Revamping the Flawed Car Ordering and Allocation System
Table of Contents:
- Introduction
- The Broken Vehicle Ordering and Allocation System
- Two Main Ways Dealerships Get Cars
3.1 Car Allocation
3.1.1 Manufacturer's Control Over Allocation
3.1.2 Limitations of Car Allocation
3.2 Car Ordering
3.2.1 Dealerships' Control Over Ordering
3.2.2 Customization and Customer Satisfaction
- Pros and Cons of Car Allocation and Ordering
4.1 Pros of Car Allocation
4.1.1 High Demand for In-Demand Vehicles
4.1.2 Streamlined Production Process
4.2 Cons of Car Allocation
4.2.1 Gap between Manufacturer and Customer
4.2.2 Discounts and Overproduction
4.3 Pros of Car Ordering
4.3.1 Customer Satisfaction and Customization
4.3.2 Avoiding Overproduction
4.4 Cons of Car Ordering
4.4.1 Diminished Demand Over Time
4.4.2 Value Dilution
- Tesla's Unique Ordering System
- Finding the Best Approach for Manufacturers
6.1 Standardized Manufacturers and Car Allocation
6.2 Optional Equipment and Car Ordering
6.3 The Stalantis Example
- Conclusion
The Broken Vehicle Ordering and Allocation System
The current vehicle ordering and allocation system for dealerships is fundamentally flawed and in desperate need of improvement. In this article, we will delve into the complexities and limitations of this system and explore potential solutions. But before we do, let's take a moment to understand the two main ways dealerships acquire cars: car allocation and car ordering.
Two Main Ways Dealerships Get Cars
Car Allocation
Car allocation is a process in which the manufacturer determines how many vehicles of a particular model the dealership will receive over a set period. The dealer has limited control in this process and is typically given fixed allocations from the manufacturer. While the dealer may have some flexibility in terms of color and certain options, they cannot change the models or package configurations. For example, a Toyota dealership may receive a set allocation of 100 Forerunners, out of which 50 may be SR5s, and a small percentage may be TRD Pros. This allocation model introduces a significant gap between the manufacturer, dealership, and customer, as the manufacturer dictates what the customer will want.
Car Ordering
Car ordering, on the other hand, allows dealerships to specify their inventory requirements directly to the manufacturer. This process offers more customization options, including choosing specific models, packages, colors, and options based on customer feedback and demands. By enabling dealerships to have a greater say in the vehicles they want, the ordering process creates a more customer-centric approach. However, it can potentially dilute the perceived value of the product due to its widespread availability.
Pros and Cons of Car Allocation and Ordering
Both car allocation and car ordering have their own advantages and disadvantages. Let's examine them in detail.
Pros of Car Allocation
Car allocation serves to keep in-demand vehicles highly desirable over an extended period. By limiting the production count, manufacturers can maintain a sense of exclusivity and drive up demand and prices. For example, Toyota's popular TRD Pro models consistently sell at premium prices due to limited availability. Additionally, the allocation method streamlines the production process for standardized manufacturers, ensuring efficient use of resources.
Cons of Car Allocation
One significant drawback of the allocation system is the perceived gap between the manufacturer, dealership, and customer. With limited dealership input, there is a risk of producing vehicles that customers may not want, leading to oversupply and eventual discounts. While manufacturers invest heavily in market research, misjudgments can still occur, resulting in an excess of unwanted inventory. Furthermore, high-demand vehicles often command higher prices due to limited supply, making them less affordable for customers.
Pros of Car Ordering
Car ordering empowers customers to get exactly what they desire, enhancing overall satisfaction. Manufacturers that offer extensive customization options can tailor their products to specific customer preferences. This leads to a more seamless purchasing experience, as customers feel that the manufacturer and dealership genuinely care about meeting their needs. By building vehicles on demand, manufacturers can avoid overproduction and only produce vehicles that are already sold.
Cons of Car Ordering
A potential downside of the ordering process is that the initial demand may diminish over time. When customers know they can order a vehicle at any time, the sense of urgency decreases, affecting long-term demand. This can dilute the perceived value of the product as it becomes more readily available. Moreover, manufacturers must carefully manage the production and supply chain to ensure timely delivery and avoid customer dissatisfaction.
Tesla's Unique Ordering System
Tesla stands apart from traditional manufacturers with its direct-to-consumer ordering model. Customers can order a Tesla vehicle directly from the manufacturer's website, and the vehicle will be built once the order is placed. This approach eliminates the need for dealerships and allows Tesla to produce vehicles on-demand, reducing the risk of overproduction. However, it's worth noting that Tesla's success with this model stems from its substantial capital investments and luxury status, which may not be feasible for most manufacturers.
Finding the Best Approach for Manufacturers
The optimal approach for manufacturers depends on various factors, including the type of manufacturer and the nature of their product offerings.
Standardized Manufacturers and Car Allocation
Manufacturers like Toyota, known for their standardized product lineup, benefit from the allocation method. This approach streamlines production and keeps the supply chain efficient. As long as the manufacturer accurately predicts demand, the allocation method ensures a steady supply of in-demand vehicles without excessive discounts. While it may introduce a gap between manufacturer and customer, its benefits outweigh the drawbacks for standardized manufacturers.
Optional Equipment and Car Ordering
Manufacturers with complex product configurations and numerous optional features, such as American manufacturers, should consider the ordering approach. By allowing dealerships to specify their inventory requirements, these manufacturers can avoid building vehicles that customers don't want. This reduces the risk of oversupply, subsequent discounts, and unmet customer expectations. Stalantis serves as a prime example of a manufacturer successfully implementing the ordering system, leading to increased sales and customer satisfaction.
Conclusion
In conclusion, the current vehicle ordering and allocation system for dealerships is flawed and requires reform. The pros and cons of car allocation and ordering highlight the need for manufacturers to evaluate their specific circumstances and tailor their approach accordingly. While neither method is perfect, finding a balance that satisfies customer preferences, prevents overproduction, and maintains value is crucial for manufacturers to thrive in a competitive market.
【Highlights】
- The vehicle ordering and allocation system for dealerships is broken and in need of improvement
- Car allocation and car ordering are the two main ways dealerships acquire vehicles
- Car allocation gives limited control to dealerships, while car ordering offers more customization options and customer satisfaction
- Pros of car allocation include maintaining high demand for in-demand vehicles and streamlining production for standardized manufacturers
- Cons of car allocation include a gap between the manufacturer, dealership, and customer, as well as potential discounts and overproduction
- Pros of car ordering include customer satisfaction and customization, as well as avoiding overproduction
- Cons of car ordering include diminished demand over time and potential value dilution
- Tesla's unique direct-to-consumer ordering system is successful due to its capital investments and luxury status
- Manufacturers should choose the most suitable approach based on their product offerings and customer preferences
- Standardized manufacturers like Toyota benefit from car allocation, while manufacturers with optional equipment should consider car ordering
- Stalantis, an example of a manufacturer using the ordering system, has seen increased sales and customer satisfaction
【FAQ】
Q: What is the main problem with the current vehicle ordering and allocation system for dealerships?
A: The main problem is the lack of control and customization options for dealerships, leading to potential oversupply, discounts, and a gap between manufacturers and customers.
Q: How does car allocation work?
A: Car allocation is when the manufacturer determines the number of vehicles a dealership will receive over a set period, with limited input from the dealership.
Q: What are the benefits of car ordering?
A: Car ordering allows customers to customize their vehicles and increases customer satisfaction. It also helps manufacturers avoid overproduction and build vehicles based on demand.
Q: Why is Tesla's ordering system unique?
A: Tesla's direct-to-consumer ordering model eliminates the need for dealerships and allows vehicles to be built on-demand, reducing the risk of overproduction.
Q: What factors should manufacturers consider when choosing between car allocation and car ordering?
A: Manufacturers should consider the nature of their products, customer preferences, and their ability to manage production and the supply chain effectively. Standardized manufacturers may benefit from car allocation, while those with complex configurations should consider car ordering.
