As Ellens Equipment — Farm Equipment’s 2017 Dealership of the Year in the under $75 million in revenues category — has grown in recent years, it became clear changes in the service and parts departments were needed to help improve efficiency, reduce costs and ultimately improve the dealership’s absorption rate.
Before any real improvement could take place, the leadership team of Don, Linda and Luke Ellens needed to educate the staff on what absorption was, which took place in the fall of 2016. Linda says they showed their team the formula (total gross profit margin from parts and service divided by total dealership expenses) and then explained what gross margin is for both departments.
“A lot of them had never really thought about it or understood it, but then we explained it to them and showed them all the expenses at the dealership and just how the absorption equation works,” she says. “Then I ran through some scenarios with them to help them understand how they play a part in it. So, if we increase sales in parts, this is what it does to our absorption rate, and if we increase our margin this is what happens. If we decrease our expenses, this is what happens.”
While all the employees jumped right in to the challenge, the Ellens attribute much of the service department improvements to service manager Brent Whetstone. “He’s our guru and has changed our service department from good to organized and amazing,” Linda says.
While it’s not uncommon to see a job board in the service department of most farm equipment dealerships, Ellens Equipment has taken its job board from a dry-erase board to a digital document. All the service jobs are tracked in a Google document by Linda Cole, service administrative assistant. A large TV in Whetstone’s office is used as a second computer monitor and makes the document visible to everyone — including customers.
The document tracks everything from which tech is assigned a specific job to whether or not parts are in for a job, and multiple people are able to go in and update information as needed.
“For me, because I don’t necessarily have the time, Linda can go in there and put all the proper information in and I can look quick and see if the parts are here or if I’m not at my desk other people can see who’s working on something or what job they have. It’s helped keep things more organized and not forgotten,” Whetstone says.
Money Saving Strategy
The parts and service departments go through grease and oils quickly and found they were losing money on bulk oil. “My parts manager would come to me and say, ‘We lost this much oil this month or we’re short this much oil,’” Don says.
The solution to the problem was simple, but it’s made a world of difference. Ellens Equipment purchased metered nozzles to track fluid usage. All the nozzles are managed by the parts department and service techs need to check them out before they can take them back to the service shop. “They can’t pump any oil out of the tanks unless they come to the parts guy,” Don says. “ They need to put their work order number on it and what they’re working on. And then they go out, pump their oil, come back, read the meter, and put it on their work order.”
Don says they no longer are losing money on the fluids and are able to charge the customer for it because it can be tracked. They’ve also put the same system in place for the fuel and DEF tanks. “We make them come to the parts guy and get DEF. We make them come to the parts guys to get fuel. They have to register when they use it, and they’re responsible for that when they come back. So all of that — comes back to parts,” he says.