My good friend Glenn Mercer in the US publishes a blog called Car Charts which never fails to provide fascinating insights based on a single chart related to some aspect of automotive.
In consulting we used to call these ‘killer charts’ – somewhere in a mountain of Powerpoint you always hoped to have a single chart that would convince the client about the action you were proposing.
I am particularly proud of the chart at the top of this blog, drawn from a presentation by our Sales Director at Auto West London, Hamid Noman, to the sales team reflecting on a very successful September.
In most businesses we are used to hockey shape curves reflecting achievement of objectives over time – whether it is production or sales, weekly, monthly, quarterly, annual.
It seems to be an unwritten rule that there is always a last minute dash for the finishing line.
That is particularly true of car sales at the end of key periods, and March and September in the UK are about as key as the come.
Although the change in the car registration format (originally annual, now every six months) was initially introduced as a way of stimulating the car market and shifting demand away from the more understandable January, start of a new year, peak, consumers seem to be less motivated by having the new registration format than they once did.
The industry however is obsessed with it, with the best deals such as interest free credit and deposit contributions typically being at their most generous in these two months.
The result is that one third of the annual sales volume falls into these two months, and there is huge rivalry amongst manufacturers to top the charts in these months in particular.
It will not surprise anyone familiar with the industry that this leads to some crazy practices with big fleet deals and pushes for self-registrations in the last few days of the months.
Apparently 30% of the total UK registrations in September happened in the last three days of the month, with a rush of activity right up to the last available minutes that vehicles could be registered on the Government system on the 30th.
This concentration of business into two months, and within those months into the last few days, drives huge inefficiencies and waste into the whole supply chain.
Those cars registered right at the end of the month will be coming back into the market as zero or low mile used cars within days and weeks, damaging the residual values, which in turn makes it tougher to come up with attractive finance deals in the months and years ahead.
A glut of discounted nearly new cars becomes an attractive option for retail buyers in the following months so the pressure to hit October and November new car sales targets is greater.
The operational challenges of satisfying this distorted demand are also huge. Capacity at ports, storage compounds, physical transport, dealer storage, pre-delivery inspection and every other part of the eco-system that supports the process comes under strain.
Systems outages in the finance companies and in the Government registration system become nightmare scenarios towards the end of the month.
Temporary capacity has to be brought into play, overtime premiums paid, and inevitably the quality of process execution comes under strain.
None of this adds any value to the customer so in Toyota Production System terms is ‘muda’ or waste.
Zooming out from the peculiarities of the UK twin peak registration months, the industry as a whole suffers from similar waste through chasing sales registration targets – almost at any cost.
This is what drives the whole ‘stock push’ system, with supply being optimised around a set (usually optimistic) volume, and the effect of this being passed downstream to the sales system – national sales companies, distributors and dealers.
This is what drives most of the 30% cost of distribution that is widely recognised as typical and is certainly exceeded by some manufacturers on a consistent basis.
It is why I am so proud of what our team has achieved at Auto West London in September.
Although it helps that there is strong retail demand for the Omoda and Jaecoo products (the Jaecoo J7 ended up as the best seller in the UK market in September), not all their dealers had such a smooth month.
We achieved that amazingly consistent daily registration rate through planning and a team effort that included our manufacturer partner, their chosen logistics and finance partners, and our own team in sales and aftersales.
We had built a strong order bank at the start of the month, and had around half the required stock on the ground.
We tracked every car through the logistics and funding process to ensure that every car required was funded by the start of the second week, and every car was physically delivered to us with a week to spare.
The whole process was driven by a target daily registration rate which actually slowed towards the end of the month whilst others in the industry were hitting the panic button.
I am not so naive as to believe that we can repeat this every month, but I am certain that to the extent we can stabilise flows and plan for success rather than accept the inevitability of a last minute panic, we will deliver better outcomes for our customers, staff, shareholders and manufacturer partners.
Now comes the difficulty of delivering that consistently – something that we started working on even as were still wrapping up September.
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