Articles

For the first time since the 1980s I’m sensing a lot of anxiety among our industry brethren. Inventory levels, interest costs, weather, politics and consolidations-along with finding and keeping good people to work for us-are just a few of the worries that are raising doubts in our minds. Such anxiety requires strong leaders to make tough decisions.

In product support, we have all the tools to weather the storm. We have talented people, willing customers and excellent products. There’s still a large working machine population that is the source of our sales. We still have a strong potential market to work within. But the dynamics have changed quite a bit.

For many of you, your business depends on product support. Yes, we certainly need to keep putting more equipment out into the field, because it makes for more aftermarket business. But it is viscerally clear that without strong growth in parts and service sales-and at effective profit levels-many dealerships could be in jeopardy.

New and used equipment “net incomes,” after-interest expense, have reached rock bottom. For many of you, the descent happened too quickly to deal with. To adjust, we must turn more of our attention and investments toward the parts and service side of the business.

Knowing what to do is the first step toward survival. After we learn the “what,” we can address the “how.”

We must determine the right levels of customer service and profitability. To do this, we must closely monitor gross profit levels, inventory levels, labor efficiency, inventory service levels and turnovers. We must make sure we have the right number of skilled people on board. And we have to be experts at expense management.

Customer retention-along with acquiring new customers-is vital. Maintaining the status quo no longer is enough to pull us through. We must develop a strong customer base and hold on to all of the profitable customers we serve. At the same time, we need to recapture the business that we’ve lost to competitors.

We must identify better sources of information. We receive loads of data, but does it contain the information we need? Do we learn machine population, customer profiles, customer buying habits, parts and service potential, asset management and purchasing habits? This is the effective management information we need to move forward effectively.

What we need is a facelift. Our image in parts and service needs a makeover, internally and externally. How easy is it to attract young workers? Do we recognize that mechanics are every bit as important as equipment sales people to our continued success? Many of you don’t and, as a result, our technical staffs are underappreciated and unrecognized.

“I check on sales every time I call the dealership, but perhaps I should be checking on service, too.” I heard this from an executive during a recent gathering of dealership managers.

Some dealers have come to realize they need to invest in parts and service. While we don’t have the luxury of throwing money around, why can’t we have extra mechanics on the payroll? Don’t we realize that this is money well spent, money that will produce many happy returns? Product support personnel should be measured the same as equipment inventory. The purpose of both is to make money for the dealership. Why is it that we can have an interest expense that is substantial in supporting equipment inventory, yet we don’t have a tolerance for “too many” mechanics?

There’s never been a better time to get serious about parts and service. We know what needs to be done. We must act on that knowledge.

“Can you do the job?” “Will you do the job?” I always ask people with whom I work these two key questions. They pertain to everything we do. These two questions also have to be presented to the dealership as a whole. “Can you do the parts and service job?” “Will you do it?”

Give your answers some serious thought. It could determine whether or not your dealership survives.