I want to riff a little bit on an outstanding suggestion in a diary by FoundingFreedoms com.
FoundingFreedoms suggested that in former times, car dealerships were not the "auto malls" that have become commonplace today. They were smaller, leaner sites that didn’t rely on large, costly inventories of cars that no one has ordered, but that dealers hope to talk you into buying. FoundingFreedoms suggests that less inventory and more customization could reduce costs by changing the delivery model. Some commenters said American customers don’t like to wait a month or six for a special-order vehicle. But is that really the way it needs to be? Because, as FoundingFreedoms correctly points out, it didn’t used to be that way.
I have a hard time believing that for domestically manufactured cars it would take a month to deliver a completed car to order. The only reason it takes that long today is because special orders are subordinated in the assembly line process to the thousands of what I (appropriately, I think) call speculative units made to stock dealer inventories.
Where I work, right next door they have just built a new, multi-million dollar dealership on 18 acres. 18 acres! It has fountains, landscaping and a coffee bar!! And this is a dealership for a Japanese manufacturer who shall remain nameless. Didn't the Japanese eat our lunch with the idea of Lean manufacturing?
One of the principles of Lean and Six Sigma processes dictates that you eliminate from your work those things that have nothing to do with your core business. If your business is the manufacturing, selling and servicing of cars, why do you pay to build and operate fountains and coffee bars?
Dealers pay millions in financing to maintain their inventories of speculative units that they hope to talk you into buying. Their word for it is "floorplanning." It requires financing and regular audits that take hours of time and is labor-intensive (I know, I used to do floorplan audits on a feelance basis).
My wife comes from a small, agricultural city in Illinois, an hour away from any decent-sized city. It's a county seat, so at one time it was a vital hub to the region, though these days it’s just another down-at-the-heels small town. There are a handful of buildings in town that were once car dealerships (and one or two still are, though they have annexed adjacent properties for increased lot space). The original dealership buildings are quite small. They have significant service space inside, but the sales "showroom" has room for perhaps three vehicles, and the buildings themselves are zero-setback, i.e., built right up to the sidewalk out front. There are no huge lots for "inventory" because in the '20s, '30s, '40s and '50s, dealers didn't maintain much inventory.
There was a sample of each available model on display, maybe another one or two to test drive out back. Sometimes they opened the big side doors and drove the floor model out for you to test drive (I remember this being done for my Dad when he was shopping for a new car in 1974). You ordered the trim and options you wanted by looking through brochures and catalogs. In my wife's Illinois hometown, you could order farm tractors from the same place, in the same way.
It was also not unusual up to the '60s, maybe even into the early '70s, to personally go to the factory to pick up your new car right off the assembly line.
With computerized order entry and parts procurement, modern manufacturing processes and just-in-time delivery capabilities, there really is no good reason that an innovative, disruptive car manufacturer couldn't risk a completely new delivery model that borrowed heavily from the delivery model of the first half of the 20th century.
Picture this:
Your car "dealership" is little more than a few-hundred-square-foot storefront in a suburban strip mall in a high-traffic area. Out front in the parking lot are maybe one or two of each available model for test drives. Inside are maybe a half-dozen workstations for salesmen, and two offices -- one for the manager, one for the financing chief.
Each desk has a computer linked directly to the manufacturing plants, and a second screen facing the customer where "their car" can be graphically created right in front of them in the right color, trim options and interior. Once the car is "created," and financing approved and contracts signed, the order leaves the salesperson's desktop and arrives in real-time at the factory where it is placed in queue for assembly at a known date and time -- which the customer could be told at the time of sale. A modern assembly line with computer control of parts to match the options the customer selected puts it all together.
Or maybe you sidestep most of the dealership process altogether and place your order at home, online. All you show up for is to sign the contract and either pay for the car or arrange financing. Think of how much money this saves the dealer if you do much of their work for them.
A modern assembly line can put together a car to order in hours, and delivery by rail or truck to any point in America should never take more than a week. Or perhaps you go to the factory to pick it up, as in the old days, in which case you could have your car as quickly as you could arrange travel to get there (or the dealer arranges it for you, for a nominal markup over his cost of buying plane, bus or train tickets and hotel rooms at bulk rates).
You need service? It's not done at the dealership. It's done at a remote location in a more industrialized section of town where land is cheaper, overhead is lower and the zoning is more appropriate. These service centers serve multiple dealerships in the region installing "dealer-installed options" as well as performing regular service and maintenance for customers.
Might dealers and manufacturers still want to build "speculative" units, on the off chance a customer wants something generic and fast? They can build them and store them at regional distribution centers, again in remote locations where the land is cheap and the zoning rules are friendlier. Large lots of cars could be at the ready for even faster delivery to multiple dealers in a region. Maybe the dealer charges MORE for this "express" or "convenience" delivery, instead of cutting margins on speculative units sold out of inventory as they do today.
Let’s face it. The contemporary car dealership with its high land costs, heavy zoning burdens (sign ordinances, setback rules, wetland mitigation, stormwater retention ponds), millions in construction and inventory financing and coffee bars is every bit the dinosaur that the Buick Roadmaster was. It is a conglomeration of solutions in search of a problem that lean manufacturing and just-in-time delivery have long since solved.
Automakers like Chrysler and GM, going through bankruptcy and having to shut down hundreds of dealerships — in Chrysler’s case, a quarter of all its affiliates and in GM's, 18 percent of all dealerships — are literally at the stage where they have nothing to lose. The market capitalization of these two companies is less than it is costing to keep their inefficient methods alive. Why not try something new and disruptive? Or in the case of the dealer delivery model, why not something old?