Don Ferrario says he could have doubled new-vehicle sales last year if he only had the inventory.
Ferrario, president of Ferrario Auto Team, says the factories' turn-and-earn allocation system can't keep pace with demand.
It's a "self-fulfilling prophecy," says Ferrario, who runs four domestic-brand stores in Elmira, N.Y., and Towanda, Pa. "If you base stocking on the last three months of sales, you are going to guarantee that you won't sell more than that over the next three months."
Automakers are tuning their systems because the mix of rising sales, low inventories and lean production is increasing the pressure. They're monitoring inventory more closely and providing tools to help dealers order efficiently. Technology suppliers are working on software that helps dealers track customer demand.
Dealers say the turn-and-earn system has two basic problems:
1. It's too slow. Lag times can reach three months from order to delivery.
2. It's always fighting the last war. Deliveries reflect the realities of two or three months earlier, guaranteeing short supply in a rising market and often missing changes in consumer tastes.
Seventy-six percent of the 412 dealers responding to an Automotive News poll on vehicle allocation said they were losing sales because of inventory shortages. Other dealer concerns from the survey: 80 percent said they have to wait two months or more to get replacement vehicles, and 65 percent said the factory checks inventory only once a month.
Turn-and-earn systems, which require dealers to turn new-vehicle inventory to earn replacement stock, are a sensitive subject. Although several automakers are tuning up their allocation system, they won't talk about those systems in detail. And many dealers contacted were hesitant to make public criticisms.
"Vehicle allocation is factory-driven rather than customer-driven," says Steve Cook, dealer principal of Cook Chevrolet-Buick in Vassar, Mich.
When the factory checks inventory once a month, sales reported after that date aren't counted until the next month's survey. That can create inefficiencies -- and lost sales.
For instance, a single-point Hyundai dealer who asked to remain anonymous said Santa Fes account for half of his business -- but that day he had only three Santa Fes in his 150-vehicle inventory.
Automakers say they're working to change things:
-- American Honda Motor Co. plans to update its MOVE allocation system within 18 months. Dennis Manns, vice president of sales and logistics planning, says the system will weigh local market demand more heavily.
-- General Motors Co., which used to check stock levels once a month, is shifting to twice a month, dealers say. GM spokeswoman Ryndee Carney did not confirm the change, but wrote in an e-mail that GM is "studying a number of possible alternatives."
-- Ford Motor Co. and GM confirm dealers' reports that they're giving priority to sold orders.
-- Chrysler Group recently provided dealers with two software applications to help manage inventory and orders: the Fastest Moving Vehicle and the Virtual Inventory Vehicle Locator. The software helps dealers determine the fastest-turning vehicles in their markets.
An ordering tool cites vehicle configurations with the fewest days on the lot. A locator application expands dealers' ability to trade inventory by opening almost all units in production for dealer trades.
"If a dealer needs to quickly fill a customer order, he can use Virtual Inventory to see if that vehicle is in production or scheduled for production, and then attempt a dealer trade," says Chrysler spokesman Ralph Kisiel. "At any given time, there are 200 to 300 vehicles in this Virtual Inventory system."
Suppliers of dealer management systems such as ADP Dealer Services, Arkona and Reynolds and Reynolds and some independent software suppliers provide dealerships with software to manage inventory. Some are refining the programs to help dealers monitor what's selling in their markets, says Paul Gillrie, a Tampa, Fla., dealer computer consultant.
But he says the systems often provide a sales history without recommending what to order.
Proactive software, which predicts market trends based on existing hard evidence, has found its way into other auto-dealership departments.
It's possible, for example, to create models of used-vehicle trends based on past new-vehicle production and lease data, or to predict demand for parts by assessing the number and the age of models on the road.
Used-vehicle inventory management software from vAuto of Oak Brook, Ill., predicts demand and recommends orders by looking at the dealership's recent sales history as well as the broader market.
"No single dealer's sales history is representative of the broader market," says Dale Pollak, founder of vAuto. "You need to tap the live market to see what's selling at least 50 miles surrounding the dealership."
The software analyzes supply, demand and price sensitivity using data commonly posted online. But such information is not publicly available for new vehicles.
A software developer would need real-time sales reports from automakers to create a similar forecasting tool for new vehicles. On a daily basis, the factory would have to provide how many units of each vehicle -- by make, model, year, trim level and equipment -- were available within a market and the sales rate for each. And automakers would need to be able to shift production quickly, Pollak says.
"The technology is there," Pollak says. "But because of constraints within the supply chain, they're not able to shift on a dime."