Tuning for Automobile Dealers

January 9, 2006 by admin

The automobile industry and its associated dealerships are important sectors of the economy. Throughout the world, the industry faces increased competition – particularly because of consolidation, the multiplicity of brands, and changing legal requirements. For example, the abolition of brand loyalty triggered by the European Commission’s Regulation 1400/2002 on Vertical Agreements and Concerned Practices in the Motor Vehicle Sector triggered significant challenges. Since the regulation took effect on October 1, 2002, restrictions on competition between manufacturers have been disallowed. Automobile dealers are no longer tied to a single manufacturer, so they have new sales opportunities. And on October 1, 2005, the location clause went into effect, allowing dealers to establish sales locations in other European countries. But these new freedoms come at a price: increased competition, falling margins, and market consolidation.
In this type of environment, dealers need an exact analysis of the economic results of their businesses more than ever before. Information on the sales of new and used cars, repairs, and stock require precise evaluation. Dealers use a dealer management system (DMS) to track this information. Automobile manufacturers used to require the use of these usually brand and interface-specific systems to simplify orders for cars and spare parts. SAP Dealer Business Management now fulfills the specific requirements and processes of automobile dealers – and it does so independently of brands. Horizontally, the application links sales locations into a uniform view of the company. Vertically, it corresponds with the systems of manufacturers or importers, which overwhelmingly count on SAP software.
Manufacturers have large volumes of data about automobiles and their accessories and spare parts. It’s the task of a DMS to record all vehicle and order-specific information and integrate it with in-house business processes. The more manufacturers that a dealer represents, the more interfaces that are required to link the systems. Unlike insular solutions that demand a great deal of effort to ensure error-free communication, SAP Dealer Business Management is based upon the SAP NetWeaver Exchange Infrastructure (SAP NetWeaver XI) component. SAP NetWeaver XI enables data exchange with manufacturers’ systems and simple adjustment of the interfaces helps dealers monitor the exchange.

Central Point of Information

SAP Dealer Business Management maps several brands within a dealer’s company. That’s an important feature because more and more dealers count on consolidation, process optimization, and growth to secure their sales. It’s common to see one dealer sell several brands, each of which competes directly with the others. At first, the brand plays no role for profitability analysis within SAP Dealer Business Management. Nevertheless, the application displays the most profitable brands for the service department, along with the spare parts or services that do not earn profit.
For years automobile dealers have used several, insular IT solutions. The DMS handles internal flows; one or more additional solutions handle communication with the manufacturer. The solutions are not linked to each other, and the service department has no idea what the sales department is doing. Data must be entered multiple times so data often contains errors.
Here an example of how these heterogeneous systems affect automobile dealers. A dealer (let’s call him Matt Mobil at More Mobility) knows this situation all too well. Matt has to use a manufacturer’s software template on his PC to enter data manually on orders for spare parts that he printed from his internal DMS. If a simple transposition of digits triggers an order for a clutch instead of a fender, Matt won’t be the only one to be upset. The customer will be dissatisfied because she has to wait even longer for her car to be repaired.
But SAP Dealer Business Management eliminates this problem because it transmits every order directly and without additional, intermediate steps to the manufacturer. Matt no longer needs to transfer the purchase price into a separate DMS solution, eliminating another source of errors. Because additions to stock are entered and corrected directly at goods receipt, there’s no manual entry for accounting. The application processes invoices and payments immediately. The result is accounting that’s always up-to-date and informative.
When it used a stand-alone DMS solution, More Mobility had to fight with three different inventories in a worst-case scenario: actual, physical, and available stock; the stock carried in the DMS; and the stock listed in accounting documents. Matt Mobil had to reconcile the numbers manually – sometimes as late as the creation of the annual balance sheet. But the list of goods carried in stock accounts in SAP Dealer Business Management corresponds to real values in the warehouse.
In addition to accounting, SAP Dealer Business Management supports all the important business processes that occur at automobile dealerships in controlling, spare parts, service, sales, and personnel. All activities are based upon uniform data. Bid proposal management integrated in SAP Dealer Business Management provides information on possible special prices, discounts, or special conditions. The ability to consolidate data across several locations enables users to trace every sale or invoice item – in both sales and service. This feature creates a relationship between the selling price and the targeted revenue. Such detailed reporting also forms the basis for calculating the contribution margin for customers and orders, as required by auditors. Matt can now see how much profit he earned (if any) from each order. SAP Dealer Business Management gives an automobile dealer’s management a tool that supports economic decision making based upon current numbers.

A Dialog Between Sales and Service

SAP Dealer Business Management is a comprehensive application. Because sales and service process are closely linked with each other, the dealerships of large manufacturers and independent retail partners can both benefit from it. After every vehicle sale, SAP Dealer Business Management directly transmits customer data to the service department at More Mobility for further use. And in the opposite direction, information on inspections and repairs from the service department is stored in a central data record.
The linked information on customers, orders, and vehicle history opens new revenue opportunities to dealers. At More Mobility, for example, SAP Dealer Business Management informs the service department how much Karen Customer spends to repair her older vehicle. Once the spending exceeds a given threshold, Matt can approach Karen to discuss how the purchase of a new car is a better deal than continued repairs of the old car. More Mobility improves customer retention with this approach.
In the past, SAP R/3 or mySAP ERP provided the foundation for automobile dealer solutions developed by SAP partners. Any technological improvement to SAP solutions meant that the DMS also had to be updated. SAP Dealer Business Management now offers a DMS that SAP developed and maintains and that has a secure future.

SAP Dealer Business Management Convinced Volkswagen AG

At the international automobile exhibition in Frankfurt in 2005, gedas, an IT service provider, introduced dealer systems that the Volkswagen Group recommends to its truck dealers for all Volkswagen brands. With the addition of SAP Dealer Business Management to the list, the Volkswagen Group closes all the requirements gaps that affected its dealers. Internationally, a list of recommendations now contains only three DMSs. The dealers of other manufacturers and independent dealers are on the brink of productive implementation of SAP Dealer Business Management.

Friederike  Hertenstein

Friederike Hertenstein

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