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S ERV ICE D E PA R TME N T Tune Up Your Service Department: Part 3 This is part 3 of a 3 part series on how to increase profits and customer satisfaction for service departments BY D A V I D V I S AGGI I • • • • • • N PART 1, WE DISCUSSED HOW TO IMPROVE OPERATIONAL performance and thus greater customer satisfaction. The topics covered were: Callback reduction Service call response time – exceeding expectations Faster and more accurate estimating In part 2, we discussed how to get paid well for your great service. Topics covered were: Increasing service margins Increasing service contract profitability Getting paid faster This month we will discuss how to ensure your service depart- ment is continuously improving. MEASURE YOUR PERFORMANCE Despite being the last item of this article series, this is really the place to start when upgrading your service department. If you don't measure your performance, it's hard to decide what to improve first. Once you've implemented your improvements, it can be difficult to tell whether they are working without mea- suring. Even if you're not aware of any changes, sometimes performance drops when you are least expecting it. Consider the following: • • • • • Now that you've implemented that inventory system, are you spending less on parts per service revenue dollar? Now that you've hired that new technician, how does his call- back rate compare to the rest of your staff? Is that flat rate system you subscribed to truly increasing your profitability? Are your new service contracts more profitable than your old ones? Now that you've added GPS to the vans, are you seeing fewer 14 JANUARY 2012 | FUEL OIL NEWS | www.fueloilnews.com • • miles driven between calls? Why are you suddenly installing a lot of fuel pumps? Sometimes a change in performance means your staff is mea- suring things differently. Perhaps they are using the codes incorrectly or getting sloppy in their data input. Your gut feel is worth a lot, but it is not fool proof. Nearly every time I measure something, there are surprises. One time I replaced a service supervisor and I found a significant reduction in parts expense per service revenue with the new guy. This was good a thing. However, I found out that the previous supervi- sor had been over purchasing and left our stockroom filled with many expensive items that are hardly ever used. If I had been tracking parts expense per service revenue prior to hiring the previous supervisor, I could have nipped the problem in the bud instead of finding out after the damage was done. Here are some metrics that should be watched by service departments: • Service department profitability – It's not always practical to run a full P & L on the service department. If office salaries straddle more than one functional area, they may be hard to allocate accurately. However, some broad revenue to expense ratios can be informative indicators. (parts to rev- enue, labor to revenue, etc.) Additionally, within the service department these three profit centers are worth watching: • • • • • Service contracts Billable repair service Installations Callback rate – You need to keep this in check and be aware of sudden changes. Service billing lag – you need to know if your invoicing is falling behind. This is a common problem for smaller busi- nesses.