So, how’s business? At the outset of 2019 all of the available data that I could find portended some economic softening throughout this year. The MHEDA Journal issue for the first quarter even asked dealers to compare their current business climate with what was happening just prior to 2008. That could be a daunting exercise. Who wants to go back to 2008? I remember that as a painful time.
As disquieting as it may be to relive old wounds, I have to give MHEDA some credit. The best way to learn from our mistakes, is to have the fortitude to examine what happened, and have a solid game plan if the winds blow our ship back into turbulent waters. Strategy is best planned when you aren’t desperate for answers. John F. Kennedy famously quoted “The time to repair the roof, is when the sun is shining”!
Like it or not, our business runs in cycles. Pullbacks must be anticipated. Sales success is seldom a straight line on the growth chart. Whether this economic softening actually happens remains to be seen. There are however some common-sense things that every dealer can do to prepare for this possible instability.
If customers are not replacing equipment, that means that they are probably making do with what they have on the plant floor. That means that will we most likely see an upturn in service repair opportunities? Are you ready for that?
In 2007 and 2008 I remember that we had customers cancelling, and deferring PM services, only to have them call in a panic when the machine went down. Sound familiar? If I am to take a lesson from the past, I would now insure that repair parts inventory is robust, both on the shelf and in the van. We need to anticipate the needs that we know will undoubtedly come.
Inventory is not the only area to be adjusted. Do you have certain “specialized” technicians that are the only ones certified to repair certain machines? What happens when they are overwhelmed with service calls on equipment that should be been replaced? It will pay great dividends to broaden the certification of your manpower BEFORE you disappoint customers.
Are your vans in good condition? Do your techs have the technology they need to be efficient?
I know that it sounds counter-intuitive to invest more money in manpower, training and parts inventory prior to an expected slowdown. It’s important to remember that when the equipment sales department slows down, the service department can actually grow. As long as we don’t have a full-scale economic depression going on, the machinery in your market area will still get utilized. Hours will still accumulate, and they will accumulate on equipment that is already nearing the breaking point in terms of serviceability. Add to that the fact that many of the “low profitability” PM’s may be delayed, and you can expect that more profitable breakdown repairs will take center stage.
Field service dexterity
In far too many dealerships, quoting common repairs just takes far too long. Most times when additional work is found on a forklift, the technician will be constrained to have to make a return trip to the customer location to complete the repair.
This is caused many times by a policy that prevents the technician from “quoting prices”. Even if they could estimate a price, the absence of adequate van parts inventory would preclude a “first time fix”. With the uptick in both service repair activity, and customer urgency, we cannot afford to be burning time and fuel needlessly returning to complete repairs that could have been completed on the spot. Our road technicians must be provided with every customer service tool we can afford them.
I have helped several dealers put together customized solutions that put these menu programs in place. If you don’t have a way to give your technicians a running shot at saying YES, where right now they are CONSTRAINED to say NO, let’s work on a plan to end the madness.
In addition to being “efficient” in the field, we should also be PRODUCTIVE. It still astounds me how many dealers do not track their labor productivity. To be able to make the most of a softening economy, you cannot afford to ignore the KPI’s, especially when most business systems will do the calculations for you.
One big hole that I have observed in this process is using service accounting software that does not force accountability for every paid hour. Even if your system allows it, you should never allow processing of hours into payroll without having every paid hour billed out to an invoice (or at least a GL). If time has to be taken off a job for any reason, those hours should be REQUIRED to be billed to another job, or to an internal expense invoice. There are only three types of hours to be billed: retail hours, internal hours, and expense hours. Retail hours are self-explanatory, internal hours include time logged to sales department units, demo prep, rental repairs, and full maintenance lease fleets. Expense hours is where things normally get complicated. Do we account for ALL of the expenses? The best systems actually open active jobs every month for every possible expense and non-billable time should be included.
Any batting coach will tell you that “you can’t hit, what you can’t see”. This is true for expenses as well. Here are the categories that I feel are critical to track actual expenses.
- Shop expense
- Van expense
- Fuel expense
- Vacation Time
- Sick Time
- Training and Safety
- Gratis – Goodwill
- Gratis – Rework
- Gratis – Quote variance
- Start of day non-billable
- End of day non-billable
There are dozens more I could add, but you need the ones listed to account for the hours needed to calculate a true productivity report. The productivity calculation is simple. Divide the number of non-expense paid hours, by the total number of paid hours. The productivity report helps to demonstrate one thing. How much time that COULD have been billed and wasn’t.
Most dealers pay their technicians for a full 8 hours, even if the tech cannot bill out all of the time to customers. This happens primarily at the beginning of the day, when a technician may be delayed for one reason or another, or at the end of the day, when the tech has under an hour remaining in the workday, but cannot effectively be dispatched elsewhere. This is one of the largest leaks in service department profitability. How can we seal this leak, if we don’t have a way to identify it? If I lose an average of 20 minutes a day (per technician) to “end of day” inefficiencies, that means that I lost more than 4% of my available weekly billing by default. Being able to identify this number “by branch” and “by technician” can at least signal the number of available hours that are currently escaping under the radar.
Sealing this hole is not always easy, however equipping your techs with the right inventory and the right tools to engage customers (see point 2 above), may go a long way in allowing them to fill these gaps with much needed retail billing.
You may notice that the list of expense categories did NOT include cleanup time. I am a firm believer that clean up, and waste disposal are part of the job, and the customer should be billed for the time necessary to perform these tasks. Even if the actual waste disposal takes place the following day, the allotted time should be billed to the customer.
Even in the face of a recession, opportunities exist. Be ready for them, especially in the aftermarket area of your dealership. Building your infrastructure now, providing dexterity tools to your techs, and identifying and addressing non-billable time will go a long way to helping you to balance the inevitable downturn.
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 firstname.lastname@example.org to contact Dave.