A Service Department is an essential part of your dealership’s Fixed Ops profitability. However, today’s dealerships are feeling the pressure of a significant technician shortage, exacerbated by industry changes, supply chain disruptions, and unforeseen global events.
As many dealerships navigate these unprecedented events, it has become apparent that Service Managers lack the time and tools to enhance the capacity of their current technicians, factor in and plan for future capacity, and understand how that can affect revenue and profitability. It can also be challenging to have the insight needed to make long-term departmental enhancements that will improve technician retention, pay, and overall job satisfaction.
This article is designed to help you effectively manage the technician crisis by optimizing current staff, maximizing CP labor rates and pricing compliance, and finally by building a winning team that consistently meets expectations and long-term projections.
Optimize Existing Technicians
Time is a precious commodity. The first step in tackling the tech shortage is making the most out of the staff you currently have in your service drive. There are three different areas to examine when optimizing your existing technicians. First, looking at the different types of technician times, then measuring productivity, and finally understanding and predicting technician capacity.
4 Types of Technician Times
There are different types of technician time that should be considered when optimizing your existing staff. This is the first step you should take when beginning to maximize the capacity of the technicians already in your service drive.
- Scheduled Time: The time that each technician is scheduled to be working is their scheduled time. This excludes holidays, vacations, and training. Scheduled time is the starting point for creating a projection.
- Present Time: This type of time accounts for how long each technician is onsite and available for work. Considerations here include individuals who are late, leave early, call in sick, etc.
- Assigned Time: Assigned Time is the time that each technician is assigned to a job and is expected to be working. Time moving vehicles and time at the parts counter is included.
- Booked Time: Time each technician is paid for a job they performed is booked time. Oftentimes, booked time can exceed assigned times.
Once you have analyzed how your technicians are utilizing their time, you can then measure their productivity. The goal, of course, is to be 100% productive and/or efficient (depending on your OEM’s language). Productivity is a measurement of the percentage of the hours that the technician is present are actually assigned. Service Advisors are responsible for selling the needed volume of work, while management that assigns the work is responsible for keeping the shop as busy as possible.
The capacity of your existing technicians is a constraint to revenue and the volume of work able to be performed. The best place to start is to develop a plan that provides sufficient capacity to enable desired revenue as the year progresses. Capacity is best determined using a “bottom up” strategy focusing on individual recent prior performance technician by technician.
Developing a technician capacity forecast requires a deep dive into the recent performance (over the last 60-90 days) of your technicians to determine the following: work mix, labor sales, ELR, technician pay rate, gross profit per hour, parts sales, and more. This information establishes the baseline needed to create the forecast.
Manage CP Labor Rates & Pricing Compliance
Once you’ve analyzed and maximized your technician’s time, it is important to turn your attention to labor rates and pricing compliance. In your service drive, you should strive to charge the “perfect price”.
The “perfect price” is not so high that it impacts retention, but also not so low that it leaves profit on the table. Determining the “perfect price” depends on your geographical location, the type of work, and the customer type. From there, your service department will have the operations in place to be paying your technicians well, and to continue to bring in work from new and returning customers. Included in this are a few different elements you should be aware of including types of work, types of customers, and warranty labor and parts.
3 Types of Work
- LOF (Lube, Oil, Filter): This requires the least amount of skill and also has a highly visible “market price”.
- Maintenance : Maintenance is still relatively unskilled and has a visible market price, it is essential that your pricing is competitive in your market.
- Repair: This area of work requires a higher level of tools, technology, and technician skill. Factors such as labor, parts, shop supplies, and taxes all go into the job price.
Types of Customers
Service Advisors have the ability to modify prices in numerous ways, and the type of customer being serviced can impact pricing. The different types of customers include: retail customer pay, dealership employees, fleets, insurance companies for extended warranty, OEM warranty, and dealership for internal. Having this in mind with assist with pricing compliance to ensure continuity across the different services for each type of customer.
Warranty Labor and Parts
When your CP labor rates and pricing compliance are dialed in, you can reap the benefits of warranty labor and parts. The rules that govern warranty labor and part rate calculations are complex, but most dealerships can apply for an increase every 12 months.
Warranty labor is reimbursed by applying the labor times in the OEM warranty guide to the OEM approved labor rate. However, while it isn’t prevalent across the country, there are a few states where the law requires reimbursement at a retail rate. Your warranty labor rate is determined by CP labor rate for similar jobs, so the more effectively you manage CP labor rate, the more you’ll be entitled to!
Warranty Parts are reimbursed by applying the OEM approved parts markup percentage to the cost of the warranty part. As with labor, a well managed CP parts makeup, the more you could be entitled to for warranty parts.
5 Steps to Build a Winning Team
Bring the work you’ve done with your existing team full circle by following these steps to recruit, train, and retain the right talent. There are specific lessons to be learned from building a sports team that can be easily applied to your dealership in combating the technician shortage. To develop a winning team, you’ll need to follow these guidelines.
- Recruit the Right Personnel: People are the foundation of a winning team. Your technicians should have skill, the capability to learn, a hardworking attitude, and the willingness to be a team player.
- Develop the Right Playbook: Your playbook is equivalent to a written step by step guide to the processes within your Service Department. The content of this manual should be modified to incorporate improvements in your personnel or improved tools
- Coach the Playbook: A strong playbook is useless without the proper framework to effectively teach it to your staff. Utilize the “Wooden Method” following the steps of explanation, demonstration, imitation, and repetition to create habits that can be executed without hesitation.
- Understand the Key Performance Indicators (KPIs) that Lead to Winning: Data and analytics are an important decision enhancement tool that has become standard in sports. When applied to service and parts management, the same performance enhancement opportunities in sports become possible in the service drive.
- Repeat: Repetition is the best way to form habits that optimize performance. Building a team with persistence and determination is a winning strategy!
Included in this article have been both short and long term considerations for your dealership during the ongoing technician shortage. While the future remains uncertain, there are clear steps you should take to maximize the staff power you currently have, all while making your dealership a better place to work with great pay and a busy service drive. Dynatron Software makes running your Fixed Operations easier and more profitable, reach out to learn about the opportunities that exist in your Fixed Ops department!