Measuring service

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PARTS TO LABOUR RATIOS

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Many of us remember when the value of the parts on a work order often exceeded the labour dollars. That was in the days not so long ago when you installed rebuilt engines, transmissions and other high-dollar components — all in huge quantities.

But vehicle quality has improved significantly since then and our focus has now shifted to preventative maintenance.

This poses an interesting question. What is a good parts to labour ratio? Well it depends on a number of factors. The opportunity to sell parts may be higher for some franchises than others. Some brands now have an extended oil change service with a very expensive and creative visual inspection. This in turn creates low parts sales and high labour revenue — some vehicles, for example, require brake servicing every 20,000 km.

Having said that the reality is if you measure it, you can improve it. So let’s look at some basics.

Different wavelength
The parts manager and service manager are two different animals with two different agendas!

It’s amazing how many parts managers don’t get along with their service managers, and vice versa. It’s mainly because they have vastly different agendas and social styles — “Driver versus Analytical.”

From the parts manager’s point of view
A number of parts managers I work with would rather sell parts wholesale with low margins than supply them quickly and efficiently to the service department, even though the latter avenue yields higher profit and less risk. Ask a parts manager who their best customer is, It’s not often they will likely say the service department.

From the service manager’s point of view
Most service managers will tell you they get paid on labour sales, not parts, and with the labour gross at 70 per cent, that beats the hell out of selling parts. Technicians tell me that they would rather let the customer’s vehicle continue to run with a plugged air filter than waste time waiting at the parts counter for a new filter — a part that they often don’t get paid to install. Makes sense to me!

Things to consider
• In some market areas, the last few months have been slow for the service department. Technicians are running out of work but at the same time the special parts bin is full. Instead of getting them installed, we see the parts manager busy sending parts back and using up their return allowance;

• In all the years of driving and having vehicles serviced, not once has anyone tried to sell us a set of wiper blades. I know why; do you?

• Ever driven at night and been amazed how many vehicles have a driving light out? Have you checked the parts department to see how many bulbs actually get sold?

• There are many vehicles now with pollen filters that used to be expensive, but often customers are not aware of them and it appears neither are we! Take a look at how many you sold last year, the good news is that many manufacturers have dropped the price on these filters;

• Some dealers think that because they have tires on display in the drive-through, they are in the tire business. It is true that we sell more now than we used to, the question is how many more could we sell if we were focused on it?

• Take a good look at any coolant flush work order and see how much incremental business was sold — like a thermostat or a belt. Ever wondered why the customer is back two days later with a coolant leak? It appears that due to extended-life antifreeze in many vehicles, some stores have stopped selling this service completely, probably because the technicians don’t like doing it!

When working in dealerships we love having meetings with the technicians and asking them what sort of job they do selling specific parts. When they claim they are doing a good job, we then ask them, “so where are you getting the parts from because they are not being sold by your parts department?” Parts history is easy to check.

Recently we discovered that during a 12-month period, a store in the metro Toronto area had sold less than 50 of their fastest moving air filters and only 30 pollen filters. These are not unusual numbers and you have to bear in mind that this particular store does a huge number of oil changes.

As a general guideline, we like to set a goal of 80 per cent parts to labour ratio, which might be tough to achieve in some dealerships.

On a final note, we had a service manager ask why his parts manager will sell a fuel filter wholesale with a 15 per cent mark up and deliver it across town, but won’t deliver it his own store techs with a 40 per cent margin?

Hell of a good question!

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