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Tag Archive: Fixed Ops

Kirk Felix

From the 20 Group: 12 New Ideas for Fixed Ops

Cars in the automotive service

During each of my NCM 20 Group meetings, I encourage members to come up with ideas to improve Fixed Ops business and profits. As you prepare to close out 2016 and prepare for the coming year, I thought I’d share their top 12 insights.

  1. Add a sales manager to the service drive. Dealerships are adding this position to improve service drive performance and consistent management of processes.  This new personnel should also enhance sales through training and immediate T.O.’s for turned down sales.
  2. Increase entry-level pay to attract higher-quality staff. One way that fixed operations directors are improving the quality of their applicants is by offering higher starting pay.  Plus, promoting from within is more successful when starting with a higher quality individual!
  3. Leverage Amazon Prime to negotiate with local vendors. Check all outside quotes against Amazon Prime to ensure the lowest pricing; ask local vendors to price match.
  4. Create body shop installation kits. Build parts kits with assigned part numbers for standard installations. The kits should include sealers, sanding discs, tape, clips and any other needed items. Because insurance companies typically pay for items with a part number, this should simplify the payment process.
  5. Get involved in local high schools and encourage kids to consider technician careers. I think everyone agrees that we need to attract more talent to our field. Some of my 20 Group members work with high schools in their communities to help students learn about options for automotive careers. If you do this, be sure to explain the great earning potential of fixed ops work.
  6. Set monthly goals for technician and advisor production; review them during weekly 1-on-1 meetings. Make sure every team member is contributing to department goals by working with them on individual achievements. During weekly sessions, review performance and coach anyone who hasn’t met their objectives. A good starting place is increasing technician production by five hours per week.
  7. Track closing ratios on failed items by advisor. Failed items on multi-point inspections have to be repaired. The question is, will they be serviced at your dealership or a competitor? Monitor which service advisors close these items successfully, then coach the ones who do not. Consider service advisor training for those team members needing more help. (NCMi has a great course.)
  8. Get phone training for all front-line staff. We may live in a digital age, but the majority of business is still conducted by phone in fixed operations. Training staff to handle incoming calls properly will increase business opportunities.
  9. Make expense analysis and reduction a priority. A common worry from fixed ops directors is in our meetings is that they have gotten lax on expense management.  Almost universally, my members feel it is time to analyze all billings and look for reductions from their vendors.
  10. Train service advisors in sales. Fixed operations directors are running service departments as sales departments, so focus on improving the skills and performance of their service advisors. An excellent internal training resource is your dealership’s sales manager.
  11. Require advisors and managers to prewrite repair orders at the end of the day. Reviewing all scheduled work helps make sure parts are available and ready for customers. Management can also use the advanced notice to make recommendations about the proper word tracks for increased sales.
  12. Track parts fill rate by repair order. Having only 6 of 7 need parts for a repair order is zero fill rate for the repair order because you were unable to complete the work.

 

Learn more about Kirk Felix and how he and his NCM colleagues can help your dealership through 20 Groups and in-dealership consulting.

Permanent link to this article: http://blog.ncm20.com/2016/12/from-the-20-group-12-new-ideas-for-fixed-ops/

George Gowen

From the 20 Group: The Importance of Value

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We all know that a customer will buy a product or service when the value exceeds price. Unfortunately, automotive dealerships hide the value that the service and parts departments bring.

Here’s how you can change that.

Recognize the value of “free”

Grocery stores commonly show the customer how much they “saved” on every receipt. That builds additional value to the price they paid for groceries. For some reason, dealerships comp services but, unlike the grocery store, never let anyone know about it.

Here’s an example: Almost every dealership I know requires a multi-point inspection (MPI) for each repair order. This check builds trust and helps to sell needed services.

But what is the “value” to the customer for that service? None. However, if you show on the repair order (RO) that the MPI has a $49-$149 value that we provided at “no charge,” it does means something.  After all, the service has actual value, and we should let customers know it.

Here’s another example. Many dealerships charge a diagnostic fee, using the information to explain the nature of the problem and how much the repair will cost. Along with the diagnostic work, you probably do a complete inspection of the entire vehicle and don’t charge for it. You should mention this value to your customer.

Always offer a deal

While we’re looking at other industries for inspiration, let’s consider restaurants. I’ve been to many establishments that promote a special that includes the appetizer, salad, entrée and dessert. You’re told that you’ll get a special value by ordering the components as a group versus ordering them individually. The reality is that people will take advantage of the “deal” even though they likely would not have ordered all the items separately.

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You can apply the same principle to service menu items. The best performers on menu sale penetration show the value of the combined services versus doing those services individually. But if you offer a “30k Service” for $400 without explaining the value of the individual services, all they will see is the $400.

Imagine the penetration level if you showed that all the services in the “30K Service” would separately cost $530! If the menu item is “only $400,” the customer just saved $130 by purchasing it.

The same advice goes if you provide a car wash, loaner cars, or any other services: Always make sure the customer knows the value. And, no matter what, make sure the value you provide exceeds the price.

Tell us below how your dealership creates value in the service department. Learn more about George Gowen and how his NCM colleagues can help your dealership through 20 Groups and in-dealership consulting

Permanent link to this article: http://blog.ncm20.com/2016/10/from-the-20-group-the-importance-of-value/

NCM Associates

#AskNCM: Why are Labor Sales Important to Parts?

Why is labor important?

“Well,” says NCM expert, Rick Wegley, “labor-to-parts sales ratios typically show almost a dollar for labor,  dollar for parts on almost every ticket, if we do an overall big picture view.”

Get Rick’s recommendations for how you can keep technicians in the bay and keep Parts sales going by focusing on labor.

Have another for Rick or the other #AskNCM experts? Leave a comment below! 

Permanent link to this article: http://blog.ncm20.com/2016/08/askncm-why-are-labor-sales-important-to-parts/

NCM Associates

#AskNCM: Should We Charge Shop Supplies on Internal Work?

“We use shop supplies on internal work, don’t we?” asks Rick Wegley, NCM Institute Instructor. One of our Fixed Ops experts, Rick takes a deeper look at this common question and goes over the laws that  impact the answer for your dealership.
Ready for more insights from Rick? Join him and other experts for NCM’s Boston Roadshow this July! Find out more.

Permanent link to this article: http://blog.ncm20.com/2016/06/askncm-should-we-charge-shop-supplies-on-internal-work/

Steve Hall

Curing the Fixed Ops Hangover

Monday morning again

What a party it was! We showed up, had a great time, talked excessively, drank a bit too much, stayed out far too late and were glad that we did it.

Glad, that is, until the next morning when we woke up and had to face reality. Now, our head hurts, our body aches and we don’t want to go to work! The only reason that we actually get out of bed and go to the office is that we are afraid of the consequences if we don’t. We resign ourselves to the mantra, “Just make it through the day.”

Hangovers aren’t just post-party events—they happen in Fixed Ops, too.

The idea of “Just making it through the day,” can occur in any aspect of our lives. You’ll often see this attitude pop up in Fixed Ops departments after month end.

Just think about it. At the beginning of the month, does your service department get off to a sluggish start? I’ve typically found that work in process is low. The team is feeling the “hangover” effect of closing repair orders while looking for those last dollars to finish the month. Many dealerships have a light appointment schedule around this time, too, as they pushed customers into those final days.

Reacting to this environment, employees just want to take a day or two to catch their breath. As a manager, you can just feel the entire department is coasting. It’s as if they too, have also adopted the mantra, “Just make it through the day.”

What causes the Fixed Ops Hangover?

If you were to review the typical advisor’s monthly sales on a weekly basis, you would find that the sales aren’t spread out evenly. Rather, the advisor sales distribution curve usually looks like this in a four-week month: 15% the first week, 25% the second week, 25% the third week and 35% the last week of the month.

It’s a cycle that feeds on itself. And whether this uneven workload is caused by the month-end hangover effect or a combination of it along with the advisors not closing tickets until the end of the month, it is a major problem.

Stopping the Fixed Ops Hangover

So, how can a manager stop this monthly hangover? I recommend motivating your service advisors with a “fast start” spiff. This could be a monetary bonus or another reward to any advisor who hits a pre-set objective for the first seven calendar days of the month. The idea is to keep your department rocking from the very first day of the month, rather than losing the first couple of days while everyone relaxes after the close.

The spiff can be set at different levels for various types of advisors; you can set different goals for the main shop and express, rookies and veterans, as long as they must work to achieve it.

No matter what goals you set, make sure they are challenging enough that the “just make it through the day” attitude cannot pay off. This spiff can not only be used for advisors but can be incorporated with your technicians’ compensation, also. Be creative, and get out of the starting blocks strong—right from the very first day of the month!

Do your service advisors and staff suffer from the “Fixed Ops Hangover?” Learn how to break the boring cycle and other useful service tips at our Service Management Roadshow

Permanent link to this article: http://blog.ncm20.com/2016/05/curing-the-fixed-ops-hangover/

NCM Institute

Developing the right pay plan for service advisors

Mechanic wrench tool

Last week, George Gowen wrote about the importance of service advisors to retaining your customer base (Miss it? Check it out.) This naturally leads to the question: How much should I be paying them?

Taking Stock of Service Advisor Pay

Before you make any decisions about your dealership’s pay plan, you need to carefully evaluate the current market, as well as your budget constraints. In general, NCM recommends that you consider the following questions:

1.     What’s your philosophy towards advisor compensation?

2.     What’s the right amount to budget for advisor compensation?

3.     Should advisor productivity affect advisor compensation levels?

4.     In addition to monetary compensation, what other elements do you want to include in a well-balanced advisor pay plan?

What’s your philosophy towards advisor compensation?

Most dealerships have begun to view their service department as a “selling” organization, not just a “fix it and smile” division. When you take that philosophy, your compensation plans must focus on sales activities and results. To achieve this, your advisors will need to improve their customer R.O. transactional quality while decreasing their customer R.O. transactional quantity. This could result in the need to add more advisors.

What’s the right amount to budget for advisor compensation?

When it comes to service advisor compensation budget, NCM recommends using 12.0% of department gross (before any parts gross transfer) as the metric for budgeting service advisor compensation. This budget guideline may vary sometimes—a little higher for domestic franchises and a little lower for luxury franchises—but relating compensation to performance is an important step. And, remember: budgeting refers to how much you should pay, while structuring refers to how you could pay.

Should advisor productivity affect advisor compensation levels?

Advisor productivity is a critical component of compensation. You must clearly define this connection, and let your service advisors know that their income will be dependent on it. Set expectations and get their commitment to this approach. After all, it’s advantageous to them: an advisor with high transactional quality and CSI, could earn as much as 14% of the gross he/she generates; meanwhile, an advisor with below average transactional quality and CSI, might earn as little as 10%. When your service directors understand this, they will do what’s necessary to improve their pay.

What other elements do you want to include in a well-balanced advisor pay plan?

This is harder to answer. Here’s the thing: there is no “one size fits all” solution to automotive pay plans. What works brilliantly for one dealerships may be an absolute disaster in your shop. Each dealership has a different business culture that impacts pay plans. And your franchise requirements, personal priorities and state and local laws will all significantly influence the decisions you make on pay plans.

Structuring Service Advisor Pay Plans

While you must keep in mind that every dealership is different, here are the general recommendations that NCM has for any service advisor pay plan:

 

1.     Service advisor pay plan structure should be 100% incentive based, with a reasonable underlying guaranteed draw against commission.

2.     As billable hours is the force driving service and parts profitability, the main determinant for pay should be Hours Billed per Individual Advisor per Month, with $x.xx paid for each hour billed, in all labor categories. We’ve seen this as a stand-alone compensation metric, as well as combined with either customer effective labor rate or hours per customer R.O., sometimes both. This category might represent 55% – 70% of the plan structure.

3.     CSI Performance is usually the next element. The advisor should be rewarded for achieving world-class service. The payment can be quantified as “an additional $x.xx paid for each hour billed” (see #2, above). Depending on how much manufacturer money is tied to CSI, this category might represent 10% – 20% of the plan structure.

4.     Next up are the Spiffs and Incentives, which cover such things as: (a) Parts Sales per Customer R.O.; (b) Customer Effective Labor Rate; (c) Menu Closing Percentage; (d) Tire Sales; (e) Service Contract Sales; (f) MPI (ASR) Closing Percentage. The payment might be quantified as an additional $x.xx paid for each hour billed (see #2, above), as a flat amount or as a per item amount. This would represent approximately 15% of the plan structure.

5.     The final category is a Team Incentive based on Percent of Total Monthly Shop Hours Objective Achieved. The intent here is to have all service and parts personnel focus on one number—total shop production capacity— throughout the month. Their goal is to achieve or exceed full capacity operations. You may quantify the payment as an additional $x.xx paid for each hour billed (see #2, above) or as a flat amount. This should be about 7% – 10% of the plan structure.

Pay plans are tricky. What successes have you had in creating and implementing pay plan changes? Tell us below.

 

Permanent link to this article: http://blog.ncm20.com/2016/01/developing-the-right-pay-plan-for-service-advisors/

Steve Kain

What’s the Score?

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Just imagine. It’s a glorious fall night and you’re the quarterback, racing for the end zone. Lungs aching from the run, you finally make it: touchdown! You look at the scoreboard to see the score: -/-. What?

That’s right. Nothing. No score. All that work, and no idea how much it may have affected your team! Did you win? Are you losing? Without results, you have no idea.

Don’t know the score? Then, you’re losing the game.

Far too often, I’ve found that dealerships leave their staff in the dark when it comes to performance. Not only is it confusing for your personnel, this tactic makes it hard to determine a clear strategy for success.

Monitoring the current state—and sharing it daily—gives you concrete data to guide your decisions and clear metrics by which to hold your staff accountable. It’s only when they see the reality of their performance that they can improve it.

Prepare for victory.

First, let’s consider how you can use a scoreboard to help with advisors. Things I like to track include, customer repairs and customer pay dollar sales in both labor and parts. It’s also good to monitor the closing percentage on both menu opportunities and additional service requests, follow-up sales, number of warranty repair orders and customer satisfaction numbers.

Next, let’s score the technicians. There’s a lot you can track here. You definitely want to know the daily number of repair orders, how many hours were billed and productivity per tech. Other things to consider are how many additional service requests were generated from multi-point inspections and the number of comebacks. Lastly, and maybe most importantly, monitor customer satisfaction numbers.

Moving on, I also like to look at parts and service holistically. The key to this is tracking fill rates. After all, isn’t there a much greater chance a customer will say yes to the advisor when the part is in stock? I’ve even found dealerships that pay incentives to parts personnel based on technician productivity, because service can be negatively impacted by time wasted at the parts counter.

But don’t base parts’ score just on others’ performance. You want to note both total parts sales and also the gross profit margin of parts sales both individually and as a group. And, like I mentioned before, keep an eye on the fill rate for parts requests. It may also be beneficial to track the dollar amount of special order parts in the special order bin because those parts mean both parts and labor sales.

Make your own playbook.

Don’t be limited by my suggestions! If you want to improve numbers in your dealerships, start tracking them and developing an improvement plan. If there’s a number in the dealership that you want to improve, just track it and it will change.

Alright, Coach—are you ready to get those score boards up? Tell us your objectives and share how you plan to rally your team to a victory this month.

Permanent link to this article: http://blog.ncm20.com/2015/11/whats-the-score/

Steve Hall

Two Quick Tips for Service Managers

Auto Mechanic

It seems these days everyone is pressed for time and running a million different directions. Because of this, your team can feel disconnected and often times alone in their jobs. They don’t get quality time with their supervisor and never get to really hear what is going on in the department or business. They have questions like, “are we doing well or not,” and “am I doing my job to your satisfaction, “or ”am I about to be the next ex-employee?” Most of the time employees don’t actually ask these questions; instead the questions just keep floating around in their mind.

It’s a shame when valued employees feel this way. After all, it doesn’t take a lot of information or interaction to make these questions disappear. With this in mind, today I would like to give you two quick tips you can implement, with no added expense. These two items can possibly help your employees feel more informed and secure in their jobs.

The first tip is the monthly wrap-up and kick-off meeting. According to Marcus Buckingham and Curt Coffman in the book First Break All the Rules, one of the key components to employee retention is making the employee feel they are part of the information stream within the business. One way to help your team with this is to hold a monthly kick-off meeting.

On the first day of the month, bring your departmental team together for a quick three to five minute kick-off meeting. Think pre-game speech for the professional sports team. This meeting can be held right in the service department around the lifts and vehicles during normal business hours. Have the attendee’s stand, so the meeting stays short. For the wrap-up part of the meeting, let them know how the prior month finished up. Cover items like departmental gross profit, or shop hours versus objective, and be sure to cover CSI. Don’t forget to congratulate a few employees that had stellar performance

For the kick-off portion, set the goals for the month that is starting. Be sure to acknowledge upcoming employee anniversaries and milestones. Include anything that is upbeat and challenge the employees to reach the goals that are set.  Giving just a couple minutes of your time, combined with the key information that is shared, will make the whole team feel like an integral part of the organization. This meeting costs nothing, but has a lot of value. By doing this you can bring the team together, and win together.

The second tip I would like to share today is coaching from the sidelines, not the locker room. I think that is worth restating. Do you coach from the sidelines or the locker room? Let me explain what I mean. You would never see a NFL coach hanging out in the locker room while the game is being played. They are found watching the action as it happens and coaching everyone on the team to perform better.

Now, put this into your everyday work life in the service department. Game time for the service department is every morning from about 7:30 to about 9:00. Where are you during this time? Are you hanging out in your office running reports, answering e-mails and reviewing numbers? That would be considered “in the locker room”. Should you be on the “sideline” watching the game and coaching the team while the action is happening? Yes.

Is there really anything more important to a leader than helping their team perform better?  Wouldn’t this also help the employees better understand how they are performing in their jobs? Keep this in mind each and every morning and spend the time directing the team, when the game is actually happening, then perform the behind the scenes work during the non-peak times of the day.

Remember that your team moves at the speed in which you lead them, and to lead you must be in front of them. Don’t focus on the wrong items. Put your efforts into your people and unleash the power of the team.

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Permanent link to this article: http://blog.ncm20.com/2015/05/two-quick-tips-for-service-managers/

Steve Hall

Sales Management Responsibilities of the Service Manager, Part 2

servicemgr

Last week at the NCM Institute, we talked about six of the “35 Responsibilities of the Service Manager”.  Today, I would like to go over five more of the sales management responsibilities on this list. These processes are not in any particular order of importance, but realize that if you want to become a world class service organization, they will all be important. Let’s get started!

Labor Pricing System

In continuation from our last six responsibilities, the next responsibility is the labor pricing system.  Ensure that a proper grid labor system or precision labor rate for non-competitive repair work is in place and followed consistently to improve the effective labor rate.  Also, verify your factory maintenance service and high visibility repair work is priced competitively.  You can sum this up by saying, have a well thought out method to your pricing, employ different target effective labor rates by category, and then make sure your employees follow it.

A.S.R Process

Responsibility number eight for sales management in the service department is the A.S.R. process. A.S.R. stands for Additional Service Request. These are the needed items found by your technicians during the multi-point inspection process.   Ensure you have a documented process for these requests, and that it is followed consistently by the technicians and advisors.  This is a crucial process to maximize sales opportunities. As with any crucial process this must be measured and inspected every day. You should track average requests per vehicle and the closing percentages on these requests as a department, along with by advisor and technician.

Extended Service Hours

The ninth responsibility is extended service hours. Always have extended service hours with early bird and night owl services, along with Saturday hours that will accommodate your customers. You don’t have to be open longer than your competitors, but you should be open the same.  When a customer needs help and you aren’t open and your competition is, you run a real risk of losing that customer.  In conjunction with providing great customer service, the incremental gross profit that can be obtained in these additional hours can have a large positive effect on your net profit. Just be aware that if you aren’t currently doing this, it will be a culture change and you must communicate well with you staff to make it succeed.

Internal Repair Orders

The tenth responsibility under sales management focuses on internal repair orders. You must ensure you are retaining 100% of all available internal work.  This should include all reconditioning, pre-loaded accessories, aftermarket items, and detailing.  You must also make sure all reconditioning work is being completed within three business days.  The quick turnaround of reconditioning helps to maximize the opportunity to turn the inventory for the pre-owned department. As a result of that, you have an increased opportunity to gain additional vehicles to recondition.  This will make both the service and pre-owned departments more money.

Fleet and Commercial Accounts

The final responsibility we have under our sales management of the service department section is fleet and commercial accounts. In an effort to achieve incremental sales and gross profit, you should pursue these volume accounts.  Guaranteed this is somewhat easier for certain brands, but if you look hard enough you can find fleet vehicles for every manufacturer in the market. Some places you might look into for this type of work include, local and state governments, rental facilities, construction companies, medical transportation companies, and the list can go on and on. That covers our 11 responsibilities that fall under the service sales management category, even though these are just the tip of the iceberg.  Again, as you work towards taking your dealership to the next level, feel free to reach out to NCM, and all of its professionals, to see how we can help. Did you miss the first six responsibilities? Watch a recap from CBT News here:

Permanent link to this article: http://blog.ncm20.com/2015/01/sales-management-responsibilities-of-the-service-manager-part-2/