May 25, 2009: Installing the small and infinitely important process pieces
May 25, 2009
Filed under Archives
“Sales” is nothing more than taking a big decision and turning into many, much easier smaller decisions. Running a dealership can be viewed the same way. What separates the successful dealerships from those just hanging on is not any one thing. It’s many, strategically implemented, smaller process pieces. Unfortunately, many dealers operate the only way that they know how to (“the way we’ve always done it”), and don’t solicit other options. As a result, some have procedures in place that are counterproductive and contributing to the dealership’s own demise, oftentimes unbeknownst to the dealer himself. Put simply,people don’t know what they don’t know.
In this article, and in the months to come, I will examine many of these process pieces. We will talk about what is popular, why it may be counterproductive and what would be a viable alternative. This edition’s topics are proper ratio of techs to non-techs and PG&A obsolescence.
Proper tech ratio
What are many dealers doing? The first thing we need to do is define a tech from a non-tech. Put simply if the employee turns a wrench in the service department, he/she is a tech. If he is doing that job 50 percent of the time, he should be calculated as a .5 tech. A non-tech is anyone dedicated to the service department who does not turn a wrench (service advisor/writer, service manager, shop foreman, porter, etc). Often times dealers carry a very low ratio of non-techs to techs, forcing techs to do jobs other than turning a wrench.
Why is it a problem?
First off, when a tech is pulled away from turning a wrench, productivity, proficiency and efficiency all suffer. Having a tech retrieve a part pulls him off of the job. Having a tech grab the next bike pulls him off of the job. Having a tech act as a PT service advisor/writer pulls him off of the job. When productivity, proficiency and efficiency fall, so do revenue and profits. Secondly, and usually done with good intentions of keeping payroll down, short-handing techs actually increases payroll as a percent of sales. For every hour a tech is not turning a wrench, the dealer is forfeiting $70-$120/hour (labor rate). One could pay for multiple assistants to keep the tech on the job, and still come out ahead on payroll.
What’s the solution? The most profitable service departments are running a minimum of 1.2 non-techs for every one tech (1.2:1). If you think about the technician as a machine, you’d want to keep the machine running as efficiently as possible, with the wrench turning every minute of every hour that he is on the clock.
What are many dealers doing? In a word, nothing. Many dealers have purchased product they believed they could move. After months (and sometimes years), those same outdated products continue to sit on the shelves, not allowing for fresher merchandise to take its place. The successful dealer will recognize it quickly and work to eliminate slow-moving merchandise.
Why is it a problem?
To stay profitable, a dealer must turn the inventory. We look for an average of four turns per year. If the product didn’t move in the first month or two, it’s not going to move. Sure, there’s the guy out there with the 10-year-old bike who needs a part or accessory from time to time. But in general, once it’s out of fashion, much effort is needed to move the merchandise. That effort involves payroll to post on the Internet, sending out e-mails, etc. A process needs to be put into place to minimize payroll, as obsolescence will happen. Every dollar sitting on the shelf in outdated merchandise is one less dollar that could be spent elsewhere.
What’s the solution?The first step is to quickly recognize that it’s not moving. This needs to happen in the first 30 days. The second step is to have a structured discount to make it go away. (90 days = 10 percent off, 120 days = 20 percent off, etc). Another plan with accessories is to work with the sales department to dress up some of the bikes.
Ensure that nothing on your shelves is one year old. Most products that are one year old or older could literally be thrown in the trash (or given away at events) at less cost (payroll) than trying to move the product. Lastly, take note of why the product became obsolete. Many will find a breakdown in process and procedure more often than a bad purchase.
Every successful process that gets implemented in your store is one less subjective decision that needs to be made by a manager. A great store is one that runs on systems, allowing for the staff to give impeccable service to everyone who walks through the door.