Which of these statements best describe your service department?
A. The Service Department is the most expensive department to run.
B. The Service Department should return your biggest profit.
C. The Service Department must know and use the highest level of technology.
D. All of the above.
The answer should be “D.” In this column we’ll discuss the service department of the future — one that uses technology (statement C) to reduce expenses (statement A) so that statement B (service equals biggest profit) is also true.
Service is without a doubt the most expensive department to operate. It occupies the most space in the dealership so it has the highest occupancy costs (heat, light, power, rent/amortization, etc.); it also employs the most people, and has the highest operating costs. This is particularly true when you include the costs associated with field service vehicles, special diagnostic tools and consumables used in repairs.
The best dealerships spend 35% of every dollar in the service department for labor expense. The lowest performing dealerships spend a lot more. Expense control, as well as higher technician productivity, explains why the best dealerships make up to 30% net profit in service and the worst dealerships lose money.
Technicians in the best dealerships are 50% of the total number of employees and their productivity is vital to achieving gross margins from labor sales between 65-70% or even higher.
Because they must diagnose and repair today’s highly sophisticated machines and integrate electronic information to and from those machines into the total farm information system, technicians are technologists. They are the best example of knowledge workers in your dealership.
Yet, to what extent is technology used to help the technologists reduce expenses, increase productivity, make more money and better serve the customer?
Let’s examine the possibilities of using technology in the automated, paperless farm equipment service department of the future.
Telematics: A Game Changer
For your service operations, telematics could be a game changer. Providing notice in real-time that a farmer’s machine is in trouble gives the dealership and the farmer the ability to get a jump on fixing it fast. Having information on how a machine is performing moves the service department from being reactive to being proactive because one can predict failures and speed up diagnosis. Telematics provides the opportunity for the technician to know what needs to be fixed before he or she leaves the dealership!
This capability improves productivity and customer satisfaction by automatically generating a work order and parts pick list, thus reducing expenses.
Live Work Scheduling
Managing time is at the core of a successful service department and a fundamental of time management in any situation is to have all your tasks on one single list. So the best service managers maintain one list, whether it’s on 3x5 cards hung on a cork board with stick pins, a big white board, an electronic spreadsheet or a report within the dealership’s business system. Now, add to this the concepts of collaboration and real-time information — both of which are enabled by technology.
One of the techniques that we see being adopted is the development and use of live work order scheduling systems.
I’ve seen several dealerships develop their own system using Google Drive. There are also stand-alone systems available for purchase, and your dealer business system has or will soon have this capability.
In the service department, collaboration is key so that everyone can see the same list at anytime and from any place. The service manager can determine job priority, the parts department can update with back orders, and techs can close jobs and open the next work order even if they are 2 hours away.
Technology allows for live work order scheduling and management without paper, in real-time, so all relevant individuals can be involved. In the future, even closing work orders may be automated. As a technician leaves a machine and gets into the service truck after a repair, the job is closed and that information flows to the business system.
In addition to the opportunities with telematics described above, technology will be utilized to give technicians more resources to diagnose and repair. This can be as simple as having schematics available electronically on their tablet or heads-up display, or even a live video call to a technical resource center to have another set of eyes look at a problem.
Faster diagnostics means faster repair, less write-off of technician time, more productive time billed and happier customers.
Auto-Record Time & Rate
Geo-location linked to a work order system provides the ability to automatically post to the work order and bill the customer. Whether in the shop or on the road, technology can be used to know when the tech is moving between jobs (which may be one rate), when they are on the job and when they leave the job.
This means that actual times are calculated exactly and not estimated. All time is recorded and the work order can be posted for billing automatically. The technician does not have to remember or record except to override if an unusual situation exists. Billing can be done in real-time.
In many dealerships the add-ons for shop supplies, vehicle expense and environmental or technology fees are often discretionary and haphazard. The best service departments post these add-ons as a matter of policy and reduce the discretion of employees to post or not.
Combined with the automatic recording of time and rate, these add-ons are determined at point of use. When an electronic service tool is hooked up, then the technology fee is automatically added to the invoice. Vehicle time is calculated and posted based on where the work is done. Shop supplies and environmental fees are posted to every work order, without the cost of manual posting to every work order.
Invoice & Collect Payment
The state-of-the-art in the business world is electronic commerce and it’s very applicable to your service department and entire dealership. Once a work order is closed automatically (see above), the billing can be sent to the customer immediately with an email or, better yet, electronic invoice.
With the proper credit authorizations — say any invoice below $1,000 is paid automatically — then you can send an invoice and collect payment immediately. This reduces or totally eliminates the cost of generating an invoice and results in faster cash generation with no collections costs.
You might think that all of these ideas together are way out there, but each individually is being done in some form or another now. Combining them with the intent to use available technology to automate the processes and reduce expenses is absolutely possible. This future is now.