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February 7, 2011-Action items for service department profitability

February 8, 2011
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These articles recap some of the opportunities uncovered by GSA powersports consultants during actual consulting visits. These are followed by recommended actions that address these opportunities. Our goal is to provide you with ideas to help improve your dealership.
This is the final part in a series on this dealership. The first part provided an analysis of their overall operations, the second part reported on their sales and F&I departments and the third part delved into the store’s parts and accessory department. In this edition, GSA consultants report on an analysis of the store’s service department.
Dealership
The owner recently purchased this dealership and was approved for the two major product lines they carried. The original dealership had no computers and no financials. They were underperforming and held very poor market share for this area. They also had a poor reputation with local customers. The new owner feels there is a good potential for growth due to the dealership’s past history. Since they acquired this dealership, they have increased the market share by more than 60 percent for one of the lines. However, most of their unit sales have been for very low margins as they have had to clean out noncurrent inventory (some up to six years old).
The local town has only about 10,000 people. However, the market area has a population of more than 300,000. They have purchased a new facility with frontage on a major highway. It is currently under remodeling construction. They plan to move in the next few months.
They have a lot of work to do in order to make this into a profitable dealership. Their sales volume is small and there are poor margins in nearly all departments. They have no inventory management and no personnel management structure.
Analysis
There is no one in the service manager position and many of the required duties are not being performed correctly, if at all. Given their current needs, it was recommended the GM be moved into this position and that the owner assume the GM duties until a suitable replacement can be found. There was a discussion of marketing the service department in order to increase service business.
This is one of the major holes sucking revenue from the business. Techs are not doing a lot of paid labor work and tech wages are higher than income. There are also issues with RO flow, warranty filing and follow-up that need to be addressed quickly.
No reception checklist is being used and no upselling is taking place. Implementing a reception checklist helps ensure most repairs can be spotted at the time of write-up. In addition, this is a great tool for upselling service and add-on P&A. It also helps protect the dealership from damage claims.
While they do have a service menu system, it was recommended they remove the labor rate references from the menu.
The GM already has completed the major task of straightening out the large open RO situation. He will be tracking the techs’ time, creating internal ROs and working on fixing the warranty system.
Another major issue is the lack of customer signatures on ROs. This is a legal problem and cannot be tolerated. It is imperative the GM and owner become familiar with state laws that govern ROs, work authorizations and OE warranty reimbursements. The techs are not providing good notes on the ROs. This can become very important if a potential liability situation should arise. Comebacks need to be closely monitored and corrective actions taken as necessary.
All work on ROs needs to be tracked through a time clock so proper performance measurements can be made. First services need to be scheduled at the time of unit delivery and percent of first service returns tracked.
Action Items

  • Become familiar with state laws that govern RO authorization signatures, phone authorizations and warranty reimbursements.
  • Require customer signatures on all ROs prior to any work being started on their unit.
  • Ensure techs are adding descriptive notes to the ROs. What did they find?
  • Ensure techs are only responsible for repairing units. Admin functions should be removed from their responsibilities.
  • Utilize a reception checklist on every write-up to document damage and create additional sales of service and P&A.
  • Utilize the time clock for all jobs. Monitor tech performance in the spreadsheet. Print reports for each tech weekly. Post them to encourage peer management.
  • Raise gross profit to 70 percent. Tech compensation (not including benefits) should not exceed 30 percent of revenue. PSB
    Gart Sutton has been a leading provider of on-site dealer consulting, dealer 20-groups, online financial composites, accounting rescue services, and OEM and dealership training solutions for more than 30 years. For additional information on these services, visit www.gartsutton.com

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