Dave Baiocchi

2020 planning

Posted on Sep 20, 2019 in Featured, Features

Many dealers in our industry operate using a fiscal year that mirrors the calendar. If you are one of these dealers, I’m sure that by now, some if not all of you have started your internal budget planning for 2020. Over the years, my observations of how dealerships usually create a yearly plan have run the gamut. Some dealers use this opportunity to truly engineer initiatives and improvements. Others employ a process that simply “checks the boxes” and uses a mathematical formula (using last year’s numbers) to drive next year’s goals.

In the April 2017 issue of MHW magazine, I discussed the process of building a SWOT analysis for your dealership. Those familiar with SWOT, know that this practice involves assessing your current (S)trengths, (W)eaknesses, (O)pportunities, and (T)hreats. Once identified, strategies are formulated in each of these categories to heighten your advantages and minimize your risks.

It is not my intention to replay the narrative of SWOT for this article, but I wanted to reference it, as it provides a framework for a planning process that is normally not exploited to its full potential. You may want to look up this back issue to help you institute a formal assessment and planning process going forward.

In this issue, I want to make some suggestions on moving beyond simple forecasting, and expanding the actual planning agenda. In doing so I want to consider some areas of dealer operations that are routinely overlooked in the planning criteria. I think that it is important to remember that “forecasting” and “planning” are mutually exclusive practices.  When we forecast a budget, we estimate revenues, expenses and profitability. We use “what we know” and “what we imagine” to arrive at a set of “results” we would like to see.

Forecasts however are simply a listing of desired results. Achieving the results that we have listed requires significant planning. Results don’t happen by themselves. Instead, they are the natural by-product of deploying a plan of effective behaviors. This means that all of the work poured into the “numbers”, needs to be counterbalanced by an equal or greater amount of work to determine what behaviors will be implemented to produce those results. If we don’t invest in the second half of this process, and come to a shared understanding with our employees of what behaviors will be required to produce those numbers, we are likely to be disappointed with how some of these results are derived (if they are derived at all).

For the next two issues, I want to suggest a possible list of planning initiatives, and accountability programs that may assist us in constructing a battle plan of targeted behaviors that can help us reach our desired results. In this issue I will discuss possible strategies for meeting PARTS objectives.  Next month I will add some methods to help us achieve the goals in the SERVICE department.

Parts Department

Let’s start with the assumption that all forecasted targets are going to be consistent with three generally accepted norms:

• Forecasted sales are going to INCREASE. (We want to sell more parts.)
• Forecasted expenses are going to INCREASE. (Although part of our goal is to mitigate expenses if we can.)
• Forecasted profitability is going to either IMPROVE or MAINTAIN its current level.

Listed below are suggestions for initiatives and behaviors that will help us meet these goals.

1.) Counterperson effectiveness

Do we currently track parts and repair order line item postings for each counter person? I routinely see this behavior ignored in many dealerships. The largest expense in your parts department is wages. Conventional wisdom suggests that parts staffing should be governed by sales volume. Many dealerships use a total monthly volume of between $50,000 and $60,000 per parts employee as a volume target for sizing their parts departments. I am not suggesting that this is wrong, but I am suggesting that we add an additional layer of accountability. Real time data for all parts countermen should be reviewed regularly (quarterly at minimum) to gauge their effectiveness in moving parts over the counter. Talking points for this discussion should include:

• Monthly quotes issued
• Monthly line items posted
• Monthly sales volume posted
• Suggested sales closed (front counter)
• Service department referrals posted
• Parts ordered incorrectly
• Parts Return percentage and associated costs

This is a powerful assessment, and well worth the investment of time and effort. Both parties learn a great deal about reasonable expectations, needed training, and employee development. It’s important to mention here, that not every counterman will produce the same results, or should be held to the same standard. The purpose of the assessment is to establish a BASELINE, and then measure ongoing results against that baseline. Continuous IMPROVEMENT is the goal; not holding each counterperson to an arbitrary standard.

2.) Lost order tracking and quote follow-up

The parts staff spends an inordinate amount of time on the phone. This is necessary and prudent in a parts department. The question is: Do we document their conversations, collect important contact data, and have a plan to follow-up on the parts they have quoted?

When we lose an order, do we track the reasons why? Is it price? Is it availability? What else can we do to improve our “quote to close” ratio? Every minute of time spent on the phone is an investment! Treat these investments with respect, and don’t be afraid to account for the actual “close ratios” of all customer phone interactions in the parts department.

3.) Construction and promotion of comprehensive repair kits

When a technician shows up at the back counter to order parts for a repair, the normal protocol is to access the equipment schematics and order the parts necessary to complete the task. The selection of repair parts is usually determined by the technician, the parts counter person, or both.

What if we re-thought this equation? The availability of repair kits in our business is sparse to say the least. Seal kits are really the only item that the OEM reliably packages for sale as a single item. Some OEM’s package brake kits, but many times the kit contains little more than shoes and linings.  Even when the OEM provides a complete brake kit, I see technicians returning individual parts, because the tech had the opinion that the job really didn’t require the springs, adjusters or cables.

It is my contention that wherever possible the dealership management team should dictate what parts need to be included in a repair. This is where kits play a pivotal role. So, what do we do when the OEM does not assemble a kit for us? Assemble it ourselves! Include ALL of the parts! Instruct our techs that parts in a kit are NOT returnable! If the parts are in the kit, they must be installed on the unit. This should include new hardware, spacers, covers, lubricants, fuel treatments, gaskets, filters and belts. If it’s in the kit….it goes with the repair.

Assembling kits achieves two objectives. First, sales volume will improve. Secondly, it ensures a complete repair reducing your dealership’s exposure to warranty call-backs.

Here are a few suggestions on what kits can be assembled:

• Brake kits (including ALL of the springs, cables, pins, adjusters, axle seals, dust covers, brake cleaner and DOT3).
• Rear axle clevis pin kits (incl bushings, bearings, spacers, seals, retainers and grease fittings)
• Hydraulic kits (including the breather, suction, return and micron filters, and gaskets + fluid)
• Chain kits (including chain cut to size for popular masts, anchor bolts, hardware and lubricant)
• Water pump kits (include gaskets, thermostat, and fan belt)
• Alternator kits (include pigtail and belt)
• Fuel system kits (including fuel filters both inline, and at the injector)

It’s easy to see how additional parts sales can be driven by including parts in a kit, that may not be considered in an individual repair.

4.) Tech and CSS incentives

Many of us have ongoing incentive programs for our road technicians and CSS crew. These programs are necessary to keep customer service at a high level, and engage our employees. Many of the programs I see however are cursory in nature and don’t really motivate behaviors that help us achieve our goals. My suggestions to improve incentive programs includes the following:

• Have a goal. Share that goal. Instead of running a constant year-round incentive on fork sales, why don’t you create a shorter-term campaign that pays greater rewards for higher volume. For instance, an employee can earn $10 for the first 5 sets of forks, $25 for the next 5, and $40 for every set after that.  Shorten the campaign timeframe to compel activity. At the same time, we should generate promotional materials to get the word out. Get creative. Compile a target list of certain items for road techs, other items for CSS reps, and even another group of items for counter-people.  Change programs a couple of times per year highlighting differing products. Keep it fresh, and keep it relevant to seasonal changes.

• Buy the inventory needed for the program. I don’t care if its forks, tires, tanks, chain, or lighting. If we are going to mount a campaign our employees need to see that we are committed to purchase the inventory and have the products on hand and ready to deliver. Use your buying power to lower the net price. Sometimes a volume discount we enjoy by actually making the purchase, can help to pay the cost of the incentive!

• Pay the rewards regularly and publicly. Nothing greases the wheel like combining tangible rewards with recognition. Managers should present reward vouchers to employees during staff meetings. This is an opportunity to showcase your performers, and call the others up at the same time.

The bottom line is that true goal setting is much more than forecasting numbers on the budget. The more important conversations are the ones that create the planned actions and consistent behaviors that will help us to reach our objectives.

Dave Baiocchi is the president of Resonant Dealer Services LLC.  He has spent 37 years in the equipment business as a sales manager, aftermarket director and dealer principal.  Dave now consults with dealerships nationwide to establish and enhance best practices, especially in the area of aftermarket development and performance.  E-mail [email protected] to contact Dave.