Welcome to another episode of Service Drive with Don Reed, CEO of DealerPRO Training. One of Reed’s fixed operations specialists from DealerPRO Training recently spent two days completing a performance evaluation of a dealership’s service and parts operation. Once the assessment was finished, the specialist reviewed the findings with the dealers and his management team. He outlined strategies to improve processes, management practices, employee productivity, and profitability. The specialist’s recommendations also included a training program; however, the dealer responded by claiming that his service department was not broken and rebuffed further help.
Let’s take a closer look at the numbers. The dealer is averaging 65% service absorption, well below the industry guide of 100%. The dealer’s auto technicians are producing at a rate of 75% versus 120%, as the industry guide says. Hours per repair order average 1.2 but should be closer to the 2.5-hour range. One-item repair orders are at a staggering 52%, and CSI scores were below zone average. In fact, his net service profit was -6%, and his parts net profit came in at 21%.
“If this operation ain’t broke, then break it,” exclaims Reed.
Now, the obvious question is, if car dealers know how to make the necessary changes to improve performance and profitability, why are they waiting? If you find yourself in a similar situation, Reed says to ask yourself the following:
- Are my fixed ops employees on a performance-based compensation plan that motivates them to perform at higher levels?
- Are my service advisors presenting maintenance menus that educate and train customers on how to properly service and maintain their vehicles?
- Are my advisors advising customers on necessary and recommended repairs that ensure customers are driving safe and reliable vehicles?
- Are my hourly technicians producing 20 hours or less per week?
If you don’t see the value of investing in training for the fixed ops team, consider this. The absence of training costs dealers $57,000 per month in customer pay parts and gross profit, explains Reed. Additionally, if service department staff members were adequately trained on effective customer communication, they might positively impact CSI scores, which have a lasting impression on owner retention.
Record gross profits will not last forever. Fixed operations account for about half of a dealer’s gross profit, so dealers and general managers should devote half of their time and efforts to supporting their service team. Don’t let the good news in your sales department become the bad news for your fixed operations.
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