Q. Where is your dealership’s best opportunity for improving absorption rates — parts or service? What are you doing to improve parts sales and service?
A. “A few years ago Deere reduced my margin from 25% to 20%. I’m now lucky if I see 10-15% margin on sales. To make this up I’ve increased parts margins, gave up on sales and went after box store customers. I signed contracts that allowed me to increase the size of my shop and hire more personnel. The warranty work alone can keep one technician busy 24/7. I’m going after more box stores — Wal-Mart, Target, Home Depot, Lowe’s, even the corner hardware stores. I’m also an MTD service center, and there are huge numbers of returns to all these stores, with hundreds of units to be serviced. And I can charge just to check the unit over and MTD pays warranty on it. Our company has never been stronger.”
—Gary Smolik, general manager, The Tractor Place, North Royalton, Ohio
A. “The best opportunity for us is in our service department, offering parts and service specials and financing through sources like Rabobank QuickLink.”
—Brice Terry, owner, Terry Implement Co., Gallatin, Mo.
A. “We think that a dealer needs to cover these 3 bases: rental, sales and service. Profits are different in each segment, but a dealer should cover all the needs of their customers to be a long-term partner.”
—Marcus Auerbach, director of compact equipment, Wacker Neuson Corp., Menomonee Falls, Wis.
A. “Both departments are important. In parts we’re not discounting as much in the winter months and we’re also making sure everyone is paying a little for freight on special-ordered parts. We’re asking for more sales on the parts counter to get 1 or 2 more items on every ticket. We’re charging $10 more per hour on service calls to cover mileage and other costs we’ve overlooked in the past.”
—Steve Lefeld, president, Lefeld Implement, Coldwater, Ohio
A. “Both areas need attention. With service, many of our new high-tech tractors, combines and other equipment require units to be maintained by highly qualified and competent technicians. This requires mainline dealership service to improve and drive more business to this department. Our service department sells about 50% of all parts, which results in much better parts revenue. The parts department must get better at attracting customers to our fast-moving but competitively priced parts. Better marketing and stocking will be required to change the perception that the aftermarket companies have better value.”
—Bob Downham, owner, D.S. Downham Equipment, Stratford, Ontario, Canada
A. “The best opportunity is in the service area. We’re working on a winter inspection program to get customers to bring their equipment in this winter and have it ready for next year.”
—Mark Anthony, corporate parts, Ray Lee Equipment, Muleshoe, Texas
A. “Monroe Tractor employs product support reps who promote parts and service on the road, as well as bringing in leads for wholegoods. We also joined a buyers’ group, which allows us to promote generic product offerings at a greater savings for all makes and models of equipment to a broader customer base. It also gives our product support reps more to promote and sell.”
—Janet Felosky, president, Monroe Tractor, Henrietta, N.Y.
A. “Increasing the labor rate seems to be the easiest and best way to do it. Also, controlling or reducing the expenses.”
—David Kleiber, Kleiber Tractor & Equipment, La Grange, Texas
A. “The best department to improve absorption rates is service. We’re actively expanding our service department and have expanded outside of the ag industry into trucking. It’s a lot less seasonal and it also increases our parts sales. It only makes sense to diversify. There are less farmers every year to do business with.”
—Rolly Richard, sales, Tweed Farm Equipment, Medora, Manitoba, Canada
A. “Our best opportunities come from service. If you grow the service business, the parts side will also grow. Costs vs. gross profit contribution is generally higher on the service side, so the opportunity to reduce costs is also higher. Technician utilization is probably the single-best opportunity — the higher the better.”
—Ted Breland, product support manager, Strongco Equipment, Mississauga, Ontario, Canada
A. “This year has been different than any other year. We’ve increased our parts absorption rate by 10% and our service absorption has decreased by 10%. The weak economy has forced customers to repair their own equipment, which I feel has increased our parts absorption but reduced units coming to our shops. So the biggest opportunity is in our service department. This year we’re getting out and building relationships with customers so we’re the people they think of when they need service. We’re positive this will grow our aftermarket business. We’re holding a number of educational clinics and spending valuable time on the farms, showing our customers how we can partner with them.”
—Mark Hungle, aftermarket manager, Friesen Equipment, Abbotsford, British Columbia, Canada
A. “We’ve incorporated a service request form as a standard communication tool in the dealership to allow the service manager to receive written work instructions from other departments on equipment trade-ins, new setup, etc. All work to be done by the service department must be accompanied by this form. We also use standard job pricing on new setup, as well as maintenance programs on ag and lawn-and-garden equipment. We now offer a standard maintenance package to each customer who purchases riding lawn equipment. In parts, it’s more important than ever to utilize pre-season “buy right” programs. We have to buy when the best prices are offered.”
—Steve Schar, aftermarket manager, Shearer Equipment, Wooster, Ohio
A. “In a slow market, absorption is critical. Manufacturers and suppliers are taking away incentives, discretionary money and margin. They assume we can make up the difference on parts and service. The suppliers are convinced we can survive on 0%-margin wholegoods and service with absorption. If we give wholegoods away, the stockholder-value-added principle and manufacturer’s market share will impress the management team. Absorption can be attained in a large ag marketplace, but it’s a true challenge in a small ag or consumer business.”
—Dennis Guettinger, store manager, Columbia Tractor, Moscow, Idaho
A. “Our best opportunity is to push wholegoods-type kits or attachments through our parts department. The parts department can better handle these kits and make sure they’re complete and accurate. They can charge through a counter ticket, help load them on the trailer or pickup or even suggest installation through our service department. This helps develop the relationships initiated by our sales staff with a wholegoods sale. Our parts and service departments have become more involved in the customer’s solutions, which means our sales staff can spend more time pursuing big-ticket relationships.”
—Jeff Romsdal, sales manager, Central Sales Inc., Jamestown, N.D.
A. “We’re focused on customer satisfaction and very quick turnaround — getting jobs into the shop and equipment back to the customer as quickly as possible. This is the best way to get customers coming back.”
—Rod Paul, store manager/regional sales manager, Greenline Implement of Hand County, Miller, S.D.
A. “We’ve stretched our market area by providing delivery of parts and service. We’re trying to find new ways to attract business, which is difficult with credit standards tightening and equipment prices increasing every year.”
—Shawn Parker, general manager, Blue Valley Tractor & Supply, Stilwell, Kan.
A. “We’ve placed much more emphasis on advertising our parts department products, and we’ve all but eliminated overtime in the service department to increase service department margins.”
—James L. Taylor, vice president/general manager, Hillsboro Equipment, Hillsboro, Wis.