable to obtain a credible commitment from the DMS supplier towards a successful deployment, than a few dollars in savings.

So, be wary of suppliers who offer significant discounts or price reductions, especially regarding training and accompaniment during the “go-live” stage.

This kind of concession by the supplier will certainly translate into a reduction of vital services needed to guarantee a successful deployment.

And most likely, you will end up realizing, too late, that you do need those services. But since you’ve already committed so much time, money and effort with this supplier, they can now begin to reel you in.

Posts in this series:

• Rule 1: Make sure the new system can accompany your company’s growth

• Rule 2: Does the system stay up-to-date regarding fiscal compliance?

• Rule 3: Attend a demo

• Rule 4: The system should be flexible

• Rule 5: Training is essential

• Rule 6: Choose a supplier that provides more than just a system

• Rule 7: Ask how technical support is handled

• Rule 8: Be wary if the system is too simple

• Rule 9: Discounts can be pyrrhic victories

Tags: Autologica, DMS, ERP, SMB, SMBs, dealer management systems, auto dealer software, automotive, auto industry, automotive industry, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers

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Eleven rules of choosing business management software: Rule 8

Continuing with our list of eleven "rules" to help guide small and medium sized companies when they evaluate potential suppliers of business management software...

Rule 8: Be wary if the system is too simple.

A dealer needs more than just an invoicing system.

A vehicle dealership has precise needs that do not exist in other industries: very specific parts inventory management, the management and tracking of warranty claims, finance plan management, and the treatment of repair orders.

Even marketing tasks are different than in other industries as they must take into account a totally different set of variables.

That is why a specific category of software called Dealer Management Systems (DMS) was created, to address these special requirements.

Of course in theory a dealer can be managed through a standard accounting or financial program. There a great many of these on the market, from small generic invoicing programs generally used by small shops, to expensive and bulky ERP systems used by larger corporations.

But however good an accounting or ERP package is, if the dealer wants to go beyond simple invoicing and bookkeeping and actually improve processes and operations, the need for a true DMS is clear.

As profit margins on vehicle sales continue to decrease around the world, the dealership’s after- sales department gains more and more importance.

A Dealer Management System has powerful, industry-specific tools and functionality to manage and maximize the profitability of the Parts and Service departments.

An accounting package, or even a world-class ERP system, does not.

Similarly, the dealer should be careful regarding the database used by their chosen system.

Small software programs tend to use small databases that are geared towards personal or very small-scale use, and totally inappropriate for a business, especially a vehicle dealership. Even the smallest dealership needs a business-sized database that can handle the appropriate volume of transactions and provide stability, security, and speed.

Posts in this series:

• Rule 1: Make sure the new system can accompany your company’s growth

• Rule 2: Does the system stay up-to-date regarding fiscal compliance?

• Rule 3: Attend a demo

• Rule 4: The system should be flexible

• Rule 5: Training is essential

• Rule 6: Choose a supplier that provides more than just a system

• Rule 7: Ask how technical support is handled

• Rule 8: Be wary if the system is too simple

• Rule 9: Discounts can be pyrrhic victories

Tags: Autologica, DMS, ERP, SMB, SMBs, dealer management systems, auto dealer software, automotive, auto industry, automotive industry, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers

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Eleven rules of choosing business management software: Rule 7

Continuing with our list of eleven "rules" to help guide small and medium sized companies when they evaluate potential suppliers of business management software...

Rule 7: Ask how technical support is handled

The technical support offered by your dealer management system (DMS) provider is a critical factor in your long-term satisfaction.

In fact, it does not matter how simple a program may be, and even if users received adequate training and have competency in the use of the system, the time will come when an unexpected malfunction or a misunderstanding regarding a procedure will restrict the dealership’s operation.

In these cases a prompt response and qualified advice will make the difference.

Unfortunately, it is very difficult to guarantee in advance how long a support request will take to be resolved.

Therefore, the best thing to do is to evaluate using the same methods used by quality certification systems: they do not try to certify a product or service in absolute terms, but rather the procedures used to offer a solution in these situations.

To get a good idea of the quality of the support services provided by your new DMS supplier, you should evaluate the tools and methods they use to provide support.

The supplier should have:

• Support technicians that truly comprehend how the system functions and how a dealership works, instead of flipping through a manual and trying to find answers to something they barely understand.

• A formal Help Desk, which should include a system that allows each support issue to be recorded with all pertinent details, including screenshots.    

Ideally, customers should have access to the Help Desk to: (i) register their own cases; (ii) track open issues all the way through to resolution, and (iii) view a history of all of their support cases.    

The best software suppliers also allow their clients to make feature requests and suggestions through this Help Desk system, for possible inclusion in future versions.

Finally, it is better to clarify with the supplier exactly which services will be included in the agreement, which services can be provided at an additional cost, and which services are not available. This will protect you against unpleasant surprises and will help you keep a good relationship with your supplier.

Be wary of suppliers who won’t provide direct answers to your questions regarding how they provide support, or try to skirt this issue.

Posts in this series:

• Rule 1: Make sure the new system can accompany your company’s growth
• Rule 2: Does the system stay up-to-date regarding fiscal compliance?
• Rule 3: Attend a demo
• Rule 4: The system should be flexible
• Rule 5: Training is essential
• Rule 6: Choose a supplier that provides more than just a system
• Rule 7: Ask how technical support is handled
• Rule 8: Be wary if the system is too simple
• Rule 9: Discounts can be pyrrhic victories

Tags: Autologica, DMS, ERP, SMB, SMBs, dealer management systems, auto dealer software, automotive, auto industry, automotive industry, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers

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Eleven rules of choosing business management software: Rule 6

Continuing with our list of eleven "rules" to help guide small and medium sized companies when they evaluate potential suppliers of business management software...

Rule 6: Choose a supplier that provides more than just a system

There is much more to choosing a software supplier than simply picking out an application.

What the dealer is really buying is a homogeneous package of services that includes the actual design of the system, but also its installation, configuration (based on the particular needs of the dealer), training, after-sales services and technical support.

Thus are the buyer's and seller's activities inseparably fused.

We no longer live in a world where we need to conform to business systems that merely address accounting or administrative issues and offer no other added value.

On the contrary, a dealer management system is a business software solution that has been specifically designed for the dealer’s particular industry, and is the prime tool through which:

• All of the information to and from the Manufacturer is processed

• All business transactions are recorded

• Management information is obtained

• The company is managed

An ideal supplier will have specific industry knowledge and experience. The vehicle industry has many idiosyncrasies that make it quite different than other industries. A generic software package cannot hope to offer the wealth of benefits that a dealer management system can provide.

If the supplier has good knowledge of the dealer’s specific industry, they will also be able to continuously recommend best practices and help implement them, with the end goal of increasing the dealer’s bottom-line.

A good dealer management system will support these process improvements and serve as their framework.

Posts in this series:

• Rule 1: Make sure the new system can accompany your company’s growth
• Rule 2: Does the system stay up-to-date regarding fiscal compliance?
• Rule 3: Attend a demo
• Rule 4: The system should be flexible
• Rule 5: Training is essential
• Rule 6: Choose a supplier that provides more than just a system
• Rule 7: Ask how technical support is handled
• Rule 8: Be wary if the system is too simple
• Rule 9: Discounts can be pyrrhic victories

Tags: Autologica, DMS, ERP, SMB, SMBs, dealer management systems, auto dealer software, automotive, auto industry, automotive industry, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers

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