CarMax 2004 Annual Report Download - page 11

CARMAX 2004 9
PURCHASING AND INVENTORY
MANAGEMENT
■More than half the cars we retail are purchased directly
from consumers, an excellent source of quality, high-
demand vehicles. Customer vehicle purchases that do not
meet our retail standards are sold at our own in-store
auctions, which are an economic and efficient means of
disposal.
■We have built a team of more than 500 skilled buyers,
150 of whom have each completed more than 10,000
appraisals. Our buyers have online access to data on
current inventory and recent sales, as well as wholesale
industry information.
■In our 10 years of operation, we have appraised more than
4.5 million customer vehicles, retailed more than 1 million
used cars, and sold nearly 600,000 cars at our auctions.
Information captured and analyzed on each transaction
allows us to continually refine our complex inventory and
pricing models.
■Our inventory and pricing models help us:
•Buy the mix of makes, models, age, mileage, and price
points tailored to the buying preferences at each super-
store.
•Recommend pricing adjustments based on complex
algorithms that take into account factors including
sales history, consumer interest, and seasonal patterns.
•Optimize inventory turns to help maintain gross mar-
gin dollars per unit and minimize the depreciation risk
inherent in used cars.
RECONDITIONING
■The majority of our service operation resources are
used in vehicle reconditioning, which supports our
used vehicle sales.
■We employ state-of-the-art production techniques, and
we focus on balancing quality, speed, and cost. Our
production planning process allows us to match
reconditioning capacity and inventory demand across
multiple stores.
■At the end of fiscal 2003, we rolled out our electronic
repair order system (“ERO”), which optimizes the
sequencing of vehicle reconditioning procedures. ERO
has reduced reconditioning cycle time and is providing
the basis for further quality improvements.
■Over the past five years, we have reduced our reconditioning
work-in-process cycle time by 50% through our improved
process and production techniques.
■Automotive technicians are in short supply in the U.S.
We are able to attract and retain skilled technicians by
offering a superior working environment, including air
conditioned bays, a corporate benefit program, and the
opportunity for career advancement. We also have
developed an extensive in-house apprentice program.