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Service department missing out on revenue potential

Gart Sutton, Columnist
December 26, 2011
Filed under Columns

Retail Remedies

These articles recap some of the opportunities uncovered by our 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.

Dealership details
This family-owned multi-line dealership started as a used motorcycle business more than 20 years ago. The owners soon began acquiring additional dealerships in surrounding cities, purchased the current location and consolidated the other stores into this dealership a few years later.

The dealership sells more than 1,000 units per year. It has a local population of just less than 100,000 and draws from nearby towns and larger metro areas. The facility is made up of multiple buildings that house the main dealership, P&A and additional wholegoods inventory.

Part 4: Our GSA Consultants report on their analysis of the service department.

Service department
The service manager started as a technician and has been with the dealership for many years. However, he does not have a lot of authority and does not train techs, track tech performance or handle the warranty paperwork.

First service returns aren’t monitored. Dispatching is under the control of the techs. There are no goals or rewards for performance. The basic benchmarks are not being tracked, so techs can’t be held accountable. The service department is able to track benchmarks, and has done it in the past. However, the department does an excellent job of reconciling ROs, and had only one open more than 90 days.

In general, the service numbers are not trustworthy. However, the gross profit number is pretty solid and it is not good. The department cannot make a net contribution until the gross profit margin approaches 70 percent.

Techs are losing a lot of productive time doing things that should not be a part of their duties. Techs are pulling parts, dealing with customers in their work areas and even having to find bikes to work on (no pre-staging or use of lot techs to do have the bikes ready for service).

The department is laid out well enough and has adequate equipment, but it needs to be cleaned up and painted. There was a discussion of creating a “model” service bay that customers could observe through a viewing window. There was another discussion of possibly creating a service drive with the model bay in that area. P&A displays should be added to this area to increase add-on sales.

Salespeople frequently bring customers back to service following the sale and then leave them to wait for their unit. Other customers also wander in and hang out. This creates the potential for liability situations and a loss of productivity while techs deal with the customers.

Special tools are lumped in bins in the parts department and are not readily accessible to service. There is no inventory of these necessary and expensive tools. There is no check-out, check-in procedure.

There is no menu displayed in the service department. Using a monitor and PowerPoint setup was discussed. The service manager says he has all the standard service jobs set up in the computer, but there is no evidence manual for the service counter to justify the costs to the customer. Creating one of these books using the OE-provided service forms was discussed. There was also discussion of creating service menu flyers for the parts and F&I departments to distribute.

Service does use a decent reception checklist. However, the service writer struggles with qualifying the needs of the customers and does not have a good tech background. This creates issues with the techs and sometimes requires calls to customers. The techs are not doing a good job of making notes on the ROs. This often results in the writer having to question the techs at the time of service delivery so he can explain the repairs to the customer. This creates another productivity loss and can result in liability and customer relations issues.

This department reveals many opportunities for improved profitability. On the positive side, according to follow-up surveys, it appears to have an excellent reputation for quality service.

Action Items
• Keep customers out of the service department to improve efficiency and reduce liability.
• Require quality tech notes on all ROs. This is necessary for liability protection, customer satisfaction and add-on sales.
• Ensure that units are dispatched one at a time to prevent “cherry-picking” by techs.
• Monitor gross margin and COS (tech compensation). Maintain a 70:30 ratio.
• Attend weekly manager meetings and review the flash report (provided by owners).
• Develop a service menu board with frequent service jobs. Utilize price ranges for services that feature multiple prices/models. Make menu flyer for F&I and parts departments.
• Measure tech performance and post results in the service area on a weekly basis.
• Post technician pictures and service certificates near the write-up area to build value for labor prices.
• Put all processes in writing.
• Track first service returns and implement programs to improve the ratio.
• Install “Service Entrance” sign at outside access door. Install store hours sign on or near the door also to reduce issues with customer expectations for drop-offs.
• Improve the comfort of the customer waiting area and add stimulating accessories displays.
• Move special tools storage near the main service access from parts to improve efficiency. Inventory all special tools periodically. Create a check-out, check-in sheet.
• Clean up the shop area. Add shelf units to get clutter off of benches to improve efficiency and appearance.

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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