Revving Up – Increasing Throughput in this Market

Today’s automotive dealerships face unique challenges, one of which is that consumers can find reviews, pictures, and prices of vehicles online. Knowing this, what can you do to foster customer relationships with online and traditional shoppers?

To foster a positive relationship with customers, ensure that the department staff is knowledgeable and friendly. This can create customer loyalty and encourage repeat business. That’s where service throughput comes in.

Service throughput impacts every department in the dealership. Without sufficient throughput you can’t produce prompt customer warranty work, upsell customer-pay hours, provide efficient used recon turnaround times, perform accessory installs, recalls, or PDIs.

“Sales sells the first vehicle,” comments Brett Coker, President of Coker Automotive Consultants, “But, service sells the next three. Limited throughput means limited customer-pay (CP) work, warranty repairs, new PDIs, recalls, and internal reconditioning. Thus, impacting the dealership’s bottom line today and, as importantly, customer retention and vehicle resale rates in the future.”

Reliable Profit Center = Increased Overall Profits

With low inventory still a concern for dealerships across the country, a well-managed fixed-ops department is a key to the dealership’s profits. A well-oiled, fixed-ops machine affords the dealership some flexibility to be less dependent on vehicle sales and can help it to weather economic downturns or inventory shortages.

AutoLeadStar has an effective example of how this works.

“Let’s assume you’re running a very efficient fixed ops department and that 100% of customers that buy cars from your dealership decide to also buy car parts from you and service their cars with you. Your dealership sells 100 units in January and all of your January buyers return in April for their first scheduled service appointment. This would mean that your dealership would see an increase in 100 service orders on top of its existing customer service base. Now let’s assume that the same happens in the following months. Consequently, your dealership would be growing its fixed ops department by 100 parts & service orders each month. In turn, this generates more gross profit for your dealership, which increases your service absorption. Eventually, your dealership will reach 100% service absorption, allowing you to withstand any inventory crisis or economic recession. Your dealership can now survive and thrive regardless of inventory levels.”

In that example, an efficient, fixed-ops department reached 100% service absorption, avoided an inventory shortage, and increased profitability.

Tech Shortages

According to TechForce Foundation, technician demand will outpace supply 5-1. “Although the demand is strong, with 797,530 auto/diesel/collision techs needed between 2021 and 2025, the shortage continues to worsen,” it states in its 2021 Transportation Technician Supply & Demand Report.

“There is no short-term immediate fix for the tech shortage because it takes time to cultivate and train new techs,” said Jennifer Maher, TechForce CEO. “However, we are seeing growing industry support and student engagement with near-term solutions.”

What else can you do to increase productivity?

Carryovers are not a bad thing especially when it comes to productivity. Carryovers allow for techs to begin work immediately in the morning and work until the end of the day. This alone could save 30-minutes of time every day.

A proactive parts department that delivers parts to the techs can also reduce time, increase efficiency, and impact profits.

You can also boost productivity with:

• A shop assistant for the technicians,
• Easy logistics and access to shop supplies and tools, such as having nuts and bolts available in each stall,
• More effective service-advisor write-ups to increase technician proficiency,
• A proactive parts department that has a sense of urgency and support-activity mindset, and
• Staff training, payment plans or incentives, and team-based knowledge sharing among technicians.

“There are huge strategic and paradigm shifts occurring in fixed ops,” Coker adds. “I predict this coming year will be a watershed year and some dealers will have a record year in fixed ops and some will struggle mightily with throughput and lose substantial CP work, while also severely damaging customer retention (vehicle resale rates).”

Be In The Know

For more on throughput and your dealership, listen to Brett’s “Fixed Operations: The Numbers Tell the Story” video.

Also, visit our Dealership M&A Webinar series to hear three industry experts discuss a number of issues and market forces impacting M&A activity in the dealership world.