IAC Blog & Articles

Fixed ops, the granular details

Posted On: August 16, 2019

Over the years, I’ve encountered many general management executives at dealerships that are astute, smart and focused. The trouble is, l rarely see this focus aimed at fixed operations. 


Of course there are multiple facets to running a dealership, and as most general managers come from a sales background, it’s not surprising parts and service can seem daunting and as a result, pushed to the background.  


Yet when car sales slow, fixed operations becomes critical to the dealer’s survival and therefore warrants attention. Whether it’s the design of a new building, planning of processes or fine-tuning service department operations, the detail is what counts. 


Those of you who remember the early 1990s will remember consumer confidence took a long time to recover after the 1993 recession. In fact, new car sales didn’t recover until 1997. 

It was during this time that investors turned to their fixed operations departments to “hold the fort” so to speak.   


Fast forward to the crash of 2008, and it only took two years for many dealers to come back to pre-crash volumes. Clearly, people didn’t suddenly get flush with money and the consumer confidence to buy a car outright. 


The answer is leasing, and more specifically, lease terms. In 2015, the average lease term was 74 months, up from 54 months in 2010. In 2018, it was a staggering 84 months for the average new lease on a vehicle. 


Why the history lesson? What does this have to do with fixed ops? 


For the repair side of the business, the rate at which new cars are coming into the workshop is, or will in the future, start to decline as new car sales cool off. In the first four months of 2019, the car sales are down 4.9% overall in Canada. 


This will, of course, have an impact on the rest of the business as the Vehicles In Operation (VIO) move from in-warranty to out-of-warranty, and customers continue to find alternatives to dealer servicing. Need proof? Just look at the number of customers that stop seeing you after their warranty period ends. 


This issue needs to be tackled in two ways: an automotive industry culture shift, and a more efficient process. Let’s delve into process first. 


Some quick math: let’s assume your door rate is $150 per hour and you have 10 productive bays. Each bay has four repair orders per day each on average, and work for 46 weeks in the year. If you do nothing else than save one minute and 17 seconds per repair order (this represents a 1 per cent increase in efficiency), you will net a further $27,600 per year. 


This profit comes without working any faster, not charging any more, but by simply working smarter and eliminating waste in your processes.  


Saving time come from first examining your current processes and altering them to suit your business and your facility. This requires a critical eye as well as an intimate knowledge of dealer operations. While reviewing and assessing your processes is arduous, this time invested in having your processes enhanced will stand your facility in good stead for profitability. 


Quite often you as the manager or business owner are so close to the “eye of the storm” that you’re unable to see the process changes that need to be made. After all, if it isn’t broken don’t fix it right? Wrong! Even if your dealer has an operations manual, how often do you audit your processes and address the need for change? 


The culture issue is ingrained in the automotive industry. We have somewhat of a mass exodus from the main dealer after the warranty period expires and this comes down to two factors: trust and perceived value.  


When it comes to trust (or lack thereof), I believe this stems from the belief that all vehicle issues need to be resolved at every visit. There is a notion that the vehicle must be re-PDI’d every time it comes into the shop, leading to expensive repair bills.  


When I was a technician, I was taught to resolve every issue to cover my butt, so to speak. Even in school or manufacturer training the notion of keeping the car going but giving sound advice is not taught, so this negative perception isn’t surprising. 


I’ve had customers tell me they were advised that unless they replace their brakes they will likely fail and that people could be hurt. Sure a perfect machine is a nice to have, but in the mind of the customer these are often seen as scare tactics and bullying. It’s an extreme example but unfortunately a common one. 


For most service appointments customers often say, “It was running just fine when it came in and now it’s still running just fine. The only difference is that I’m out $2,000!”   


A vehicle is a machine that will deteriorate over time, and though we emphasize the term client or guest we often fail to treat them as such. This is where we get to the perceived value piece of the puzzle. 


Advice is often seen a sales pitch to ensure the cost is maximized. There is rarely advice on what should be held off until next time. We even call it declined or deferred work rather than advisories or future work that builds customer trust.  

Ask yourself: how many of your invoices include advice that informs the customer that tires, brakes or something else will be due next time they come in for service? 


What is the average age of the vehicle coming into your dealer? How many are out of warranty? We need to look at these metrics moving forward as part of the bigger picture. 


I welcome comments and discussion on these topics and if these, or other dealer topics, are of interest please drop us a line at IAC Ltd. at greg@intautoconsulting.com


It’s by improving profitability through operational excellence, and building customer trust that dealers are going to thrive in the coming years. Please email us to organize a free business coaching call.