Profit Scorecard: Part II
Oct 1, 2012 12:00 PM, BY RICK WEBER
Doing a better job as a trailer dealer, NTDA workshop
View all NTDA Profit Scorecard photos, captions, and charts
Trailer dealer and truck equipment distributor shops are filled with places where money is made and lost. A workshop sponsored by the National Trailer Dealers Association pointed out where to focus attention in order to improve quality, productivity, and profits.
The August issue of Trailer/Body Builders gave most of the areas that trailer dealers should address to become a more profitable business. This month we give you the rest of the story — based on a presentation consultant Allen Phibbs gave at a National Trailer Dealer Association workshop earlier this year.
(Click here to read part one of this article)
Processes: making it easy for customers to do business with you
COMPANIES have external customers and internal customers. How easy is it for them to do business with the parts department, accounting department, etc?
How effective and timely are your processes?
Consultant Allen Phibbs said over 80% of customer problems are caused by process failure — a process poorly designed or not designed at all, or designed but not followed. Less than 20% are due to unforeseeable “accidents.”
“Invest the majority of your time designing and executing systems to head off problems,” Phibbs said. “Process improvement involves activities which improve quality or reduce the costs of a process through the elimination of waste or non-value-added activities — or standardize best practices between locations of the same business. Start a process at one location and roll it out to the others when proven effective.”
Phibbs said process improvement is important because it improves operating efficiency and productivity, enhances customer service, and promotes teamwork.
- Customer write-up.
- Scheduling and shop loading.
- Handing waiting customers.
- Service status and reporting system.
- Delivery process.
- Follow-up and after repair.
- Handling upset customers.
- Incoming customer phone calls. The telephone remains an important interface between the company and its customers, yet Phibbs questioned how well the people who answer the phone represent the company. “Are you training people?” he asked.
- Facility appearance. “Would you take your vehicle there?”
- Customer service reminders. “Are you sending out reminders? That's about 90% effective. How do you do it? Phone? Fax? Email? Do you have the right contact information? Not the guy who gets the invoice — send it to the guy who makes the decisions regarding trailer service,” he said.
If the shop is disorganized and congested, technicians spend billable hours searching for benches, trash barrels, and rag barrels, and time is wasted searching for shop equipment such as lifts, jack stands, and tools.
“Studies indicate technicians can spend over five minutes per repair order searching for shop equipment and tools,” Phibbs said. “Shadow boards for shop tools provide easy access to tools and significantly increase the probability tools will be returned to their correct locations. Shop-efficiency improvements include identifying the most frequently used shop equipment and tools and placing them closest to the technicians. Efficiency improvements have been shown to reduce the time spent searching for shop equipment and tools by over 60%. This amounts to three minutes per repair order. Phibbs suggested charging the cost of the tool to the RO until it's returned.”
Phibbs said a disorganized lot adversely impacts technician efficiency. Studies show technicians spend over 19 minutes per repair order locating and moving equipment. Reasons include not labeling equipment; specific location of equipment on the lot is unknown; equipment is located several hundred feet away; and other equipment blocks access.
“Studies show a technician can locate and move equipment into the shop in less than eight minutes on average when the lot is organized,” Phibbs said. “Lot layout and processes to maintain an organized lot vary. Proper planning and management are vital to sustaining associated benefits.”
He said that often the most visible and talked about efficiency improvement opportunity is reducing the time technicians spend waiting for parts. Studies indicate technicians spend over 21 minutes/repair order obtaining parts. This includes: walking to the parts counter; waiting to be waited on; waiting to determine availability; waiting while parts are pulled; and walking back to the service bay. Technicians needing simple items such as bolt or filter kits may wait over 20 minutes to be waited on.
Phibbs suggested these ways to make improvements:
Requiring techs to use parts lists eliminates waiting. Time/date stamps are recommended for tracking purposes.
Using parts runners to deliver parts provides techs with more time to repair trailers.
Providing techs direct access to bolt bins and oil kits reduces waiting.
Parts lists, parts runners, and direct access to key parts alleviates bottlenecks and improves efficiency in both parts and service departments.
Employing in-shop parts coordinators with tablet PCs to place orders and deliver parts almost eliminates waiting for parts.
The biggest opportunity for efficiency improvements in shops is improving information flows.
“Studies indicate technicians wait for more than 100 minutes per repair order for estimates, customer authorizations, vendor warranty authorizations, technical advice, results from test drives, next job assignments, and more,” he said. “Bottlenecks in information flows often results in several technicians waiting simultaneously. Causes vary from shop to shop, requiring unique solutions.”
How can a dealer improve the flow of information? Consider these suggestions:
Explicit processes providing technicians timely and accurate information significantly improves efficiency.
Reassigning technicians while estimates, customer authorizations, vendor warranty authorizations, and results from test drives are obtained impacts efficiency dramatically.
Preparing repair orders before technicians finish their current job eliminates waiting for job assignments.
Studies indicate improved information flow can reduce the associated time technicians spend waiting from over 100 minutes per RO to less than 46 minutes.
A 23% improvement is under your control, even if you have no control over the parts department.
RO improvement ranges from $20,000 to $46,689 annually.
“RO cycle time is important because time equals money for both the dealership and the customer,” he said. “Downtime is critical to dealership customers. RO cycle time is critical to the dealership. Customer wants to know ‘when’ and ‘how much.’ Minimizing RO cycle time by the dealership equals value to the customer and increased sales capacity for the dealership. Cycle time is about the RO process and measuring the process steps for performance.”
Capabilities and Capacities
Phibbs said everyone at the company is responsible for the reputation. Does everyone understand their impact on the reputation of the dealership?
“The more undifferentiated you are, the less relevant you are,” he said. “As you differentiate yourself, the more you can command a higher price. The only way to be a successful dealership is to be a dealership people seek out and are willing to pay for.”
Phibbs said brand is more than a logo or product — it's the perceptions you own and promises made to your customer. People instantly see it and know what it stands for.
“Are you who you want to be?” he said. “In branding success, you must be true to the nature of the business, distinctive, and meaningful to your customers. One of the big challenges of marketing is how to inform the customer of the services you offer that can help the customer improve their bottom line.”
Inform the customer of the expertise and services you offer through a website, social media, sales blitzes, prospecting, and direct selling.
Prospecting is the heart of dealership marketing, he said, and requires persistence, consistency, structure, a commitment to the program's success, and a combination of mailings, telephone, and personal contact.
He said prospecting and cold calling are not the same.
“The days of cold calling are dwindling,” he said. “Prospecting is an activity.”
He said 71% of customers call your business before they do business with you.
“How well are the phones answered at your dealership?” he asked. “Who answers the phone? Do you train as to how to answer the phone? You make a big investment in advertising, prospecting, and a fancy phone system, but one bad phone-call answer by a dealership person can ruin a customer relationship.”
Phibbs said team leaders tap into the potential and talents of others. They focus, coordinate, and integrate a variety of diverse roles and responsibilities to create and sustain synergy and a sense of shared responsibility.
“Performance equals ability times motivation times role clarity,” he said. “If any one of these is missing, the result is zero. Therefore, it's important to have job descriptions and a simple list of expectations.”
He said performance feedback is the process of evaluating how well team members are doing compared with a set of standards and communicating that information to them.
“You should provide feedback in some form every day,” he said. “Compare them with a set of standards and let them know. Send them the job description before the interview. If they don't read it, don't hire them.
“Eighty-five percent of managers and employees are fundamentally dissatisfied with the performance appraisal process. Fifty percent of employees don't understand what they need to improve.”
Phibbs said turnover is very costly. A tech position can cost ½ to one times the cost of annual salary. For a more technical position, it's 1½ times. For management, the cost is three times or more.
He said dealerships must look at “transition planning” — the idea of planning for managers turnover.
“Transition planning builds loyalty, identifies recruiting needs, creates motivation, ensures confidence, and increases stakeholder value,” he said. “You have to identify recruiting needs. What if you realize you don't have anyone to take the place of a key employee?
“Increasing stakeholder value decreases business interruption and makes the business more valuable if the staff is seamless.”
You can find good help
Where else can you find techs?
Competitors. There is a danger in doing so, though. “Be careful not to hire their baggage,” Phibbs warned.
Grow your own.
Job Corps. “This is a Department of Labor program,” Phibbs said. “There is a big misconception that it is for criminals. It is a program for disadvantaged youth ages 16-28. If they have a criminal record, they can't enter. Consider looking at their website. Make an appointment with the center director. Tour the center and meet with the placement officer. The Job Corps preference is to place them back in the area where they came from. Aim for the older graduates of the program.”
Military. The military is a great source for job candidates who have been trained in discipline and teamwork.
Making a dealership distinctive
Commercial dealers need to differentiate themselves with their cost structure and ability to serve their market, according to Allen Phibbs, a professional advisor for KEA Advisors and a former general manager for a large Mid-Atlantic commercial truck and trailer dealer group.
In his expansive and enlightening seminar for the National Trailer Dealers Association, “Unlocking Commercial Dealership Profit,” he said KEA uses the Profit Scorecard approach — a strategic, proactive method that focuses on activities that drive performance, particularly in service departments, and not necessarily on financial results.
It involves: developing a dealership strategy and group/branch/department profile, identifying objectives, developing measures, preparing a strategy map to clarify logic, developing goals and action plans to achieve objectives, and developing measurement reporting.
The Profit Scorecard components:
Objectives. “What must be done to achieve the strategy — the critical success factors. Should tie directly to the dealership strategy. It's a verb with an action statement.”
Measures. “The means of determining whether the objective is achieved.”
Goal. “The specific level of performance that determines success.”
Action plans. “Activities that must be completed to ensure goals and objectives are achieved. Each action plan must be properly funded, supported, and assigned ownership.”
The Profit Scorecard focuses on four areas: financial, market, process, and capabilities and capacity. We took at look at the first two areas in the August issue. Here's a look at the last two areas.
© 2013 Penton Media Inc.
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