As the automotive industry continues to break records, Ian Carlisle, CEO of Paragon Automotive, argues we need fresh thinking if we are to avoid supply chain issues.
Automotive manufacturers and fleet operators are in uncharted territory. Four years of record new registrations have created unprecedented volumes of used vehicles.
The volumes are already creating stress throughout the supply chain, from logistics to storage and refurbishment, to more complex issues like remarketing.
It was Einstein who defined insanity as doing the same thing over and over again and expecting different results.
A fresh approach is required. Long term planning and investment is needed to ensure there is enough capacity in the system to allow for flexibility. The industry needs to move from a transactional relationship to a partnership approach that builds in shared goals. This will unlock investment and fuel innovation.
Paragon touches over one million vehicles a year, from new vehicle management at the docks, to in-life service, de-fleet and remarketing. This provides a wealth of data and insight that allows for forward planning through the life of a vehicle.
The volumes of vehicles at de-fleet mean that traditional remarketing channels will not be able to cope without distressing values and increasing days in stock. Our own advice to customers is that auction should account for no more than 30% of volume.
Digital and alternative direct channels have evolved to accommodate larger volumes and allow for vehicles to be targeted to the areas of highest demand.
Working on a gain share basis in partnership with the OEM allows for a truly independent outsourced remarketing service that protects residual values, and can take time out of the used vehicle cycle. By engaging the retail network and fully leveraging all digital channels, speed to market can be improved, eliminating book drops and depreciation.
Innovation and flexibility to scale a programme at speed are key factors for any OEM or fleet operator. Technology should be driving the pace of innovation. We have seen little innovation over the last decade but we expect this to change as the industry faces some ‘burning platforms’.
The technology is now available to image a vehicle at the inspection stage and remarket it into the retail network. This will not only vastly reduce days in stock but also ensure that refurbishment costs are kept to the minimum as each vehicle can be prepared to the dealers required standard.
Data can be used to allow dealers to flag the models they require and be alerted as those vehicles hit de-fleet stage. Fresh thinking has the ability to remove a vast amount of cost for the OEM and provide real value to the retailer by opening up a much larger pool of stock they can begin to sell.
Challenging times have always driven the pace of change. The opportunities are there to be taken.