Issue link: http://read.dmtmag.com/i/358154
August 2014 | Construction Equipment Distribution | www.cedmag.com | 31
To be successful, you must establish effective procedures
and policies for the technician who does the inspection.
How does the recommended repair get communicated
to the customer? When is the customer asked to ok the
repairs and by whom? How does the technician docu-
ment the customer's refusal to proceed with repairs if the
machine is to be tagged and shut down for safety? How
does he prevent your liability in case of operator accident?
How does the dealer train the technicians to do all this
properly? Finally, what type of lead fee is paid to the tech-
nician for identifying an opportunity to sell a replacement
machine? Remember, he likes to fix things, not sell them.
The three most important metrics for technicians are
productivity, monthly dollar billing and efficiency.
Productivity is weekly hours billed ÷ hours available.
Monthly dollar billing is the total labor sales for that
technician that month.
Efficiency = Estimated Time ÷ Actual Time on each job
and all jobs for the week. As you improve your data on
estimated times, you will be able to provide more accurate
customer estimates. In addition, you will have a valuable
tool to identify technician problems and training needs.
Remember: Each incremental dollar of billing achieved
through increases in technician productivity incurs zero
cost. And each incremental dollar of billing also carries
through parts sales at full gross profit margin. If a dealer
really wants to increase profitability, the first place to look
is improving service labor productivity.
If not there, you need to find out why, and quickly.
Compare what the very best are doing compared to the
average. What is the difference? What can be done to help
the lower billers achieve what the top producers are doing?
You do not want to waste their time on facilities mainte-
nance and other nonrevenue-producing activities.
We found that as much as 50 percent of improvements in
labor productivity can be attributed to better supervision
with performance metrics. And half of that can be directly
attributed to improved off-shelf parts fill rate to the service
department. (The other half is based on better supervi-
sion with individual technician productivity metrics.) Your
immediate off-shelf parts availability to support primary
lines should be well over 90 percent. If not, determine why.
Then fix it.
One of the big reasons why fill rates can be low is that a
large portion of your inventory is dead. We just worked
with one dealer in which 28 percent of his stock had zero
movement in 12 months. And this excluded protected
stock for new models. Considering direct, indirect, and
opportunity costs, his $385,000 in dead stock was costing
him $481,000 in reduced operating profit every year. And,
it crunched his inventory turns down to 2.3.
What are you doing to defend the service and parts
customers you already have? Are you building a high
level of product support and customer service? Have you
constructed such a robust, protective defensive perimeter
around your customer base that you can ward off all
competitors? Remember, low price is a terrible defensive
strategy. Excellence in product support is the best. Do
you offer full or guaranteed maintenance opportunities to
help the customer avoid the variable costs of running their
business? The biggest challenge in running a business is
to avoid surprises, like major repair expense the customer
was not expecting. The value to your dealership of offering
fixed cost maintenance is that you will not lose the business
to a competitor over a labor rate; you will lose it because
you do not respond and keep them up and running.
Today, the computer is the great equalizer. Even the smallest
dealer can afford a management information system to
provide essential data to deliver excellence in your service
and parts operations. The rule of thumb is that your new
information system investment returns about four times
the cost. We have covered most of the essential metrics
in this article, and, the important point is that if you can't
measure it, you can't manage it!