Dec. 24, 2007: Ways to tinker — and improve — the parts, service departments

Yes, sales are down. But as we noted last month, about one out of three metric dealers is up, while the other two are down. You can’t always control sales, but you can affect them.
Remember, there are people who make things happen, there are people to whom things happen, and then, there are people who wonder what happened.
Here are some ideas. We’ll take parts and service this time and hit sales and F&I next month. Use these ideas as a springboard for thought, then choose your spot and get busy.
Parts Department

  • Cull or retrain low performers. Learn what is good and what is poor performance. Until you know that, you have no clue who to fire, who to replace and who to retrain or move to another spot. I recently discovered that of the two guys on the parts counter in a certain store, one had an average ticket of more than $65. The other was consistently running at $45 or below. They were each selling about 350 tickets per month, and that $20 difference was costing the dealership (350 tickets x $20 x 40 percent margin x 12 months =) $33,600 per year in gross margin dollars! Find the benchmarks for your market, measure your people against them and remove or retrain the poor performers. They are using up your customers and costing you.
  • Returns to manufacturers. Most OEMs now allow you to accrue a return allowance and return parts to them. This is the best tool you have (besides eBay!) to get rid of obsolete parts. Use it. Those credits will pay a good part of your parts bill. Any expired and unused return allowance should be grounds for some penalty to someone in your organization. Make this a part of somebody’s pay plan.
  • Return special order parts not picked up. You can usually return any part within 30 days. Make your pick-up policy comply with the return restrictions for each vendor, and get that part back to the seller if the customer does not pick it up within the time allotted. There is a reason that part had to be special ordered: You don’t want it to just slip into inventory even though it might be paid in full.
  • Shop vendors for parts purchases. We are not a grocery store, and those reps are not bread salesmen just re-stocking the shelves. Make them earn that PO. Shop every line item, and get the best price possible. Remember, it’s not so much how you sell, it’s how you buy.
  • Discounts. Justify every discount granted. Make the manager approve all discounted tickets.
  • Emergency purchases. Report, track and justify. If you buy a part locally, you lose return credits, it takes resources to pick it up and most margin is lost. Stock smarter. Order smarter.
  • Parts on repair orders. Do not allow techs to pull parts. Use a dedicated employee to handle the shop needs.
  • Use escalators, minimum retail and rounding. Lightspeed gives you the tools to create your own retail price for parts. Most other DMS’ do the same. Use it. Evaluate your market and set the price point you think your customers will accept. Use the minimum retail and rounding features for final parts pricing. These two tools will yield an extra $8,000 in annual gross margin for the typical store.
  • Lines per ticket. Measure and reward salespeople who are selling related items. Anything more than 2.2 is exceptional and should be recognized.
    Service department

  • Average hours sold per repair order. Should be more than two. Train writers to look for warranty, related repairs and wear items not noted by the rider. Require a 360 walk around on each machine. Have OEM recommendations for scheduled maintenance instantly available for each make and model. Post service writers stats and reward good performance. Incorporate goals into pay plan for writers. Encourage techs to point out additional repairs/maintenance to writers for follow-up with owner. Keep popular new tires close to write-up area. They look great, and that subliminal smell creates interest and desire. Let customers touch them.
  • Warranty. Add warranty goals to pay plan for writers, managers and warranty clerks. Age warranty receivables and follow up on stale dates. Justify and fight for warranty credits with OEMs. Track warranty denied and have a system to see that the customer pays. Obtain authorization before the work is done. Watch service policy work and justify every charge. Make it difficult (approval required) to change from warranty to policy.
  • Flat rate techs. Move to flat-rate pay plans. Get off clock/hourly pay. Weed out inefficient techs. Measure days-in-shop. Watch re-do’s and bill back to tech if done by second man.
  • Completed work. Call customers when work is completed. Track call dates. Charge storage over (x) days. File mechanic’s liens and sell machines abandoned. Age, report and follow days stored for completed units. Test demand for seasonal storage and find a way to provide it if warranted.
  • Shop supplies. Charge on each repair order, either as parts or as a percentage of labor as state laws allow. Recoup cost of supplies.

    Hal Ethington has been associated with the powersports industry for more than 30 years. Ethington is a senior analyst at ADP Lightspeed. He can be reached at Hal_ethington@adp.com.

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