I am sure that each of us is very aware of the impact of the fuel price change on our businesses. We are paying higher heating and air conditioning costs, fuel economy in the equipment we sell but I am more concerned with two specific areas within the parts and service operations.

• Inbound and Outbound freight for parts departments
• Field truck charges for the service department.

Inbound and Outbound Freight

The emergency freight charges that we incur for inbound freight and the outbound freight charges need all to be charged to the customer such that we receive the same amount of money in charges as we pay in expenses.

That is much easier said than done. Customers view the charge for inbound freight as another charge from dealers that they pay when it is the dealer that caused the problem. I am sure that each of you has heard these comments from your customers. “Why am I paying freight for a part that you should have in your inventory?”  “You should be stocking that part in your inventory.” Freight charges from the parts department to their customer causes more anger than any other charge that there is from the parts department. That having been said we MUST recover the costs of freight for emergency backorders and also for outbound freight.

The outbound freight issue is much easier yet most dealership come up short on the amount of money they invoice versus the amount of money they spend. And to make matter worse the freight charges have increased in the past twelve to eighteen months by nearly 50% for most of you. Did you know that? Are you recovering all of the outbound freight? You should be.

The inbound emergency freight issue for non stock parts should also be a clear discussion with the customers. If you haven’t had sufficient activity in the past twelve months to stock a part they should be able to accept that the costs that you incur should be paid by them.

Where I agree with the customer is when there is a backorder for a fast moving part. First of all this shouldn’t happen but more importantly I totally disagree with charging the customer for any freight on these parts.

The goal on inbound and outbound freight needs to recover 100% of the costs. Anything less than 100% recovery is the same as a discount given to the customer.

Field Truck

This is another area which is contentious with the customers. They want to have your field service vehicle arrive at their job site at no cost. They complain about the fact that you are charging driving time at your retail labor rate. I am sure you have heard all of the standard complaints.

The change in fuel prices has caused many of you to change your charge rates. Or you have added a fuel surcharge. I am even seeing fuel surcharges in some hotels. Imagine.

Whether you use a zone charge or charge mileage and driving time or charge a fixed mileage charge the result has to be the same. The goal is to recover all of the costs for the field service vehicles. That means ALL of the costs for field service vehicles. The capital costs, depreciation, leases whatever as well as the operating costs for the vehicles, fuel, tires, licenses, etc. You have to recover ALL of the costs. Again the customer will object but it is either they pay for the vehicle or there will be a higher rate. That should happen also but that is for another time.

But there is something else that needs to be addressed. More than at previous times the cost associated with the technician taking the field service vehicle home at night has now become very significant. In the dealerships that I have reviewed these costs it represents some 25% of the total field service vehicle costs. And this is all non recoverable. What are we doing? I know this is an employee benefit and that we shouldn’t be playing around with anything that affects the technicians as they are hard to find and harder to keep. But at the same time I am committed to doing the right thing. Remember it is important to do what is right as well as the right thing. The instant rebuttal to keeping the vehicles at the dealership overnight is that you dispatch the field service technician from their homes. This is a nice dream that rarely if ever happens. The real answer is that the vehicles need to stay at the dealership overnight.

But we need to make sure that we recover all of the customer incurred costs by invoicing the customers. This is a management issue.

How do you do with these two areas of cost? Are you recovering everything that you should?
 
Remember a cost that should be recovered but isn’t...is the same as a discount. And you all know how much I hate discounts.