What Is a DMS?

When one talks about a DMS, people usually think about a document management system, a data management system, or even a destroyer mine sweeper. But very few people know that it’s also the acronym for “dealership management system,” which is a product or package of several products which is created specifically for the automotive industry.

The core of any DMS is a system similar to enterprise resource planning (ERP), with, however, specific characteristics for car manufacturing, distribution, spare parts inventory, and work order management. DMS packages often also include customer relationship management (CRM) and business intelligence (BI) solutions.

Two of the most important players in the DMS market started doing business toward the end of the nineteenth century: 1886 for Reynolds and Reynolds in the US and 1896 for Kalamazoo in the UK. Both started as printing companies and later turned to the automotive industry (Reynolds and Reynolds in 1927 and Kalamazoo in 1960).

In parallel, some dealerships tried to create their own management systems. I have exchanged e-mails with one such dealer, Tom Mautner. In the 70s, Mautner retained the services of a bright programmer, and created something that would help businesses overcome the disadvantages of existing solutions, which were often adaptations of existing software and not designed for the car retail industry. In addition, they only worked on very expensive and difficult-to-maintain computers.

After six months of hard work and testing, Mautner and his partner tried to sell the software to other dealers, without much success. Finally they decided to sell it to a company called VISitronic. Over the years, they continued developing the product as consultants, and in the 80s their product was one of the first PC-based DMSs available in Europe.

VISitronic was later acquired by Kalamazoo, which is now part of the Reynolds and Reynolds group—one of the biggest DMS providers in the world.

A major step in the evolution of DMS systems was the Block Exemption Regulation (BER), adopted by the European Union in 2002. Its main goal was to deregulate relationships between dealers and car manufacturers and to allow dealerships to freely market their services and reach customers in different geographic areas. As a result of the BER, the DMS market also became free, and therefore more competitive—diminishing the power of the few vendors that were controlling it.

So Who Really Needs a DMS, Anyway?

Car manufacturers, that’s who; mainly for control purposes. In Europe, before the Block Exemption Regulation, automotive manufacturers used to force dealerships to use a DMS. This way, the car manufacturer could control the sales and purchases of the dealers, and decide to increase or decrease quotas for them. It also helped them determine the optimal quantities to produce, which could vary by season, by model, and even by region. Most major car manufacturers would not allow their dealers to sell other brands at the same site.

Another reason for using a DMS was so manufacturers could control the quality of the services provided by the dealers—making sure they only used genuine spare parts and that they followed the work procedures defined for specific processes. A unique system for all dealers would also provide them with the right tools to be efficient in their relationship with the car manufacturer (e.g., spare parts ordering tools, warranty management, vehicle repair history).

Dealers need a DMS to grow efficiently. Let’s say a dealer started a family business decades ago; if everything went well, it acquired five or six new dealerships in the region. Later it would expand even more. The problem: the six or seven dealerships were now using three or four different systems. This raised some very big problems. Their only options:

• Gather a team of programmers and build a completely customized solution that would make all systems talk to each other and exchange information in a seamless manner. This would mean a lot of work, and even with a huge budget, they might not be able to produce the end product—not to mention that any dealership they acquired in the future would force them to review their existing solution.

• To keep the best of all solutions they were currently using, which would mean that all other dealerships would have to implement that same system. This would mean new licenses to purchase, a possible new infrastructure to set up, training to be completed, change management, and more.

• If none of the existing solutions were good enough to make all dealerships work together, they would still have the option of implementing a new solution, which would replace all existing ones.

Car dealers need to be efficient—especially in today’s economy—but this is virtually impossible without good software. Moreover, the market is changing and customers are changing as well. They have different needs, and different ways of understanding the concept of “property” itself (they do not necessarily want to own a vehicle and be responsible for all the charges that ownership implies). Car-sharing companies such as Communauto in Quebec, ZipCar in Canada and the US, and Mint in New York are more and more successful, as many people decide to use common transportation for their basic needs.

Customers no longer want to go all the way to a dealership to schedule an appointment for an oil change, nor do they want to spend 20 minutes on the phone because the dealer’s customer representatives are busy. Customers would also like to make sure the spare parts they need are available—before they come to the shop. Some often prefer ordering, paying, and tracking the shipment online. All this today can be done through the Internet; the way a company manages this connection with its customers—and I’m not talking about speed or bandwidth—can make the difference between success and failure.

The dealership employees also expect the system to help them in their work. Let’s take the example of a customer who buys a car in Boston and has problems with it in Chicago. Ideally, he or she should be able to go to any authorized dealer, which should be able to access the full history of repairs as well as warranty information for that car—allowing the staff to be very productive, and ultimately increasing customer satisfaction.

Why Can’t an ERP System Do All That?

Actually, it can, at least in theory. The only problem is that an ERP vendor will have to customize the product, make sure it works well in all locations (which means taking into account several types of constraints: legal, technical, infrastructure, human resources, etc.), and then provide interfaces for the applications used by car manufacturers (e.g., spare parts ordering, warranty management). All this customization could end up costing more than a stand-alone DMS, which is designed for the automotive industry and can offer a dealership all the tools it needs to be efficient and competitive.

The most efficient DMSs are the ones created by or with the dealers, that are later acquired by software vendors. Some car manufacturers hook up with software vendors to create sophisticated and very expensive solutions, or adapt their own systems to the industry, but often ignore the needs of the dealers and their customers.

The end result can be a complete disaster, as one of the biggest European car manufacturers discovered in the 80s, when one of the top five software vendors created a solution for the manufacturer that integrated all systems. However, the dealers’ staff and management hated it. Finally, after a lot of work and a huge amount of money spent for nothing, the manufacturer deployed a DMS, and continues to be successful today.

So, What’s the Moral of the Story?

Times are rough for all companies nowadays, but for some reason the automotive industry is being hit much harder than others. Whatever that reason is, car dealers need to be more efficient, and they can only do it by using a robust, fully integrated system—ideally, a DMS.

If you are involved in the automotive industry, what’s your perspective?  I welcome your thoughts and opinions—please feel free to leave your comments below.