Tuesday, June 30, 2009

Automaker Re-Invention Strategy: Eliminate the Dealers

It has already been established that I have a deep antipathy to auto dealers. You might say "but the poor dealers, everybody knows they are struggling, they hardly make anything from new vehicle sales, they rely on used cars and service to keep the doors open". To that I say true, just more proof that they are obsolete.

From a lean manufacturing, just-in-time manufacturing, and inventory management point of view, the large network of dealers, warehousing hundreds of cars each, represents a HUGE source of waste in the system. I think the network of local dealerships should be replaced with regional test-drive centers. You find the car you like, then you order it. Depending how standard your feature list, the wait could be longer or shorter.

Most people can wait to get their new car, rarely are they under the gun to have it TODAY. I know, the psychology of wanting to drive out with new wheels is part of what drives the existing dealer structure. I think that could change, though, if the savings (lean manufacturing = lower costs) and satisfaction (no annoying dealer experience, getting exactly the car you want) to the consumer were there. Anyway, for the rare consumer who just totaled their car, and doesn't have an operational vehicle to use during the 2-4 week wait, the dealers could provide highly subsidized rentals. I think the economics of that would work just fine, and could easily be built into the purchase price.

One of the big challenges to even thinking about implementing such a strategy is the contractual and regulatory challenes to ditching the dealers, along with the overall risk it would involve. Only a desperate company would be likely to take that kind of risk. Well, as they say, never waste the opportunity provided by a crisis. GM, now is the time.

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