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Over the past three to four decades, the share of the labor market that the typical dealership holds has declined dramatically. The reasons for this decline are many, but for the most part, it was because we were busy doing other things and not looking after our customers properly.

The parts and service business aims to satisfy two critical needs of customers:

1. lowering the owning and operating costs for the equipment owner, and
2. protecting the residual value of the machine.

It’s important to note that this can be achieved, and the dealership can become responsible for these areas if it performs the necessary work.

We are now entering a crossroads of the parts and service business – a point at which we must determine to improve what we provide for customers in order to remain viable in the future.

For several years we have, for the most part, enjoyed a consistently active market for equipment dealerships. After the turbulent ’80s, the ’90s have been truly satisfying.

Sure these are stressful times, but let’s take a moment to enjoy our successes.

Nevertheless, even in today’s terrific market, there are concerns. Here are some underlying realities we must not lose sight of.

During a “hot” market:

• We enjoy our highest market share.
• We enjoy high profitability.
• There is less need for product differentiation.

This leads to some other truths:

• We have the lowest need for productivity.
• We have the lowest need for support skills.
• We have the lowest need for selling skills.

Yes, we are constantly pushing for more improvements, but in the end, if we survive this growing stressful market, we have become complacent. The trouble is that during a downturn, there are opposite requirements.

During a slow market:

• We have pressures on market share.
• Our profit is under pressure.
• We have a need for high product differentiation.

But now we also need, more than ever:

• High productivity
• High levels of support skills
• Strong coverage and sales skills

Quite a change and not one that is achieved over night.

This picture is further complicated because equipment is much more reliable today. Consumption of parts and service per operating hour on new equipment is much lower than in the past. If all present day equipment were to be replaced with 1998 machinery, some estimates put the parts and service reduction at 50% of the current volume. How would you handle that reality at your dealership?

There are several other factors to consider. The equipment in use today produced by many different manufacturers has all become much more alike. The same can be said about parts. Do you have the part or the machine that the customer wants? Is the price fair? Have your sales people been in on the deal? Important as these factors are, they are not really those that set you apart from your machine and parts competitors.

In contrast to parts and machinery, with service there continues to be an opportunity to differentiate – an opportunity which, generally speaking, we have yet to take full advantage of. Look around at the signals flashing from the current environment. Just look at how valuable the service department has become.

• There is a severe shortage of skilled, experienced technicians.
• Service managers are extremely hard to find and are under a heavy burden of stress.
• Customers are starting to outsource more and more of their mechanical needs.
• The volume of parts sold through the service department is growing.
• Maintenance programs are now in vogue.
• Extended warranties have proliferated.

The service department is really the last frontier. It is one of the most important tools that the dealership has to set itself apart. But the challenges are as numerous as the opportunities.

As a dealer I would have to ask myself, How can we take on more work when there is a shortage of skilled labor? “How can I expect my service manager and service organization to cope? How can I handle more work when pricing and deadlines are already unpredictable? How in the world can we accomplish this?”

At the bottom of these questions lies the ultimate ultimatum: Do we have any alternative other than to improve our service offering in terms of quantity and quality, productivity and profitability?

My answer is a clear and resounding “no.”

The current service department is a product of the days when the best mechanic automatically became a supervisor. A good mechanic requires analytical skills, an ability to work alone, an aversion to paperwork and a strong streak of independent thinking. Mechanics like to fix things, and they do it very well. So we promote them.

Now they direct other people, deal with a great deal of paperwork and lose independence by becoming part of a management team. They must operate in a system with high levels of outside control and under an intense magnifying glass on performance and profitability. And to prepare these people for this important position we tell them that they start tomorrow!

Not a very good beginning, is it? We created this situation ourselves, albeit with good intentions. After all, we gave the man a promotion and probably a raise. What more could he want?

Every service manager that I have dealt with over the past 30 years has said the same thing: “I could have done better on everything I did if I had had more time.” Every single one of them have repeated that sentiment.

Most of us say that we’re striving to get better. But that’s not what the service managers are saying.

They’re saying that they were not able to do the job as well as they already know how to do it because they did not have enough time. That’s a very different thing.

Old Ways, But Good Ways

We need to begin tackling some issues in the service department with some time-tested solutions that will help dealers position their name above the crowd.

1. The Man-hour Shortage for Technicians.

By now it should be clear to everyone-we cannot simply pass this problem onto the technical schools, high schools or colleges and universities and wait for them to provide us with all the mechanics that we require.

We need to help in the development of the technician. Way back when, we used to employ an apprentice – a helper. This is a person who is willing to work, shows a technical aptitude and has all of the other personal attributes we were looking for. We shared this apprentice between two journeymen, or in some cases on a one-to-one basis. The apprentice allowed the journeyman to leverage his skills by assisting him with lower skills tasks, and at lower cost to the customer.

He would get the tools and parts; clean the bay, the tools and parts; remove and install metalware and small components; do a lot of the physical work and be taken under the wing of a senior technician who would mentor the rookie.

It worked very well. So why did we stop this system? Part of the answer lies in the resistance you will experience when you try to start it up again. As owners and managers we are already overloaded, and we don’t have any spare time to train someone. We don’t want the additional burden. Or, as I’ve heard time and again, “I can’t make any money with that additional expense.”

The technician shortage will continue and will get worse the longer we put off this highly important starting step.

We can charge these working man-hours out to the job. But we cannot charge at the journeyman rate. Why should we expect or need to? We don’t pay the same wages to the apprentice, do we? The wage multiple formula of setting selling prices works for apprentices just as well as it does for specialists.

Training our own technicians is another good way to start solving the man-hour shortage.

2. Maintenance Services

Here is another example of how we have forgotten our roots. The argument from the contractor’s perspective is that he can’t afford to pay our journeyman rates for an oil and filter change.

Now I grant you that a maintenance service is more than a filter change and the replacement of fluids. However, the 250- and 500-hour services do not require journeyman skills. Nor can we charge the work out at that rate and expect the customer to beat down our doors with their business. At the 1,000- and 2,000-hour service, we do need, or would prefer, a journeyman technician.

Here comes that mirror again.

How do we operate a system with multiple rates? “I can’t do that,” you may be thinking. “The service department is already too complicated. Besides, I don’t have any more people to satisfy the additional work that we would get.” Sound familiar?

About 30-40 years ago we used to perform the maintenance services on our equipment. But then we became too busy and had to delay the services for the customers. They got fed up and hired their own mechanics. (Usually ours.) Then, since there wasn’t enough work for the mechanic with just maintenance, the customers’ technicians started doing simple repairs. That’s how it all started.

Don’t forget, maintenance service hours are about the same, per machine, per year as repair hours on most heavy equipment. So when we became too busy for our customer maintenance services, we walked away from half – that’s right, half – of the available labor market.

Wouldn’t you just love to have that market back today?

But our customers have other objections. They own more than just our brand of equipment. If we only do the maintenance for our machines, that will not satisfy their need for a service technician.

Many dealerships ask me if I think that dealership mechanics should do maintenance on the pickup and service trucks that the customer owns. Well, if the customer wants you to perform all of their maintenance service, I say, “Why not?”

You will probably encounter a lot of resistance in this area also. But it’s an issue that needs to be dealt with soon.

After all, are you comfortable with someone else telling your customer that your equipment breaks down all the time or needs more maintenance than some other brand?

I don’t think so.

This presents a huge opportunity for us and is a service for your customers that is long overdue.

Treat The Problem, Not The Symptoms

3. Inspections

Here’s my pet peeve when it comes to service departments. The customer calls into the dealership and tells a service writer, foreman or service manager what he wants done to his machine. This is then written on a service report that is used to open a work order. The machine arrives, and the work is assigned to a technician with the instructions to fix what is indicated and report back when completed. Does that still happen? Oh, I hope not.

Here’s the way I think the scenario should unfold. When a machine arrives at the dealership, a full form and function inspection, what I call a diagnostic inspection, needs to be performed.

The time needed to do this inspection will vary, of course, from machine to machine. Generally, a half hour to full hour is all that is required. Common sense will tell us this is not necessary for small jobs. This recommended practice is primarily for work orders that will take more than two days of labor or involve a complicated technical problem.

What we need to do is find the cause of the problems that the customer has described to us and fix that cause, not fight the symptoms.

Naturally the customer is always concerned about how long his machine will be in the shop. If we operate with a structured inspection for machines coming in to the service area, we’d be better able to estimate price and time to perform the repair. Who knows, you might be able to designate to the assigned technician how long the repair should take.

This may be a novel approach for many dealers. But make no mistake, this is exactly where we need to be if we expect to win the customer service and customer satisfaction business in the 21st Century.

These time-proven methods can be implemented at any dealership and will set your service department far apart from anything else out there.

I’m confident that two things will happen as you put these principles in motion:

1. your dealership will become a place where talented, skilled people want to work-who doesn’t want to be part of a winning team? And
2. your customers will become your best sales representatives, bragging about your work and spreading your reputation for excellent service wherever they go.