|
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.
|
