In the car business, inventory management is one of the hardest tasks at a dealership. You may or may not be aware that all those bright, shiny cars you see at dealerships are financed. When a dealer orders a car from the factory, as soon as it rolls off the assembly line, the cost of the car is added to the “floor plan” of the dealership. When the dealer sells it, the car is paid off and removed from the floor plan.
If you order too many vehicles, the cost of the floor plan, or also known as interim financing, can cost a dealership a lot of money. If you order the wrong vehicles they sit without selling, and that, too, can cost a lot of money.
Much has changed since my young days in the business
. The factories have data on what sells the best, and equally as important sells the fastest. There are companies that for a fee will manage your inventory and even order vehicles for you. This was not so in the late 1970s when I had to take over ordering cars.
Then, there was a 3-ring binder with information on options you could order, color chips, and interior swatches. You decided what you wanted, colored in microscopic little ovals next to each option with a #2 pencil, and mailed the order(s) in. You could not just glance at one of the sheets to make sure everything was OK, you had to really study it. It was a grueling task to make sure no major mistakes were made, yet it still happened.
Some years earlier, my predecessor was ordering an with everything you could get on it at the time. Unfortunately, he marked the form with a 3-speed manual transmission, on the steering column of course, instead of the automatic. That car had a couple of birthdays.
There were no safeguards to prevent mistakes like that. The factory wouldn’t call you and ask if you were sure you wanted a particular vehicle built, they just sent it on and it was your problem.
Such was the case with an early 1980s Ford Bronco. This was the large Bronco, and at the time, these were the most expensive vehicles we sold. I got a call from my make ready manager one day and he suggested I come back to his department. Being unloaded off a convoy truck was a super loaded, very expensive Bronco with no paint. None. All it had on it was the factory primer. That meant no paint anywhere, inside the doors, inside the hood, inside the tailgate, even part of the dash was primer.
My heart sunk when I saw it and ran back to my office to check my copy of the order, hoping Ford had made the mistake. No such luck…unbeknownst to me, there was one of those little ovals I colored in with my pencil that said NO PAINT, PRIMER ONLY and I had colored it in. Luckily, I knew a guy who owned a body shop and he loved the big Broncos. I called him and asked him to come look at something. After his initial shock, he bought it and painted it himself, and yes, he got the deal of a lifetime.
Fast forward to the early 1990s when the Ford Explorer was new and extremely popular. I was the General Sales Manager at the dealership I eventually purchased. The Owner at that time decided to put a relative of his in charge of ordering. The guy was a nice guy, but knew very little about ordering vehicles, and had never even been in sales, his background was the make ready department.
He was good on a computer and built some templates to order by and to track sales. As expected, he made some mistakes, but nothing just horrible, until the day I looked out the window and saw six of the ugliest Explorers I’d ever seen. They were dark green on the top, the hood, and down to the door handles, then bright gold from there all the way to the bottom. They were awful.
In his defense, it was the beginning of the model year, and the first orders you do blindly. I think the assumption on his part was that the factory wouldn’t build an ugly vehicle. Apparently, Ray Charles was the head of the color and trim department at Ford that year, but I digress.
I didn’t want to hurt his feelings, but Explorers were highly allocated at that time. The more you sold, the more you got, and six of these just sitting on the lot would hurt the number we got allocated. It was then I decided to be proactive and make the best of the situation.
In an unusual move, I called the sales staff and managers together for a meeting, and just laid the cards on the table and offered up a spiff (an incentive) of an additional $350 for each one of the green and gold Explorers that were sold. At that time, that was a lot of money to a salesperson.
We got them all cleaned up and displayed them on the lot as if we were proud to have them. Financially motivated salespeople can be a very powerful tool in moving out distressed merchandise. If people came in wanting a diesel truck, they’d say: “let me show you one of our special edition Explorers!” If someone with bad credit actually got approved, you could bet they were rolling out in a green and gold Explorer.
It was a full-court press to move these out, and I am proud to say, within 10 days, all six were off the lot and into people’s driveways. I was proud of myself for coming up with a plan, and I was proud of the staff for pulling together as a team to fix the problem. Crisis averted.
That is sadly not the end of the green and gold Explorer story. About six to seven weeks later, I walked outside to see three convoy trucks unloading, you guessed it, green and gold Explorers. EIGHTEEN of them to be exact. It felt like someone hit me with a baseball bat right in the gut.
I made a beeline for the office of our vehicle ordering person, telling myself to be calm, be nice, and to try to remember he was the Owner’s relative. As calmly as I could, teeth gritted, I remember my exact words: “why in the hell would you order eighteen of those ugly-assed green and gold Explorers?”
His answer: “Did you see how fast the first six sold?”