There are various ways, as opposed to a defined way, to successfully operate an automobile dealership. Within the framework of that thought, there are ways to accomplish the cosmetic procedures necessary to prepare the appearance of new vehicles and vehicles that require reconditioning to catch the eye of a used car customer.
Some dealerships operate their own detail departments to meet the needs of the dealership. Others sublet detail work because of the difficulties encountered with the day-to-day management and the expense associated with a detail department. Yet others operate a detail department, not only to accomplish the needs of the sales department, but also to merchandise services to their retail customer base.
The dealership as a whole has been forced to be more competitive. With websites sharing dealer invoices for vehicles, and the never-ending growth of mass merchandisers, additional areas to obtain gross profit are being examined. Have you ever considered the detail department as a profit center?
This document explores the assets and liabilities of various management strategies as we consider the ways to operate a detail department, and how to strategically operate it as a profit center. This document also defines proven strategic techniques to merchandise services, manage various production structures, control supplies, and control the expense of supplies.
MANY DEALERSHIPS TYPICALLY place the detail department under the direction and control of the sales department. A study of the detail department demonstrates room for relative improvement under most conditions.
In most dealerships, the sales department is located in the front of the building while the detail department is located toward the rear of the building. Therefore, management is located away from the workers, “out of sight, out of mind.” This fact, combined with hourly pay rates, can lead to low productivity. When first measured, it is not uncommon to have a production percentage (flat rate hours produced divided by clock hours worked) of 50% to 60%. If production is this low, it may be that more employees are employed than would be necessary if production had been higher.
On-site management is necessary under most conditions because:
- Agendas change hourly.
- Supplies are often stored in the open, subject to theft.
- The quality of the detailed product is of major importance—delivery condition is a customer satisfaction survey question on most manufacturer surveys.
Caution must be taken not to increase expenses without receiving a proper return on investment.
DETAIL DEPARTMENTS CAN benefit from being equipped with a lift. Therefore, the vehicle is at or near waist height while buffing the lower half of a vehicle or shampooing carpets. An option is a lift used in a body shop that raises approximately three feet (3) – the cost is usually approximately half that of a normal lift. Be sure to do price comparisons.
II. Production Techniques and Compensation Options
A. Traditional Operation with Working Advisor/Foreman
Another way to allow the sales department to control the detail department is to employ a working foreman to coordinate activities between sales and detail. This person should allow the flow, quality, and production to be enhanced. It may be advisable to make this person a productive employee depending on the number of employees in the detail department. The addition of this position adds to the expense structure of the department, so the financial position of the department will probably not improve depending on the pay plan selected.
B. Simple Support Groups with Transition to Flat Rate
Several options are available to allow the service department to manage the detail department. This may make good sense if the employees and work performed take place within the service department.
The first option is to structure the department in simple support groups, very similar to a service department structure. All vehicle “get-readies” are given to the corresponding service advisor for repair order preparation and dispatch of work. Individual production objectives are developed for each detail technician, and daily production objective management takes place. The dispatch of work takes into consideration flat rate hours produced by each technician as compared to the objective from the prior day’s business. If an objective is not obtained through no fault of their own, management should step in and verbalize the intention to feed work to one technician or another. The service advisor normally performs dispatch when operating under simple support groups.
Flat rate pay may also be considered. Each operation pays a predetermined amount of time based on a pricing guide being developed. This transaction can be fearful and produce frustration for the technicians. A way to smooth the transition is to track, monitor, and discuss flat rate hours produced for a predetermined amount of time, e.g., a one-month transitional period, prior to actually going to a flat rate system.
The benefits of flat rate are as follows:
- Improved financial position due to an increase in production.
- Improved structure to manage.
- Incentive pay plans.
Exercise caution with flat rate in the detail department. This position is considered hourly in many states. This does not prohibit flat rate payment, but time-and-a-half restrictions may be an issue. Be sure to consult local authorities. You may wish to consult the state automotive association, legal counsel, and/or the state labor board.
Another caution with this structure is the location of the service advisor as compared to the detail staff. The advisor is definitely closer than a sales manager. This may be a moot point depending on the level of employee within the detail department.
C. Lateral Support Groups with Transition to Flat Rate
Lateral support groups with a transition to flat rate are another way to supply on-site management and remove the service advisor location from the equation. This structure affords the same benefits as simple support groups, and the organizational structure is very similar to the service department. The driver is cost-of-sale and a productive employee, not an expense such as a foreman. This person has a production objective and manages the following areas:
- Quality control
- Dispatch dynamics
- Production management
- Supply management
Supply management is an important aspect of detail department management. This area can be a heavy theft and waste area. The production leader provides management in this area.
The production leader is typically paid a rate per flat rate hour produced and a bonus based on flat rate hours produced each pay period minus their hours. Delivery condition is also a consideration as a component of the pay plan. This could be a separate component or a qualifier for the amount per flat rate hour received. The bonus per flat rate hour produced fluctuates on a predetermined basis based on the delivery condition scores. This may vary from manufacturer to manufacturer based on the way this component is spelled out in the survey. Some dealerships actually structure supply expenses into the pay plan.
D. Combination ASM/Group Leader
Management can consider structuring the department with a combination ASM/group leader if a unique individual is found. This person assumes the responsibilities of the ASM and the group leader, handling both the administrative and production sides of the business. From an administrative side, the ASM/group leader performs the following:
- Schedules appointments.
- Writes repair orders.
- Closes repair orders.
- Pays the technicians.
- Organizes repair orders and opens repair orders within the department.
The ASM/group leader works within the detail department as a productive person and is responsible for producing an appropriate number of productive hours per week as determined by a production objective. This production objective is a major factor in determining the true expense of this position.
The average ASM/group leader has a production objective equal to 50% of the clock hours worked of a totally productive person, or 20 hours per week. This number varies depending on store conditions.
One of the most common ways to construct an ASM/group leader’s pay plan is salary, and a bonus based on flat rate hours produced and delivery condition.
The strengths of this structure are as follows:
- An improved financial position versus operation by the sales department in an hourly environment.
- An improvement in the management of the department.
- Incentive-based pay plans.
- On-site management.
The ASM/group leader must be very familiar with the mechanics of the department. This person must also possess administrative, management, and customer handling skills, or at least have the ability to learn or improve these traits.
E. Production Teams
Space can be a factor in how detailing is handled, and work is often sublet due to lack of space. Installing a team structure in the detail department is a good way to address space limitations. This structure allows one or several technicians to work on a vehicle at the same time.
This structure is identical to a team’s structure in the mechanical department. The technicians share flat rate hours produced based on clock hours worked. In most cases, this approach requires strong management due to an abstract pay plan. Employing technicians who can work together and who have similar work ethics is a key to success with teams in the detail department.
F. Vehicle “Get-Ready” Manager
Using a vehicle “get-ready” manager is becoming more popular with larger dealerships. This person acts as a liaison between the sales and service departments, coordinating the work and paperwork flow. All vehicle “get-readies” go to this person for tracking and distribution. As an example, the following operations may be handled by the vehicle “get-ready” manager:
- New vehicle check-in.
- Pre-delivery inspections.
- Pre-owned vehicle mechanical inspections.
- Pre-owned appearance details.
The basic job functions of the vehicle “get-ready” manager include coordinating all internal work. This person is responsible for coordinating the best timing of mechanical and appearance work, which can be a balancing act. Bottlenecks must be avoided since new vehicles must be prepped for the lot and/or for delivery in a timely fashion. In many states, the vehicle must be inspected by the state or approved inspection station prior to a customer driving the vehicle on the street.
Of course, a used vehicle is cash flow. These vehicles must move and be lot-ready to sell. The vehicle “get-ready” manager is responsible for a huge amount of inventory to be conditioned for sale. The paperwork, as well as the actual work, must flow. Open repair orders can be a big concern, so this person is responsible from repair order initiation to the finished repair order being booked, billed, and posted.
In some dealerships, the vehicle “get-ready” manager is responsible, either directly or under their direction, for checking in all new vehicles and lease turn-ins. Therefore, one person is accountable for these activities and becomes highly proficient.
Dispatch can be direct to mechanical and detail technicians or as dictated by the organizational structure that best fits the dealership. Dispatch direct to the mechanical technicians assumes that the technicians are used strictly as vehicle technicians. This task may entitle dispatch to an ASM or group leader. One may elect to develop a system for distribution if several production units or groups are used. As an example:
- Unit one—receives all stock numbers ending in 1, 2, and 3.
- Unit two—receives all stock numbers ending in 4, 5, and 6.
- Unit three—receives all stock numbers ending in 7, 8, and 9.
To whom does the vehicle “get-ready” manager report? This person may work or be expensed to both the sales and service departments or as conditions merit.
III. Supplies Management
A. Asset Management
Numerous considerations exist for shopping, using, and controlling supplies. The best bet is to shop numerous vendors and try all of their supplies on a sample basis, if possible. These vendors should comply if they want to earn your business.
Product dilution ratios may vary. Be sure to factor in dilution ratios when calculating the price per gallon. Also, the price per gallon when purchasing a 5-gallon container will be higher than when purchasing a 55-gallon drum. All vendors offer a dilution dispenser so that the ratio of product to water is automatically factored. Using any product that is diluted without the use of a dispenser is certainly a waste. Weekly orders co-signed by the department manager should also allow the manager to keep a handle on the usage of each product purchased and enable them to spot trends. Some companies will supply the product and bill it on a set fee per vehicle cleaned.
B. Reconditioning Manager Control
There are a few items to consider if the products are in the control of the reconditioning manager. A lesson in asset management and development of a budget provides some parameters and forces management of these items. A monthly product inventory lets the employees know that someone is watching. If possible, use a separate room adjacent to the detail department for storage—this way, the supplies are close and can be secured upon closure of the department.
To take the supply expense issue to a higher level, consider including the supply expense as a portion of the pay plan. This places attention on conducting price-competitive evaluations of the products used. Of course, all final decisions on approving vendors lie with the parts & service director and the proper authorities.
C. Towel and Rag Options
Detail departments use a multitude of towels and rags, so that aspect must be managed as well. A uniform company can supply these items. Another option is to handle towels and rags in-house by purchasing towels, rags, a washer, and a dryer for self-service.
Another direction is to use a detail supply company. These companies offer a set fee for supplies per vehicle serviced, e.g., $7 per vehicle serviced. This may be a consideration if management chooses not to be involved in managing this area of the business.
IV. Marketing the Detail Department
There are various ways to market and merchandise detail services, each of which brings attention to the detail department. Marketing techniques create awareness as to the detail department, which is often an unknown piece of the business puzzle.
Effectively marketing and merchandising a detail department includes using menus similar to mechanical maintenance menus. There is more than one way to accomplish this—each way, or type of menu, has assets and liabilities.
- Detail Services Only Menu—This style only includes services offered by the detail department. When presented, the detail services are the focal point of the transaction. This creates an additional menu to keep at the service advisor’s workstation. Because there is another menu with which to keep up, detail services may fail to be presented in situations that have the possibility to create additional work.
- Combined Mechanical Maintenance and Detail Services Menu—As the title suggests, this is an incorporation of maintenance and detail services in one document. In most cases, mechanical maintenance recommendations are featured on one side of the menu, and recommended detail services are featured on the other side. It is possible to make some mention of detail services on the same side as maintenance recommendations.
This menu style results in less paperwork and less clutter at service advisor workstations. Getting this menu into a customer’s hands ensures that the customer has information when menus are presented at the point-of-sale. The service advisor may not discuss the detail services if they are on the reverse side of the maintenance menu, but a seed may be planted if the menu gets into the customer’s hands.
The five steps for developing a detail menu are as follows:
- Offer complete and/or à la carte services—Complete, packaged operations should be a complete detail reconditioning service and a minor reconditioning service. The à la carte services are individual items desired by the customer, including exterior services, interior services, and underhood services. This technique provides the service advisor with quick pricing options. The customer has a choice to pick and choose items.
- Establish flat rate times—Next, establish realistic flat rate times for individual and complete services. This establishes a performance standard that should be tracked, even if your employees are now hourly. This must be done if the detail department is going to make the conversion to a flat rate, performance environment.
- Review materials for each service—Required materials must be reviewed to enable you to price the services and know what to charge. You must establish what and how much is required. The cost of the necessary materials and chemicals must also be known.
- Conduct a market price survey—Performing detail services is like any other business endeavor—you must know what the competition charges and if your prices are competitive. This requires a survey of other detail shops and competing dealerships. Once the information is collected, a median price for each service should be established. That is your local market average. Close attention should be paid to this area.
- Finalize pricing—Once the aforementioned steps have been completed, put the finalized detail service prices together.
- Determine the labor price and the effective labor rate of each operation. This is the labor dollars charged divided by the flat rate time.
- Cost average the necessary chemicals and materials. Determine the selling price for each operation.
- Combine the materials prices and labor prices for the final selling price. Perform a comparative analysis related to the market survey of competitors.
B. Internal Spiffs or Incentives
To create excitement and a charged atmosphere, consider developing spiffs and incentives for sales success. The service advisors meet the people that need these services at the point-of-sale—they must be compensated if you want them to do a good job in closing the opportunities. As with any sales effort, spiffs and incentives should be changed periodically to maintain excitement and to keep the spiff from becoming the pay plan.
C. Tactical Ways of Marketing
The sky’s the limit when it comes to tactical ways to market detail services. Some ways that work well.
- Include detail services in service lane point-of-sale transactions when subject vehicles display an obvious need for service.
- Include detail service information in the service department direct mail program.
- Merchandise with signage in the service lane.
- If space permits, display a hood, sheet metal panel, etc., that is half-detailed to present a before and after look.
- Consider an addendum to service advertising in newspaper or radio ads.
- Add this to a new or used vehicle service introduction and facility tour as the customer takes delivery of their vehicle. The vehicle being delivered obviously does not need this service, but the customer may own other vehicles that need detail services. Once they know, word of mouth advertising may help you. The seed is planted for the future.
- Mention services and distribute menus during new owner orientation clinics.
- Target vehicles with need and make presentations during mechanical inspection clinics.
- Include in the write-up of 27-point inspections.
- Include in web site advertising stressing the features and benefits of these services.
- Consider contacting body shops in outside sales calls. If the need is there, buy their lunch and give them a facility tour.
- Consider dealerships that sublet this service.
With the exposure of new vehicle invoice pricing, customer awareness, and a fiercely competitive business environment, the detail department can be an additional component in increasing overall dealership gross profit.
Many managers who were surveyed prefer to avoid a detail department operation. They view it as a hassle and a loss of money. However, the management techniques described herein can be used to reduce the headaches and increase the profits.