Are You a Hoarder?
This is the time of year dealerships are making decisions for end of year adjustments. Today I wanted to focus on the parts Department aged inventory. I understand how hard it is to realize eventually old inventory loses its value and has absolutely no chance of selling. Nevertheless, this is a reality that must be addressed. There is a lifecycle of a part number that begins selling slowly, then ramps up, begins to slow down, and then stopped selling at all.
One time in particular, I was in the attic of the client looking at old plastic tubs and I wanted to understand what types of items were inside. I selected a few numbers randomly and then went down to the catalog system to see what these items fit. Imagine my surprise when the first number I checked was a brake caliper for a Chevrolet Vega. The chance of someone restoring an old Vega and needing the left front brake caliper and then contacting this specific dealership in my view is nearly impossible…Yet, here it is in the attic taking up space that could be used to inventory current items and improve fill rate to technicians and sales. I suggested the dealership send anything back that had a core value on it as a core. The rest of the parts need to be placed into the dumpster.
The percentage of your inventory that is protected is a number I think every dealer should be aware of. Most manufacturers track this number and they are available for review. Discarding old inventory with no chance of selling becomes easier when the dealer places a goal of having over 90% of inventory investment protected. This means that the dealership will have the ability to return these items for full credit on a regular basis. It assures the dealer that the inventory investment they have made has a value.
When Should Parts Hit the Dumpster?
This year the profitability of dealerships is on the rise, and most locations would benefit from marking down parts that are non-salable or aged beyond reason. In determining when aged inventory should hit the dumpster it should involve a discussion with your tax accountant. The needs will vary on a particular year, especially if you’re looking for a way to mark down a high income year.
General guidelines however, are that if a part has been in your inventory for over five years it has no hope of selling and should be placed into the trash. It’s always best to damage these items so they can’t be returned fraudulently before being placed into the dumpster. As the dealership implements a standardized program they would first discount substantially any item over 2 ½ years old and then dispose of it no later than four years old. Don’t occupy any space with items that have little or no hope selling.
Rob Gehring, President
Fixed Performance Inc.
Today let's take a look at our operations and get ready for an upcoming record year! Don't forget the dealership with the best fixed operations will always win!
The $1,300 oil change
A few years ago I was at an account of mine, working in the drive lane when I watched an advisor write up an oil change without walking around the vehicle. I then went over to the car and performed a proper walk around that includes popping the hood. The customer noticed me and came over to the car asking what was going on. I explained that this was a quick visual inspection looking for issues he might have. I then stated there were some concerns to share with him. His tires were all bad as well as the rear brakes, right tie rod end, serpentine belt and the list went on!
There are many lessons in this that the customer shared with me. He purchased three new vehicles from this dealership and on his way in he was considering this would be his last visit due to the service department. He said after the professional way he was treated today he would be a lifelong customer! Isn't it interesting he went from considering this would be his last visit to completely satisfied, and ended up spending $1,300 dollars? I have said many times the customer must see what they need. Seeing is believing and buying products and services. Now however, this thought goes even further with seeing is retaining the customer. This customer could have declined the recommendations and I would have been alright with that. The customer must be informed every time, every car what it needs to be in peak condition is our obligation and their expectation.
Stop backlogs in your shop
Many shop managers were first technicians and believe there is a since of security in having a waiting list for people to get in for a repair. This practice will always cause the customer to go somewhere else, never to return. If your service department has a backlog over two days it means you should look at staffing needs to correct. Body shop backlogs should not exceed a week. Technician staffing at this level will allow the maximum customer service and retention growing the shop every year. Don't allow your customers to suffer from your lack of attention to their needs. The company will never lose by placing the focus on customer needs. If I made an appointment today, would it be for tomorrow in your shop? If so, have a wonderful growing year you deserve it.
Take a fresh look at your labor rates
It is time to review your labor rates to be sure you are receiving a good return for the company. Many managers are afraid to bill a fair rate believing the customer will leave and not return. This aged thinking is destructive to company profits and also proper customer care. If the company is not charging a proper rate how can we pay our staff? First let me explain your company might have around $10,000 in training a master technician. The company has also invested thousands of dollars in special tools to provide the customer with a fixed right repair. These items combined with staffing costs demand a fair labor rate is charged to get a return on the investment of the dealership. Look first at your gross profit as a percentage of sales. Is your shop in the 75% area? Next look at the average technician wage your shop has. If you are staffing all higher skilled technicians your gross profit as a percentage of sales will be a struggle. The best way to maximize gross is to have a mix of mid skill technicians to reduce your average technician wage to a more reasonable amount. After all it is likely that 60% of the shops work is maintenance and doesn't require the higher skilled technician to perform.
Don't forget in this review to look at your warranty and internal rates. Internal should be at retail rates to get the best return for the dealer. Why discount this rate? To give additional sales staff commissions. When is the last time you requested a warranty rate increase? Review the rates your local dealerships are receiving and notify your manufacture you need a onetime rate increase to better serve your customers. Fixed operations will only be a profit center when rates are reviewed and increased at least once per year.
Rob Gehring, President
Fixed Performance Inc.
A Passion For Customer Care
Imagine if everyone on your service team was known for having a passion for customer care. They would make the customer feel appreciated from the moment they had arrived to the time they exit the dealership. The team would understand every customer’s concern and the detail required to fix their vehicle correctly on the first visit. They would place a great value on the customer’s time, understanding that people have better things to do with their lives than to wait endlessly at a car dealership for a vehicle repair or maintenance.
If this was an established culture at your dealership, would there be any doubt in your mind customer retention and satisfaction would never be an issue. Price would hardly ever be discussed and every team member would be proud to be a part of the dealership. This should be a standard in every dealership with all of us understanding the importance of achieving this level of quality in our service Department.
It’s A Marathon Not a Sprint
If you were to rate your dealership on a scale of 1 to 10 on your customer experience and passion of your employees, how would you do? If you were to see any opportunity for improvement and have the desire to improve, it’s important to understand your situation can not be changed in 24 hours. This is a journey involving the entire team striving for improvement to develop and implement processes constantly.
Seeking best practice processes and implementing them on a consistent basis is a requirement when you develop a passion for customer care. Without this, your customers will get bruised and beaten up with your poor processes, and will generally feel they are just an inconvenience to your day. The customer will feel like nobody cares at your dealership and they will always wonder where they could go to receive better treatment.
Developing Your Team Passion
Developing the passion in your team starts with leadership. This leadership rewards passionate customer care and won’t allow any team member to provide anything less. This type of culture lifts up the team every day acknowledging exceptional performance. Leadership must understand the value of everyone on the team and provide the clarity of how they should perform daily functions to improve the customer care experience.
The common dealerships process their customers like cattle. They say things like sign here, sit there, and are interrupted by the phone often. They never even go to the vehicle to look at the customer’s concerns and get irritated when the technicians ask questions about what was written on the repair order. If this brings to mind your dealership, it’s time for a change. It’s time you develop a passion for customer care.
Rob Gehring, President
Fixed Performance Inc.
Developing a winning culture is critical to achieving consistent success. It will never happen by accident and requires commitment from everyone on the team. Let’s look at a couple contrasting examples from Cleveland area sports teams.
The first example is: the Cleveland Browns who just announced recently they are willing to consider trading many of their top players to other teams. This no doubt, is relative to the fact that they only won two games this year and have a history of losing. Many years ago they fired Bill Belichick as coach of the Cleveland Browns, because he didn’t speak well to the press. Turns out he is a pretty good coach! They drafted players at the top of the selections only to have them never live up to their expectations. This is obviously a wonderful example of what not having a culture of winning can accomplish for you.
An example of a winning culture exists in the Cleveland Cavaliers. The owner Dan Gilbert has committed to present the finest team possible regardless of the financial commitment. General Manager, David Griffin is constantly seeking ways to improve the roster in a positive way and this effort has produced an incredible result. LeBron James is personally recruiting top talent players and plays an essential part in the team developing a winning culture in the locker room and on the court. This is truly a fantastic example of a winning culture that involves the entire team from owner, manager, and team players.
Invest in Your Teams Talent
Commitment should always be given to invest in your teams talent by providing them the best training available. They should have state-of-the-art tools with the latest computers and software that will assist them in performing their duties. Never be afraid to compensate your team financially, because if you don’t pay them well, another team looking for top talent will.
Recognize Individual Achievements
It’s important to recognize the accomplishments of your team often and in front of others whenever possible. This is a critical part of developing the winning culture we all desire to have and must be habit.
Coach for Improvement
Accepting poor results will never be a part of any winning culture. Team leadership must address quickly every area of opportunity for improvement. Coaching should always be done in a private setting with the ultimate goal benefiting the individual and team result together. Great leaders understand recognizing achievements of a team member five times for every one area of opportunity for improvement is a great ratio for success in coaching.
A great rule for leadership to follow is to spend the most time with the bottom 10% performers. This will always bring the largest gain for a team result. Acknowledging the top performers will fire the fuel they need to succeed. If a poor performer shows no effort to comply with the team needs or improve, they cannot be happy and must be considered to be cut from the team. These individuals will become like a cancer to a winning culture and cannot be tolerated.
Rob Gehring, President
Fixed Performance Inc.
Rob is President and Founder of Fixed Performance Inc. which he began over 15 years ago. His passion for customer care and helping others has assisted hundreds of dealerships with their fixed operations performance. His common sense coaching and training lifts people up as individuals and team members. With over 30 years of dealership management experience, he understands and respects the daily challenges of fixed operations. Placing a strong value in people and best practice processes always provide growth. His articles have been published regularly in national publications and weekly newsletters are read by thousands.