How to Save Some Money

I was in a dealership service department talking to the service manager. A technician approached the counter and asked for a can of brake cleaner. The parts counter person said, Take two so I don't have to see you back as often. When the service manager saw my reaction, he explained that the service department was already charged for the entire case of brake cleaner when it was received, so it's all

I was in a dealership service department talking to the service manager. A technician approached the counter and asked for a can of brake cleaner. The parts counter person said, “Take two so I don't have to see you back as often.”

When the service manager saw my reaction, he explained that the service department was already charged for the entire case of brake cleaner when it was received, so it's all paid for.

This is a typical response in many stores. Because there is a credit balance in the shop supply account on the financial statement, everyone assumes they are “making money” on shop supplies. You could make more money if the shop supplies were controlled as well as any other asset.

Here are ways to reduce this expense and make more money:

First, discontinue charging the shop supplies to the department when the items are received. They should be inventoried just like any other item would be in your parts department.

The parts manager will not be thrilled about this change but it will all but eliminate the waste of this type. The No.1 objective of the parts department is to ensure all items leaving the department are charged on an invoice with a mark-up. If they are responsible for the items, it's only right that they are allowed to receive a profit for their efforts.

Next, track the usage by the individual technician. Start an invoice for each technician and require the technician to sign off on each item as it is received. Prior to the invoice being charged to the service department, the service manager must approve the invoice at the end of the month.

Better yet, open a repair order with each line assigned to an individual technician. Once the month has ended, use some type of tracking report. It could be a tracking sheet made in Excel.

If you want to “kick it over the top,” put up a tracking board that all technicians see daily. The usage will drop! If someone is “top user” of the month, the other technicians will usually drill them for a period of time after the posting. The next month, it is a safe bet the same technician will not be the top user again!

There is also a good argument for tracking by the amount used per the flat- rate hour produced. If the tracking of supplies is only based on usage, your “top user” will probably be your top technician who produces more hours. So tracking usage by flat-rate hour produced should eliminate penalizing your top producers.

Either way, the main point is to track usage to appeal to the competitive nature of the technician staff. Usage will drop, making the amount of the credit in the shop-supplies account increase. That means your dealership just made more money.

Want to go a step beyond? Set a monthly budget for each technician that is 60% to 70% of the average shop supplies usage. Any balance remaining in the budget is given as an incentive to each technician to lower usage.

For example, assume shop-supplies usage averages $109 per technician over three months. A budget of 60% of the three-month average shop supplies usage is $65 per technician. At the end of the period, only $53 is actually used by the technician. The $12 difference goes to the technician as an incentive. Both the dealership and technician wins. The dealership saves $44 and the technician gets a spiff.

Some don't like this approach. Then consider this: the amount saved is set up in a pot and the service manager uses the amount in the pot for some type of incentive event.

It could be something as simple as a free lunch for the shop (include the parts department) or a party or a fishing trip for the larger shops.

Another alternative is giving technicians the saved money in the form of “dealership bucks” that are good for buying items at a dealership-sponsored auction of items purchased from local stores.

If you are attending the National Automobile Dealers Assn. convention in San Francisco next month, please attend my workshop, “Performance Pay Plans for Fixed Operations” and introduce yourself. This is my sixth year conducting an NADA workshop.

Lee Harkins, president of ATcon in Birmingham, AL, is a dealership management consultant and industry speaker. He is at 800-692-2719 and [email protected]

Questions or comments about this column? Send us an e-mail at [email protected].

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