I recently visited an east coast dealership when the subject came up about what it’s costing the dealership in service discounts and high shop supply charges to service. This is a common problem in a lot of stores but it is never monitored. What can we do?
We reviewed the previous months shop supply tickets and noticed we had a wheel core charged to the shop. We asked the parts manager who stated the tech didn’t return the old wheel back to parts. I then asked him how he determined what is a shop supply. I got a most standard answer that the tech says “charge it to the shop”! Sound familiar?
I had the parts manager set up a parts invoice for every technician in the shop. He made a list of each invoice with the tech name. He posted that on the wall of the shop counter. Now from this point forward the supply would be charged to the technician’s ticket when drawn. Also the service manager will now sit down with each technician at month end to review the tickets to get any explanation of the shop charge. We created a spreadsheet to track each technician’s monthly shop supplies. We recorded how many labor dollars he created in customer pay and recorded the shop supply charge as a percentage of labor. The next few months should give us realistic numbers. Our goal is to have this figure below 2%. We can then build a spiff program for whoever has the lowest percentage of shop supplies as a percent of customer labor.
This particular store took the discounts off the selling price at the cashier. PRO or CON? That may depend on the pay plan. But’s lets say it does not affect the pay plan. How would this effect you as a manager if you wanted to apply for a rate increase and had to survey your own repair orders for an effective labor rate (ELR)? OUCH…that would hurt. You might consider sending the discounts to an advertising account(s) that will allow you to track discounts by advisor. Depending on your DMS provider this could be done with a report generator. In this case we set up a report generator that will export the data to Excel. The manager can now track the discounts by advisor each and every day. This will allow him to review the repair orders. He can then sit down with each advisor to determine the legitimacy of the discount and any coaching (“Read my lips”) he may need to perform.
There are many areas that gross profit can “leak” from each and every day. It’s up to you as management to see who is giving away your dealers money. When was the last time you looked for leaks?