TradeRev has been making big changes in their vehicle logistics platform, and over the past year, the company has invested time and resources to cut down delivery times and improve efficiencies.
Through the first seven months of this year, these investments resulted in a 46% reduction in average delivery times in the United States.
At the start of 2019, it took TradeRev about 6.5 days to deliver a vehicle from the time a buyer purchased a vehicle and the time he or she received it. By July, that number shrank to 3.5 days.
This near 50% reduction in overall shipping time was significant, but the company is focused on driving down shipping times further.
By the end of this month, October 2019, the company expects to meet two of its big goals: deliveries within 100 miles in two days and deliveries within 500 miles in three days. Although TradeRev delivers nationwide, a large percentage of its deliveries take place in this 500-mile distance between point of origin and destination, which explains the initial focus on this distance.
“At the end of last year, we talked a lot about logistics, and we watched some other software companies and other businesses get laser focused on logistics,” said TradeRev EVP of Global Operations Keith Crerar. “The TradeRev leadership group talked about how important logistics is to our business. Buyers want to receive inventory quickly, they want a fast, very easy approach to buying cars, and simple bidding. They want to buy the car and have it at their dealership as quickly as possible so they can get it ready for retail.”
In 2018 the TradeRev leadership team decided that logistics was such an important part of the future of its business, because it serves both sides of the transaction — selling dealer and buying dealer — they broke out logistics from underneath the Auction Operations department onto its own department under the company’s Global Operations umbrella.
After breaking off logistics as its own department, TradeRev hired a director of global logistics — Rob Worl — along with a logistics crew for U.S. operations and then proceeded to evaluate the logistics process that they were working with.
“We really looked at cycle time and we broke down the transportation process into various specific amounts of cycle time for every stage and every phase,” said Crerar. “That focus really helped us see where we were taking too long, which part of our process was taking too long, and from there we started to move more of our process in-house. We created our own validation team, our own customer contact team, and changed a lot of our process to make our business fast, fair, and easy.”
Delivering Vehicles More Efficiently
While there are several factors that have contributed to TradeRev’s logistics improvement, there are two that stand out.
The first was transitioning more of the logistics chain in-house.
One of the biggest benefits that came from moving more of the delivery process in-house was being able to leverage partnerships that the company had fostered throughout the years in order cut out steps that had historically been part of the delivery process.
Typically, when a transportation company gets a request to pick up a car from a selling dealer, the first thing they need to do is call that selling dealer to validate if the car is on the seller’s property, if its ready for pickup, is drivable, and has keys.
Thanks to a network of trusted partners, TradeRev was able to essentially cut this process out.
“We said listen, we don’t need to call this seller to validate that they have this car in place every time because they’re a trusted seller in the TradeRev network,” said Crerar. “Their error rate is very low, 99% of the time their cars are available, so let’s just send the truck to dispatch and ship it. That alone took out days of validation process, because we have a trusted network.”
Another move that helped TradeRev improve shipping times was optimizing delivery routes.
When a vehicle is purchased through TradeRev, and a buyer selects TradeRev’s shipping option, that shipping request is sent through TradeRev’s transportation management system (TMS) to a digital board where trucks and carriers can see what vehicles need to be sent where.
If a carrier sees a shipping route and price that they’re happy with, they’ll accept the job and begin the delivery process.
TradeRev analyzed the carriers that often chose TradeRev inventory, looked for routes that they often chose, and then offered them a strategic partnership for that route.
“We said, OK, we can see that you’re accepting these routes for us from this state to this state, would you like to be a preferred partner with us, and we will directly assign you more of that available inventory through our TMS,” said Crerar. “We got very specific with really good partnerships and really good carriers that could deliver on our service level agreements, it all comes back to a laser focus on partnerships and efficiencies.”
How Many Buyers are Choosing TradeRev’s Shipping?
Earlier this year, in July, 88% of TradeRev buyers were choosing TradeRev’s shipping option.
This is an impressive figure, but Crerar acknowledged that this number was initially inflated in part thanks to promotional incentives that reduced the cost of shipping for buyers that selected that option.
TradeRev was initially subsidizing the cost of its delivery service in order to drive user adoption, and to get them accustomed to using the service.
As expected, when the company released the subsidized prices, the services’ take rate shot up quickly. After that initial period, however, the company began to dial down its promotional incentives.
As of October, the company has moved to a flat-rate model for shipping costs. Every mileage band — such as 0-100 miles, 100-500 miles, 500-700 miles, and so forth — has a flat rate cost based on distance.
And, it seems that the promotional incentive strategy from earlier this year worked out. Now, even with promotional incentives gone, the company’s delivery service take rate still hovers around 80%.
“So you ask yourself, now you’re not subsidized, there’s no promotional incentive, dealers are paying almost retail move costs, and they’re still using it 80% of the time. How’s that happen?” said Crerar.
Crerar credits convenience and speed. Choosing TradeRev’s shipping is convenient because it’s a one-click process within the app, and delivery times are faster than any other digital auto auction or auction app in the United States, according to Crerar.
Some dealers will at times choose TradeRev’s delivery service over other companies’ shipping option, even when TradeRev isn’t the cheapest, simply because it’s more convenient to go with them, Crerar noted.