CarMax 2010 Annual Report Download - page 8

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6 CarMax 2010
Building a Better CarMax –
Discovering Eciencies
ALABAMA
Birmingham
Huntsville
ARIZONA
Tucson
Phoenix (2)
CALIFORNIA
Fresno
Los Angeles (9)
Sacramento (2)
San Diego
COLORADO
Colorado Springs
CONNECTICUT
Hartford/
New Haven (2)
FLORIDA
Jacksonville
Miami (5)
Orlando (2)
Tampa (2)
GEORGIA
Atlanta (5)
ILLINOIS
Chicago (8)
CarMax Used Car Superstores
(As of February 28, 2010)
INDIANA
Indianapolis
KANSAS
Kansas City (2)
Wichita
KENTUCKY
Louisville
MISSISSIPPI
Jackson
NEBRASKA
Omaha
NEVADA
Las Vegas (2)
NEW MEXICO
Albuquerque
NORTH CAROLINA
Charlotte (4)
Greensboro (2)
Raleigh (2)
OHIO
Columbus (2)
OKLAHOMA
Oklahoma City
Tulsa
SOUTH CAROLINA
Charleston
Columbia
Greenville
TENNESSEE
Knoxville
Memphis
Nashville (2)
TEXAS
Austin (2)
Dallas /
Fort Worth (4)
Houston (4)
San Antonio (2)
UTAH
Salt Lake City
VIRGINIA
Charlottesville
Norfolk/Virginia
Beach (2)
Richmond (2)
WASHINGTON, D.C./
BALTIMORE (7)
WISCONSIN
Milwaukee (2)
CarMax Markets
Finding opportunities to implement organizational change
that improves our processes and systems is key to our goal
of operational excellence. Having temporarily suspended
store growth, during fiscal 2010 we spent more of our time
focusing on Building a Better CarMax: reducing waste
and controlling our costs while offering the same or bet-
ter quality to our customers. “While CarMax has always
been engaged in waste reduction efforts, we have now cre-
ated a common methodology and language that will help
us have the greatest impact companywide,” said Judith
Simon, Director, Operational Excellence. Teams of associ-
ates engaged in waste elimination initiatives are particularly
successful because they are working to improve their own
departments — from the bottom up, instead of working from
the top down. Exciting new successes have been achieved
throughout the company during fiscal 2010.
This year, it was particularly gratifying to realize a signifi-
cant decrease in our vehicle reconditioning costs — and on
a faster pace than we had originally anticipated. On aver-
age, we estimate we achieved a sustainable reduction in
reconditioning costs of approximately $200 per vehicle.
This reduction was primarily accomplished through our
emphasis on the consistent application of our reconditioning
standards across our entire store base. A large portion of the
reduction was achieved through our cosmetic improvement
program, where we are addressing over-processing and waste
in our cosmetic reconditioning techniques. “This initiative
was focused on streamlining our cosmetic reconditioning
standards and ensuring that the same reconditioning stan-
dards are applied to every car in every store,” said Gary
Sheehan, Assistant Vice President, Process Engineering.
Our drive to revolutionize reconditioning will be an ongo-
ing process that we believe can drive additional cost savings,
which will be available to continue to optimize future sales
and profitability.
Successful waste elimination and cost control clearly bene-
fits our selling, general and administrative expenses (SG&A).
Despite the fact that our fiscal 2010 total revenues increased
by 7%, we reduced SG&A by 7%. A large portion of the
decline in our total SG&A expense was due to reductions in
both advertising spending and growth-related costs resulting
from suspending store growth. However, the decline also
reflected our efforts to control overhead costs. Some of these
efforts yielded immediate cost savings. “An example is our
energy cost savings initiative, which has already succeeded
in reducing energy usage in our stores and at our home
office by millions of dollars,” said Joe Maccarone, Project
Manager – Construction, Design and Facilities. Other initia-
tives simply uncover a better way of doing things and will save
costs over time as we continue to grow. Most importantly,
they will most often also improve the experience for one or
more of our customer groups, such as our newly streamlined
system for registering dealers who attend our auctions.
Regardless of the successes we have achieved, we are still at
the beginning of a multi-year process towards becoming a
leaner and more innovative company. In consistently engag-
ing our associates in value-added activities and providing
them with the tools they need to improve efficiency in all
their day-to-day activities, we will continue to enhance our
customers’ experience and shareholder returns.