Managing Third party Vendors
Dealers all utilize a DMS (Dealership Management System) to operate and control the very complex group of businesses that constitute the whole of an auto dealership. Depending on many factors, including the size of their operations, franchise(s), DMS vendor and many other variables, today’s dealer will routinely utilize numerous third party vendors to improve their processes and optimize profitability. A bewildering array of new products are introduced almost daily. Just a few years ago these other solutions didn’t amount to much compared to the cost of a dealer’s main DMS contract. That is no longer the case. It’s common today for us to see a dealer paying more to third party providers than they pay for their DMS. Just like your DMS vendor, managing third party vendors is crucial.
A recent review of the tech bills from a new client (a group of about a dozen stores) found them paying $117,000.00 a month to a major DMS vendor and more than $150,000.00 a month for the third party vendors that they also employed. That’s NINE MILLION DOLLARS ($9,000,000.00) over five years! Our analysis uncovered not just excessive costs and duplication, but also ineffective and unused / under-used programs that the dealer was paying for every single month. The total waste so far amounts to over $3,000,000 (Three Million Dollars) over a five year period. It obvious that a dealer (of any size) has to exercise extraordinary diligence to manage the utilization and cost of these proliferating “solutions”. While dealers can truly benefit from the use of third parties, it’s also very easy, if the proper controls are not instituted, to let them get out of control.
The list seems to grow every day but some common supplementary services include:
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- Networks and bandwidth
- CRM / Showroom Control/ Service CRM
- Used car valuation, web inventory and control
- Vehicle History Reports and VIN Number
- Credit Bureau Access
- Key Systems
- F&I Menus & Facilitations
- Electronic Repair Orders & Dispatching
- Body Shop Repair Estimating
- Web Filtering
- Phone Systems (VOIP & other)
- Managerial Report Generators and Custom
- Written Software
- Impact Printers & PCs
- Utilization Training
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- Archiving & Archival Scanning
- Interfaces With Finance Sources
- Service Marketing, CSI & Reminder Calling
- Parts Cataloging
- Database Cleansing & Maintenance
- Paperless & Laser- Based F&I / MV Forms/Document Scanning
- Signature Capture & Virtual Contracts
- Web Design and Hosting
- Web Video Creation
- Web Marketing (including targeting specific demographics)
- Search Engine and Web Reputation
- Phone Call Tracking
- Social Media Management
- Mobile Access & Texting
- Interfaces with mobile devices (iPod, iPad etc) [/twocol_one_last]
Each of these ancillary vendor relationships will usually require an additional, proprietary contract. Each contract, after review, modification and approval, needs management with regards to terms and renewals, ongoing negotiation, due dates and administration. It is truly a daunting task. In many organizations, these contracts are set up and then neglected to the Dealer’s detriment. Renewals usually occur automatically under most agreements. Negotiations become reactive capitulation as unexpected deadlines loom. Boilerplate contract terms are routinely accepted without question. Leverage and advantage are inadvertently squandered. A proactive and systematic plan to reduce costs, limit exposure and maximize benefits is required. The first step is to identify and review all existing vendor relationships. Only then can procedures and controls of future contracts be considered and approved by the Dealer. It is crucial, for example, that those persons authorized to make decisions for the organization are specified and vendors notified that only those individuals can enter into agreements.
Vendor contracts other than the DMS contract need enduring attention from the day they are considered. Proposed contracts need to be assessed with regard to cost and terms in the same way that a DMS contract is evaluated as these can vary widely, not only from vendor to vendor but from dealer to dealer. Dealers who know what to pay and what terms to stipulate will be better off than those who don’t do their “due diligence”. It is also crucial that a dealer be attentive to contract termination and renewal provisions. Allowing a contract to renew without review of performance, cost and terms is simply dangerous. Nevertheless, this will occur frequently as most vendor contracts “auto renew” if a dealer does not take timely action. Renewals should always be planned and possible replacements vetted. Is there a new or better solution available at a lower cost? Address any contract issues with specific written addenda before you sign. Get professional help if you are not comfortable with any aspect of the deal. You may be told that you are being petty or your requests are unwarranted. If your requirement is so “insignificant”, then why won’t they acquiesce? It may be that your goals and theirs are very different. Especially when it comes to the use of your data, you may suspect that your vendor has a conflicting agenda.
The Gillrie Institute now offers a simple, low cost solution to clients in the form of a new product: Third Party Contract Alert. Contact us today and we will explain how we can provide the professional assistance you need to manage your third party vendors effectively.
Your data can be more valuable than you know.
A major focus of any assessment should be to eliminate unauthorized dissemination of proprietary data and limit your liability. Recent events in the news have made dealers aware of the need to understand and regulate access to the sensitive and valuable data stored in their DMS.
An upcoming article will cover this topic in depth but the major defensive objectives are:
[/fusion_builder_column][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][box style=”rounded” border=”full”]a. To determine which active third parties have any access to the DMS
b. To determine what data is available and is being accessed and by whom
c. To prevent active vendors from accessing data without establishing a explicit need
d. To institute guidelines that limit the use and sharing of data
e. To create a defensible system to protect customer data stored in the DMS
f. To identify and disable any unnecessary or inactive links, especially those that should have been
rendered inoperative when a previous vendor was terminated.[/box]
Remember: “It’s not who owns your data but who controls it that is crucial”
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