We talk to Ronald Wright, Senior Director of Procurement and Enterprise Optimisation at KAR Auction Services who talks us through the ever-evolving lan...
Working across more than 300 locations in North America, KAR Auction Services comprises a family of companies providing innovative, technology-driven, end-to-end vehicle remarketing solutions. Auto remarketing is a big business in North America, with 290 million used vehicles currently in operation across the continent. KAR and its subsidiaries – which include ADESA, Insurance Auto Auctions (IAA) and Automotive Finance Corporation (AFC), among others – are at the heart of this vibrant marketplace, providing wholesale and salvage auctions as well as detailing, dent repair, logistics, transportation and more. With operations spread across North America as well as the UK, implementing a comprehensive, enterprise-wide procurement strategy is a strategic imperative.
KAR’s unique platform supports the sale of more than 5.5mn units valued at over $40bn through its auctions. Ronald Wright is Senior Director of Enterprise Optimisation at KAR and it is his job to ensure support and supply across the company. Just don’t use the dreaded ‘p word’…
“We don't even use the word ‘procurement’ here,” he says, speaking from his Indiana office. “We call our operation ‘Enterprise Optimisation’. We don't talk about procurement because that's too narrow of a focus of what we do. If there needs to be optimisation of a process, we're there. If there needs to be optimisation of a particular project, we're there. If there needs to be optimisation of how we bring value, again, we're there. If there needs to be optimisation in cost, we're there. That's why we're enterprise optimisation. We're not sourcing, we're not a supply chain, we’re not procurement. Moreover, this umbrella of enterprise optimisation allows us to come to you with a variety of skills and solutions in the space.”
A former procurement specialist from the US defence industry, Wright outlines the operational pillars that have helped his team optimise KAR’s growth. “Our team today operates on four pillars: teamwork, adaptability, innovation and trustworthiness. The questions we always ask are: what are our customer’s needs? What are their requirements and how do we bring those requirements efficiently and effectively to our partners in the marketplace, so that we can achieve the overall goal?”
This notion of Enterprise Optimisation sees a shift from the traditional sense of procurement as a cost-saving measure to a broader, more holistic approach. “Our CFO is a unique senior manager, because his first goal is to bring value to the organisation. His first goal isn't, ‘Hey, how much money can you save?’ He does want us to save money, but he's more concerned about the intrinsic value that we can bring to the organisation and our customers. That doesn't always mean the lowest cost.”
Some of the biggest challenges facing Wright come from the constantly expanding and retracting need for labour. “We run physical auctions all 52 weeks of the year. As an example, say I have an auction that regularly runs 1,500 cars in a roughly four-hour period. Now, they need a lot of labour to be able to get those cars across the auction block. We have to check each vehicle in when it arrives at our facility, we have to upload its information into our system, we have to line the vehicles up in the order they’re scheduled to be auctioned, and we have to drive them across the auction block. We also handle all the transactions and all of thisis happening at a facility within a four-hour period, which requires anywhere from between 100 to 120 temps. Outside of that four-hour window, during the rest of the week we have employees handling mechanical work, detailing, body shop work and more – and we have temp employees helping with other things going on around the lot.”
To help with labour demands KAR has fostered partnerships with some key suppliers. “One of our vendors helps us replace windshields on vehicles. Our business is about velocity, moving cars quickly through our ecosystem and this vendor has been working with us on a number of system enhancements to make us better. Vehicles now have cameras everywhere and there are 10 to 12 different types of glass. Our vendor partner helps us to mistake-proof the process of replacing windshields in the digital space, thus increasing the pace at which we do business.”
KAR also runs mechanical shops at many of its physical auctions that do oil changes, tyre replacements and other modifications as requested by sellers and buyers, an area where Wright sees possible partnerships. “We’re working to build stronger, more strategic partnerships with key suppliers, but we can only do that once we've established a rapport with them and have a successful working relationship in place. We want to be nimble and goal motivated. It is important that we have good communication with our supplier partners and a strong understanding of what is expected. We can't work with a supplier that doesn't have at least a national footprint or a digitised information system. That system should track the progress of our working relationship so we can track any deficiencies and find opportunities for improvement.”
“For me, I can't be involved with a supplier that doesn't have the ability to give us what I call consumable, visualised data that we can do something with. I need a supplier to be able to tell us that we have a pretty large battery spend, so we are able to drill down to the details of our battery spend to types of batteries we’re ordering, where we are buying them, and which areas of the company are buying the largest amount. You need that clarity in order to be able to find value and efficiencies.”
“One of the unique things about our space today is how our industry is changing overall. We're aligning our business and what we do with our suppliers while also meeting the internal needs of our customer. If you've ever been to an auction house, you’ll know that usually a bunch of people watch a car come across the block before bidding on it. Now, we simulcast all of our auctions across North America, so people are able to bid online. We're seeing the changing dynamics of that online buyer who doesn't physically come to our auctions. We're working with businesses to look at different ways to deploy our services to our customer base.”
How has technology influenced that, specifically? “I would say in two areas. The first area is how you interact and interface with your customer. We've been trying to move most of our suppliers to some type of digital interface where we can order product. I would almost liken it to what we call the Amazon effect. Nowadays people are used to going online and being able to search and order the things they like and need.”
“The second part of that is the increased level of expectation from the customer. Two-day delivery is standard. ‘We’ll get that to you in a week.’
‘Huh? A week? Are you in the Stone Age? I need to go somewhere else’.”