CarMax 2006 Annual Report Download - page 13

11 CARMAX 2006
CARMAX 2006 11
■We believe our processes and systems provide us with a
key competitive advantage. These enabling technologies
have been developed during our more than 12-year
history, and we are dedicated to their continuous
improvement to maintain this competitive edge.
PURCHASING AND INVENTORY
MANAGMENT
■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 to other dealers at
our own in-store auctions, which are an economic and
efficient means of disposal.
■We have built a team of more than 675 skilled buyers.
The team includes 172 buyers who have each completed
more than 10,000 appraisals and an additional 21 buyers
who have surpassed the 20,000-appraisal mark. Our
buyers have online access to information on current
inventory and recent sales, as well as wholesale industry
information. Our high volume of in-store appraisals and
outside auction purchases provides a great training
ground that gives us an advantage compared with other
used car retailers.
■Our inventory and pricing models help us to:
●Buy a mix of makes, models, age, mileage, and price
points tailored to customer buying preferences at
each superstore.
●Make 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
margin 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
retail sales.
■We employ state-of-the-art production techniques, and we
focus on balancing quality, speed, and cost. Our produc-
tion planning process allows us to match reconditioning
capacity and inventory demand across multiple stores.
■We maximize our service bay utilization by implement-
ing 24/7 shift scheduling where appropriate.
■Over the past several years, we have significantly reduced
our work-in-process inventory requirements 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.
Our business is not unlike an iceberg. Our unique consumer offer is what draws customers
to our stores; it is what can be seen “above the waterline.” However, our associates’ devel-
opment and use of key processes and systems “below the waterline” are what make our
business successful — sophisticated purchasing and inventory management, recondition-
ing, and finance originations, all supported by proprietary information systems.
Customer vehicle appraisal Capturing test drive information