When it comes to allocating vehicles, it seems fair: You sell 20 Honda Accords and the computer allocates you 20 more Honda Accords.
So what's wrong with that?
Plenty, if the allocated Accords are mid-line LX models, and what you really want are base DX or luxury EX models. Or maybe what you really need is an Odyssey minivan.
John Reagan, owner of John Reagan Honda in Jefferson City, Mo., says, 'You get no choice' other than color and transmission when it comes to ordering vehicles from Honda.
'Choice is further and further away,' he says. 'Hondas are so popular you take everything you can get your hands on.'
Honda is only doing what the rest of the industry is doing. Manufacturers use 'turn-and-earn' to allocate vehicles to dealers. The more you sell - and the faster you sell them - the more vehicles you get. The method can reward dealers for past performance, but it frequently fails to provide dealers and consumers with what they want.
Smaller dealers argue that turn-and-earn makes it virtually impossible for them to grow or to earn allocation of hot products.
To them, it is a Catch 22. You can't sell more until you boost your allocation. But the only way to boost your allocation is to sell more.
Mark Porcaro of Clinton Car & Truck (Chevrolet-Cadillac-Ford-Chrysler-Plymouth-Jeep) in Clinton, N.J., says he sells all the trucks Ford sends him, but is not earning any additional allocation.
He says he had a customer who wanted a 1999 Econoline V-10 van. He could not get the van, but convinced the customer to wait for a 2000 version. 'It had a quasi-happy ending,' he says. 'The turn-and-earn system does not work; it's a fallacy.'
For the most part, it takes at least 30 days and sometimes up to 90 days for dealers to get the vehicles they have earned. That means a consumer who wants a vehicle configured differently from what the dealer has earned might have to wait months to get it. In some cases the dealer cannot get the vehicle at all.
FACTORIES SAY IT'S FAIR
Those in charge of the programs at the factories say turn-and-earn is fair.
Dan Bonawitz, vice president of automotive corporate planning and logistics at American Honda Motor Co. Inc., says its vehicle ordering system is called Market Oriented Vehicle Environment, or Move.
Bonawitz says dealers agree with the vehicle choices made with the system almost 100 percent of the time.
'The dealers are very satisfied with Move. Some know the system and work it to the fullest; some turn it over to their general manager or sales manager,' he says.
Paul Berrigan, director of distribution and scheduling at DaimlerChrysler, says the company has used the same allocation process, called Inventory Management System, for about eight years.
'The dealers understand it. There are no secrets. They are comfortable that they are earning their fair share,' says Berrigan.
HISTORY IS THE GUIDE
Mike Resinger, North American sales planning and distribution development manager at Ford Motor Co., says Ford's system creates orders for its dealers based on an individual dealer's sales history. He says dealers accepted 20 to 25 percent of the stock replenishment orders Ford created for them last year. In this context, 'accepted' means that dealers agreed totally with the vehicle configurations, without attempting to make modifications in the order.
After Ford tinkered with the system in March, dealer acceptance of the orders increased to 40 to 50 percent. He says the company has been working with its dealer councils to create a computer system that generates more orders that accurately reflect what dealers and their customers want.
'There are a lot of variables; our computer system needs to be better,' says Resinger.
Mercedes-Benz USA Inc. is experimenting with a new allocation system that will give dealers in some growing markets more cars than they would get under a one-for-one turn-and-earn system.
Dealers are split on the issue. Generally, larger dealers who sell a lot of vehicles and thus earn a lot of vehicles seem to be more satisfied with turn-and-earn than smaller dealers.
Ted Morse, president and COO of Ed Morse Automotive Group in Fort Lauderdale, Fla., believes the turn-and-earn system needs to exist. 'I don't know how else you could distribute vehicles,' he says.
Morse Automotive Group ranked 11th on the 1998 Automotive News top dealership group list and owns 19 dealerships.
Randy Hiley, who owns five Saturn stores in the Dallas-Fort Worth area and a Mazda-Volkswagen dual in Arlington, Texas, says Saturn's allocation system is the best he has dealt with, and Mazda does not present a tremendous problem unless there is a new product launch.
But Volkswagen, he says, has been a challenge.
Since VW's popularity skyrocketed in recent years, Hiley went from selling six VWs a month to about 55.
'We still haven't filled all our initial New Beetle orders, and there are dealers wholesaling on the East Coast' to other dealers, Hiley said this summer. 'The guys who've been selling a lot, they get the big percentage of cars, which was probably more than they needed. So they have too many cars, and we've never had more than 15 days' supply.'
VW has improved the situation since then, but Hiley says he still has customers waiting for New Beetles.