August 2014

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August 2014 | Construction Equipment Distribution | www.cedmag.com | 31 Product Support (TXLS7HFKQLFLDQVZLWK(IIHFWLYH3URFHGXUHV 3URSHU7UDLQLQJDQG,QFHQWLYHV 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. (VWDEOLVK3URGXFWLYLW\DQG(IÀFLHQF\6WDQGDUGV for Technicians 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. 6HW0RQWKO\'ROODU%LOOLQJ*RDOV)RU7HFKQLFLDQV 2YHU3HU0RQWK 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. :RUNRQ2II6KHOI3DUWV)LOO5DWHWR6HUYLFH 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. (OLPLQDWH'HDG6WRFN7KDW&RPSURPLVHV :RUNLQJ&DSLWDO 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 $481,000 in reduced operating profit every year. And, it crunched his inventory turns down to 2.3. 6WUXFWXUH/RQJ7HUP&XVWRPHU5HWHQWLRQ%HVW Practices What are you doing to defend the service and parts customers you already have? Are you building a high level of product support and customer service? Have you constructed such a robust, protective defensive perimeter around your customer base that you can ward off all competitors? Remember, low price is a terrible defensive strategy. Excellence in product support is the best. Do you offer full or guaranteed maintenance opportunities to help the customer avoid the variable costs of running their business? The biggest challenge in running a business is to avoid surprises, like major repair expense the customer was not expecting. The value to your dealership of offering fixed cost maintenance is that you will not lose the business to a competitor over a labor rate; you will lose it because you do not respond and keep them up and running. 7UDFN2YHUDOO$IWHUPDUNHW3URGXFW Support Metrics 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! 3XUVXH$EVRUSWLRQ5DWHWKH6DPH$V

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