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Tag Archive: Collision Center

NCM Associates

#AskNCM: What Are the KPIs I Need for a Good Collision Center?

If your dealership is investing in a collision center, you need to the right numbers to accurately gauge its success. In this #AskNCM video, expert Steve Hall shares what your labor gross profit margin, production per total employee and other metrics should be to create a high-performing department.

Get more tips to improve your collision center’s profits. 

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Steve Hall

Collision has Recovered: It’s Time to Get Serious

I’m not going to lie: Collision has a bad rep.

Collision Centers Infographic

Just look at the statistics. Collision centers have declined 57% since the Eighties, and a whopping 27% of that drop has happened since just 2007. Stricter environmental regulations have increased expenses, and direct repair programs have changed how clients are acquired. So, when business got tough during the 2009-2010 recession, many dealers saved costs by closing the doors on their collision center, and shifted focus to vehicles sales and the service department.

Collision centers are back, for some.

Happily, our industry has rebounded in recent years. So, I’m surprised that dealers are still unwilling to look at their collision center as a profit center. Meanwhile, our publicly-held competition is investing heavily in collision repair, and venture capitalists are actively involved with some of the largest multi-location collision companies, gobbling up locations and market share.

The surviving independents are making a killing. I think the independents’ success is part necessity. After all, if an independent collision shop can’t evolve fast enough, it will go out of business.

Dealerships, though, seem much more reluctant. This is partly because ownership often views the collision center as a loss-leader – to them, it’s a customer retention tool rather than a true profit center. Plus, I’ve seen many dealership collision centers continue to operate even when they are unprofitable.  They just struggle along while ownership focuses on vehicle sales; owners just hope the collision center doesn’t lose too much money! That’s not a philosophy that evokes much confidence.

Preparing for Collision Competition

So how do you – the individual dealer or small dealer group – compete against the mega-groups and the well-established independents? Like so many other dealership issues, I think the solution lies in three things: training, knowledge and support.

Technical excellence ≠ management skill

A common theme I encounter while working with collision managers is that many were promoted with very little management experience. Most start in the industry as a helper, moving their way in the ranks to become a body tech or painter and then an estimator. Once the prior manager quits or is released, they find themselves the manager.

Now that they’re expected to “make the department perform,” they have no clue how make that happen. Most are remarkable technicians or estimators – that’s why they were promoted – but few are prepared for their new responsibilities, such as managing a team, forecasting and expense control.  These great workers are left hanging: They don’t know how the numbers work, how to get people to produce or how to grow a business.

Sink or swim leads to drowning

All this adds up to a very frustrating experience. Lacking experience and knowledge, a motivated manager will work harder – very hard – but not necessarily smarter. They race faster and faster, trying to perform, and then – the next thing you know – that star employee is totally burned out.

And what does burn-out lead to? Quitting. I’m floored at the number of times dealers end up losing a quality long-term employee, often without gaining a thing along the way!

The craziest part is that much of this can be avoided! The sink or swim mentality accomplishes nothing. Stop putting people into positions with no training or support. Instead, equip your manager with the training and knowledge they need to lead a team and grow the business. Teach them how to obtain profitability and unlock the potential of their department.

Invest in people for a return on investment

With more vehicles on the road than ever before – and fewer shops to repair them – dealers’ now have an incredible opportunity.  It’s time to get serious about your collision center and make the collision department become what it should be … a profit center and valued part of your dealership.

Ready to take the next step for your collision center? Join NCM® Institute’s experts in learning the Principles of Collision Center Management. It’s the most effective way to turn your best tech or estimator into your best manager. Classes filling now. 

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Steve Hall

We’re All On The Same Team: Parts & Service – Helping Each Other Succeed

Parts and Service

Have you ever wondered why Service and Parts Managers don’t get along? In reality, don’t they need each other to succeed? As we examine this, let’s start with some generalizations from dealing with thousands of Service and Parts Managers along with General Managers throughout my career. The overwhelming consensus is that Service and Parts just don’t get along. That’s not to say that there aren’t dealerships where they do get along very well, but those are definitely in the minority.

If you think about it, it’s easy to see why these managers can be at odds. Here are just a few reasons:

  • Service Managers are typically extroverts, whereas Parts Managers are typically more introverted.
  • Service Managers typically have a “whatever it takes” attitude towards resolving issues. At that moment, they just want the customer handled. In the same situation, the Parts Manager will typically revert back to the processes to work through the issue, looking for the reasons why it happened.
  • Parts Managers like to have a place for everything and everything in its place. Service Managers generally don’t.
  • Parts Managers work from an inventory of parts. If a part doesn’t sell today, it will still be on the shelf to sell tomorrow. Service Managers work from an inventory of time. If they don’t utilize an hour today, it’s gone forever.

I’m not saying that one is right and the other is wrong; it’s just that they’re wired differently. That’s what makes each of them good at what they do; they have different mindsets for different types of positions. Unfortunately, these different mindsets can often times cause friction and impede them from effectively working together.

Rather than belabor the differences, let’s work on why and how they must align to achieve their departmental goals.

Did you know that, in a typical dealership, 85% of the Parts Department gross profit is generated from their internal customers, meaning the Service Department (and the Collision Department, if they have one)?

Or, have you ever thought that the Parts Department doesn’t really sell anything? They fill orders and requests. On occasion, they may “sell” an additional item when filling a request, like when a front counter customer is purchasing a timing belt and, at that time, the counterperson suggests drive belts or a timing belt tensioner and the customer purchases them. But most of the time, they are filling requests. Again, this is not an indictment; it’s reality.

Why is it so important? Because it all comes down to knowing what truly affects your department’s numbers. Realizing that 85% of your Parts gross profit is generated from your Service and / or Collision Departments (and that they are truly the salespeople for the Parts Department) is vital in building a growth strategy for your Parts Department.

Let me explain a key correlation for your Parts and Service Departments.

When dealers are asked how much total gross profit they generate for every dollar of labor they sell, we generally hear an answer like this: “We have a gross profit on labor of 75%, so that would mean we earn 75 cents of gross profit for every $1.00 in labor that we sell.”

While that answer will appear accurate on the surface, it actually is incorrect. Remember, I said the Service Department is the salesforce for the Parts Department, and when I asked how much total gross profit is generated from every $1.00 in labor sales, this changes the previous answer. Because there is a relationship of Parts to labor sales, for every $1.00 in labor sold, a typical dealership will generate approximately $1.25 in total gross profit. You have to remember that when you sell labor, Parts will naturally be sold with it.

Realizing that the Service Department generates the vast majority of the Parts Department gross profit, what would be the most effective way to grow both your Parts and Service Departments?

You need to sell more billable flat-rate hours! Both departments must be focused on this primary goal.

Are you starting to see how these managers must start working together for the good of their departments? So far, I’ve focused on why the Parts Department needs to get along with Service. You may be asking, “Why does service care?” It still comes back to the driving factor for both departments — producing more billable flat-rate hours. The Service Department can’t produce as many billable flat-rate hours if they aren’t working well with the Parts Department. Parts can slow down or even stop production, thus costing the Service Department the ability to produce gross profit for themselves.

What we need to find is common solutions that allow the Service Department to bill more flat-rate hours and the Parts Department to achieve more Parts sales through those hours billed. So, how do both managers find ways to increase the amount of flat-rate hours billed? Let’s start with what the Parts Department can do to help. Here are some thought starters:

1) Stock more breadth of Parts and less depth of Parts. With daily stock orders, departments need less depth of parts, or how many of each individual part number you have on hand. Then, you can repurpose this capital into having more part numbers in stock, thus increasing your breadth, or total number of parts that you have on hand. By having better breadth of Parts, the Parts Department will be able to have a higher filled-from-stock ratio. This will help keep Technicians in their bays producing billable flat-rate hours and help both departments grow.

2) Another way to increase billable flat-rate hours is to find ways to keep the Technicians in their bays working, rather than waiting at the Parts counter for Parts. The best way to achieve this is by delivering the needed Parts to the technician right to his bay. This saves walk, talk and wait time for the Technician, as they would normally make their way to and from the back Parts counter.

3) Stock fast-moving Parts in the express Service bays. At the very least, oil filters have to be in the bay, but in reality you should make provisions for additional fast-moving items like air filters, cabin filters and wipers. Service Managers, take note: once these parts are stocked in your bays to increase Technician productivity, the parts are now under your control and any shortages are the responsibility of the Service Department.

4) Aggressively chase parts rather than automatically subjecting the Service Department to the perils of the special order Parts process. If you can pick up the part locally from another dealer and complete the job today, do so.

5) Keep your Parts Department aware of the daily and month-to-date hours produced in the Service Department. Seldom will you have a great month in the Parts Department without your Service Department having a great month. Therefore, the Parts Department needs to know exactly how the Service Department is tracking.

By posting these numbers, this will keep the relationship of hours billed to parts sold fresh in your employee’s mind. Hopefully, this will make them more proactive in finding ways to keep the Technicians in their bays working rather than waiting in line, or talking about their latest fishing adventure.

You can even incorporate shop hours produced into the pay plans of back counter people to keep them focused on increasing flat-rate hours billed. This helps make them more open to solutions.

Those are some ways that the Parts Department can help the Service Department produce more flat-rate hours. But since this is a team effort, what can the Service Department do to assist in this effort?

The Service Manager and Department must realize that the Parts Department is a business partner with them, not a servant to them. The success of both Service and Parts will be greatly reduced if they don’t work together.

Think about this: how is the Service Department staffed? Do you have enough Technicians and Advisors? Are both of these positions selling and producing enough? If you’re short Technicians or Advisors, your labor sales will suffer, thus your Parts sales will suffer. This is a critical element for both departments. Remember: your Service Department is your sales staff for your Parts Department.

Next, track and scoreboard your “Parts sales to labor hours billed” ratio. This will help you determine any shortcomings that you have by individual employees.

The final suggestion that I would like to give is simple. Employees find ways to work their pay plans. If you want to increase Parts sales, include your “Parts sales staff”, meaning your Service Advisors. Incentivizing Advisors (along with Service Managers) will help increase your Parts gross profit and help break down some of the interdepartmental barriers, as they will feel more a part of the same team. Continue to promote teamwork to ensure that both departments are successful, as that’s how the dealership wins. Just like a football team, the offense must be successful and the defense must be successful for the team to win the game. One without the other just won’t get it done.

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Garry House

Use One-on-One Meetings to Manage Employee Expectations

h--rek-pictures-blogs-one on one meeting-small_A few weeks ago, we published an article titled “Clear Expectations Set the Standard for Dealership Excellence” (Up To Speed, January 17, 2012).  In that discussion, I talked mostly about setting expectations. Today I’ll be presenting one of the processes that NCM recommends for managing expectations…the “one-on-one” meeting discipline.  Why should we have one-on-one meetings?  Because every employee needs and deserves to have quality, individual, interactive communication with his or her supervisor on a frequent and regularly-scheduled basis.

Here are the goals for the one-on-one meetings:

  • Re-enforce the principles of Accountability Management
  • Report and review actual behavior and job performance vs. expectations
  • Provide a forum to achieve continuous improvement
  • Impart feedback to the employee and vice-versa (receive feedback)

Here is the recommended meeting frequency:

  • Senior managers and department managers – no less than once per month.
  • Sales department desk managers – weekly
  • Financial services managers – weekly
  • Vehicle sales consultants – weekly
  • Service advisors (ASMs) – bi-weekly
  • Sales team leaders and technician group (team) leaders - weekly
  • Service and collision center technicians – no less than once per month
  • Parts counter personnel – bi-weekly
  • All other dealership employees – no less than once per month

Here’s how to prepare for (and conduct) the one-on-one meeting:

  • Review notes from the prior meeting
  • Have all the metrics (hard data) on hand that relate to the employee’s behavior and job performance
  • Utilize a standard meeting template (or meeting guide)
  • Schedule a non-interruptible block of time, and notify the employee at least 24 hours in advance of the meeting (most one-on-ones take no more than 20 minutes)
  • Sample open-ended questions for the discussion:
    • “What are you doing well?”
    • “What could you do better?”
    • “What are you going to do differently?”
    • “How can I help?”

In future articles we will discuss other processes and tools to help you manage expectations; in the meantime, tell us about some of the tools you use to manage employee expectations in your dealership.

Setting and Managing Expectations is a topic that is discussed in the automotive management training courses offered by the NCM Institute Center for Automotive Retail Excellence. To view the schedule for upcoming NCMi classes, click here.

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