bbcn.com

[cbrbri@aol.com]

What kind of impact do you think business to business networks (such as bbcn.com), which link subscribing dealers together with participating vendors, will have on the automobile industry? Do you think most dealers will find it worthwhile to subscribe to such a service. And if so, what do you think the realistic average yearly cost savings will be?

[sallen1]

Great question!

Companies who supply stuff to the dealership (excluding the mfg.) live in a quasi-prostitutive world. Its a grey area between providing a real benefit to your business and wasting your money. You want the benefits and none of the waste.

Here's the short answer: Any collective method to manage your suppliers is a HUGE benefit. Now that the internet has provided an inexpensive way to manage tons of information, the benefits may even be better than before. I will address the B-2-B below.

Ask yourself this: Do you really know who all your vendors are?

Do each of your managers have their own set of suppliers they do business with, even if they overlap with the service provided by others used at your dealership?

To prepare yourself for what's coming re: internet b-2-b sales here's what you should do.

1) Get with the real world and have an electronic method of Purchase Orders and check writing.

2) Vendor analysis. Get your accounting staff to prepare a list of every vendor you paid money to in the past year, including advertisers, etc. Write down next to the names you get with what they do.

3) Now group the vendors by what they provide, i.e., shop supplies, paint, accesories, marketing, telephones, etc. Sort each group (assuming there is more than one vendor) by the amounts you paid them.

4) Select the one you paid the most in each group for a proposal to provide you with what the others in that group did. Also, always get a competitive bid. Your increased purchases from a single supplier will make a much more attractive customer. Negotiate a 12-mo. or 24-mo. contract for service (make the term as short as possible, some will deal on a month-to-month basis).

Don't ignore vendors who can supply the manufacturer's stuff, too (like parts, chemicals, supplies, etc.). We save several thousand $$ per month using jobbers and WD's for parts.

What will happen? You will eliminate a bunch of vendors that may be wasting your time and money. The highest benefit will come from only dealing with fewer and fewer suppliers while always finding the best deal.

Now to address the emerging internet business-to-business strategy. Any large scale vendor will find the direct sales method more cost effective than sending out sales reps. Those savings will be part of the price concessions you negotiate. You may also find a better level of service because the vendor response will be near real-time.

What was once the advantage of 'co-op' purchasing is available to everyone. Even without the b-2-b stuff, we have saved thousands just managing fewer suppliers.

scott

ps. You may want to know how to keep the extra vendors from infiltrating your business: Have one person in charge of all purchasing and never pay an invoice without a valid PO.


[This message has been edited by sallen1 (edited 02-09-2000).]

[This message has been edited by sallen1 (edited 02-09-2000).]

[mbowers]

Good posts.

Scott's right. I've seen many cases where simply asking a supplier to do better resulted in significant savings, particularly in high ticket areas like insurance, printing, and maintenance contracts.

What got our attention about bbcn.com, though, is the fact several highly respected car dealers have invested in the business. Bert Boeckmann, Ron Tonkin, Ramsey Gilman, Carl Sewell, Joe Serra, and Hank Faulkner are names I've heard.

That tells us that not only do those dealers believe bbcn has a sound business model, but their involvement virtually ensures that the business will provide benefits for dealer customers.

[sallen1]

Another thought along the way...

Reguardless of when the 'on-line' mall for dealership supplies or services comes or who does it, you really have to think about the best advantage (next to price), and that's convenience. We all try to provide convenience to our customers and now maybe we'll get the same courtesy.

I cannot tell you how difficult it is for me to get important things done at the store while the phone's ringing, or some (previously unknown) prospective vendor's sales rep. is looking for 'just a couple of minutes..' I get 10x the effort done at home early in the morning than I do the rest of the day. This frustration is shared by everyone I know, especially my purchasing/parts manager. If only we could choose when to order. Well...

Given a method where we can order what we want at the best price and do so any day of the week and at any time, I'd pay the subscription fee. But as I've seen with subscriber fees, et. al., it doesn't take long for the 'free' service to evolve.

Even if the on-line system did not save us more than what we have now, the savings in time and brain-damage (dealing on other people's schedules) would be worth it.

We could actually use that time to serve our customers and employees.

scott

[sallen1]

A BBCN.com update...

Just had a bbcn.com rep. come visit and sell me on the program. Overall, it was informative but several issues come to mind.

First, I'm in California and the system won't be up till July or August 2000. I was offered a waiver of the $895 setup fee if I pre-paid the $2400 per year fee AND provide my list of vendors. Service sight unseen?

Second, the rep. said that bbcn.com is owned/operated by dealers and therefore is better (huh?). They'll make their money by charging transaction fees to the suppliers (and obviously the subscription fee, too). How much will they have to charge inorder to make enough $$ ?

Finally, and in my opinion, bbcn.com seems to be a database/information collection scheme. If they are succesful in signing up enough dealerships, they'll have an awesome list of what is bought and who supplies it. This would be their most valuable asset. Perhaps the service would come second...

The rep did say that we could continue the relationships with suppliers we already have so I'm wondering how much we'd actually use the system. Also, to pre-pay for something that isn't working is not prudent.

A suggestion to bbcn.com: Offer a no-fee test drive period for 6 months. If it works, I'd be the first to sign up!

scott

[Matt Parsons]

It will be interesting to see if services like bbcn can compete with the larger exchange networks. Has anyone heard if the exchanges that the OEM's are subscribing to will be leveraged to the dealer channel?

I also wonder if groups like Cobalt aren't better situated to take on this type of activity due to the high volume of customers and web development that they are already in to. Finally, NADA seems to me to have the premier position to be this type of exchange player, and a possible natural choice as the automotive dealer web-portal - is this in their charter or outside the scope of where they can play?

[Jay]

I agree w/Sallen1. I also listened to a sales pitch from bbcn.com. Pony up our hard earned $ on promises of things to come? Only to find out I'd end up buying from many of the same suppliers? I don't think so.
I suspect that in the future the subscription fee for dealers will fall by the wayside as more web avenues open up for purchasing. Anybody remember paying dues to belong to a VHS video tape club? Sounds funny doesn't it. What do you think the freight costs are to ship in a months supply of computer/copy paper? Want to drive down expenses? Take a tip from Jeff Sacks.
Figure where you want your expenses to be. Pay those key people who can impact expenses a bonus or a share of any savings when expenses drop below the goal. You'll be amazed how creative they can get!

[larmstrong]

[This message has been edited by mbowers (edited 08-11-2000).]