central purchasing

[razmann]

COMMING FROM A LARGE FAMILY OF DEALERSHIPS
(10 TO 12 PARTS,SERVICE DEPTS., AND OFFICES)
I BELIEVE THERE SHOULD BE "ONE" BUYING AND
RESELLING (@ 1 TO 4%)CENTRAL DEPT.
THIS WOULD NOT ONLY HAVE A HUGE HAMMER IN THE
BUYING FIELD, BUT WOULD ALSO CREATE A MISSING
PROFIT CENTER !!!!
THE BUYING DEPARTMENTS "MUST" SPEND LESS !!!
ANY SUGESTIONS, QUESTIONS ???

[sallen1]

I agree with your assumption that 'central purchasing' is a benefit. We have done that for our two stores for about 2 years now in a different format. First, since there are only 2 shops to buy for, my purchasing manager negotiates the best price for material (parts, supplies, office stuff, service eqp. and support), gets a 'volume discount' and executes contracts for both. Each store is responsible for ordering, inventory, useage and tracking. In your case, you could probably staff a central office and do the purchasing for all your stores. Keep these things in mind:

Are all stores alike, or do they use different parts and material?

You may also create a paperwork headache with a centralized departement in the sense that for one dealership to get stuff, they would order it through your 'central' office and they in turn would bill to that dealership. Duplication...

What you describe is similar to a co-op which have been done succesfully in the past. The management of the co-op would find good vendors and negotiate volume discounts. Our stores would individually order from the vendors and the billing would come thru the co-op.

As far as the 'profit center' idea, co-ops generally operated as a no-profit system where all extra monies were rebated to the member dealers based on what was purchased.

[This message has been edited by sallen1 (edited 05-24-99).]

[Kevin Kavanagh]

I'm familiar with a co-op that has been successful in Canada and has recently moved into the US.

In addition to central purchasing for your shops you should also consider all your supplies. At the last meeting of a multi-franchise multi-dealership alliance group I moderate one of the memebers discussed central purchasing as it related to office supplies. It was amazing to see the different prices being paid for pens, pencils etc. He has a clerk handle this part time and has saved her entire salary just by looking at this one area.
Creating a central purchasing department for a group of the size your discussing can save significant dollars. By using your computer systems e-mail and PO systems you can control purchases between central purchasing and the stores. I know of organizations that fund the entire purchasing department staff and expenses based on savings alone!

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[razmann]

sallen and kevin thanx for reply two things :
#1 whin I say supplies I meant "all" even
down to paper clips and postit notes !

#2 I do not fathom duplication I "realize"
PROFIT !!!!!!

[razmann]

sorry that was "when" not whin but it really is a "win"-"win"

[Chuck Hartle]

I thought I would throw my 2 cents into this as well. Coming from 3 dealerships we finally set one person in charge of purchasing. We negotiated our best price with the existing vendors and we were able to not only save big $$$$ but we were able to reduce our vendor list by over 50% on redunant vendors who managers had agreements with.

Two great advantages that have not been mentioned here are
1. Shopping dealer franchises with other makes to get the maximum discount on parts purchased.
2. Purchasing exclusively within the dealer group for parts before purchasing outside.

Not knowing your exact location of the 12 stores, this may or may not make sense. There were several dealer groups in San Diego of significant size that would purchase their parts directly from us. All the while, they had two dealerships of our same make that could have supplied the parts to them as well. Of course, I didn't suggest this, but never did we ever receive a call about discounts.
Volume equals discounts. The purchasing power and the cynergies that could be explored should lead you to some increased net profit big time.

Chuck Hartle'

[mbowers]

There is also a co-op type operation in Denver which I believe the Phil Long group belongs to. Same story. All it usually takes is asking a vendor to sharpen his pencil. Potential savings are phenomenal. Vendors that don't want to compete are either at rock-bottom already or can be replaced.