THE VALUE OF TIME NO BETTER INVESTMENT FOR YOUR SERVICE DEPARTMENT BY JIM LEMAN. $300,000 and upward of $300,000 for Parts inventory.

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2 FEATURE JANUARY / FEBRUARY 2017 FIXED OPS MAGAZINE THE VALUE OF TIME NO BETTER INVESTMENT FOR YOUR SERVICE DEPARTMENT BY JIM LEMAN Modern digital and mobile equipment and tools make today s Service Department more efficient and productive and as revenue-generating investments, they get the attention of most Fixed Operations Directors. After all, margin compression in Variable Operations (and, to a measure, in Fixed Operations) continues to pressure Service Managers to generate more billable time and Parts dollars every day. If the addition of a $40,000 Service lane drive-on alignment system helps sell related services, the investment brings new revenue into the shop. Service Department investments are evaluated by Fixed Operations directors and their GMs on a few basic parameters: Is the new equipment to replace broken equipment? Does shop workload (and throughput) warrant additional equipment? Will it make the dealership more money? Some experts say the times make it necessary for a more sophisticated analysis of shop investments. To set up a typical 10-bay Service Department with lifts, an alignment rack, special tools and miscellaneous equipment could cost the dealer north of Service Departments generate a lot of paper and paperwork repair orders, inspection reports, Service bulletins, warranty claims and other documents. $300,000 and upward of $300,000 for Parts inventory. Gene White, industrial engineer and CEO of Gene White Management, a Fixed Operations consulting firm, says dealers equipment purchase evaluations are often too narrow. Any returnon-investment (ROI) analysis, he says, must also factor in ratios of flag hours to shop hours and Service bay or stall utilization rates to understand best how investments, whether equipment or labor, might benefit the business. Shop equipment investments deliver local solutions. They help Technicians fix things and although they generate revenue for the shop, their reach and value doesn t extend to F&I or human resources, for instance. IndustryWeek, making a similar argument, has noted that the effect of 70

3 localized investments (such as shop equipment) is severely limited. Beyond core sets of essential equipment and software tools, such as automated Service scheduling or Service marketing tools, how much incremental revenue does each new investment in a lift, tire changer, alignment rack or car wash generate? To White s point, the time savings that new equipment can deliver is valuable only when staff and equipment already run at 100 percent efficiency. That time, notes Fixed Operations consultant Ed Kovalchick, is the only inventory that Service has to sell. Technician time performing non-revenue-producing activities is lost time which can t be billed, he said. That s a powerful point for many dealers to remember and why different thinking about ways to push more value out of dealership operations is increasingly prudent. That said, forward-thinking dealers are increasingly focusing on paperless Service workflow technologies as a different kind of shop productivity investment. They claim that investment in paperless repair order technology removes waste, downtime, labor inefficiency, clutter and other costs from Service and other key dealership departments. The ROI on this nontraditional Service equipment investment is substantial, they say. A Different Investment A research study by an independent automotive consulting firm found that by utilizing paperless workflow technology, a single Service Technician will save 50 minutes per day by being freed from having to handle, file and retrieve paper documents. Here s the math: 50 minutes per day multiplied by 15 techs equals 12.5 hours of found revenue opportunity each day and 250 recovered hours a month. At a $100-per-hour labor rate, the savings equals $25,000 per month. This monthly savings equals $300,000 per year in new gross labor revenue. Using a very conservative $1 in Parts for every dollar of Labor sold means a total increase in gross revenue of $600,000. Given a $30,000 to $80,000 investment for this technology (one rooftop or multiple), paperless workflow technology can pay for itself in months an ROI similar to that of traditional Service revenue-producing equipment. Center BMW of Sherman Oaks, Calif., is a technology-driven dealership focused on business improvement. TRANSPORTING TIRES THE EASY WAY Introducing The safe, ergonomic and more efficient method for handling and transporting wheels and tires. The Tire Taxi will hold up to five tire and wheel assemblies or eight tires. The Tire Taxi TM is specifically designed to make moving tires throughout the service bays simple, fast, and safe. With the Tire Taxi you can: Increase Technician Productivity Increase Shop Efficiency Decrease Injuries Promote Safety No. JDI-TT1 No. JDI-TT1-EX The Tire Taxi EX is an extended version of the original Tire Taxi. To find out how Tire Taxi can improve your bottom line, go to or call toll free at

4 As part of this initiative, it installed a digital paperless workflow system a few years ago. Now that our Technicians are used to this paperless repair order system, there s no way a Technician would ever go back to paper again, Service Director Sean Clements says. By going paperless, the dealership reports it has: Reduced paper and ink/toner use by 70 percent. Increased customer turn by 10 minutes per car. Improved how quickly and thoroughly the dealership can comply with OEM audit requests to streamline the inspection process. Service Departments generate a lot of paper and paperwork, repair orders, inspection reports, Service bulletins, warranty claims and other documents. Because of all this paper, which by law must be retained for a specified amount of time, dealership backrooms and lofts and off-site storage facilities are cluttered with it. Once it can be destroyed, shredding simply adds to paper s inefficiency, errors and waste, making recordkeeping and retrieval even more costly. Consultant Mike Volkman of Service Department Solutions and others say paper-based service processes create opportunities for problems to arise: Paper repair orders, like any document a human writes on, can suffer from legibility challenges. Technicians are not alone in generating unreadable notes and scribbles. Bad handwriting can be costly. Repair order files (and deal jackets) tend to be shoved off to a desk or file room, to be filed later. When, or if, someone gets around to the actual filing, you risk the possibility of documents being shuffled together and getting clipped to the wrong RO and then incorrectly filed. By ending the waves of paperwork that flood service department operations, paperless workflow technology may be one of the automotive retailing industry s best-kept secrets. Lost, misfiled and missing paper documents slow warranty claims and frustrate transaction resolution. Document retention and storage expense risk. This technology is a must-have for dealerships that want to streamline the flow and accessibility of information throughout their organizations, boost productivity and reduce operating costs, notes Mark Sinanian, Senior Director of Marketing at Canon Solutions America. The company markets a digital paperless workflow system for automotive Service Departments. Paperless Service technology also makes F&I and human resources less paper-dependent, moving those critical documents, rich with customers financial information, from the danger of being left in public view to secure, out-ofsight digital files. As easily as digital recordkeeping makes it for the Service Manager or Service Advisor to retrieve a customer s Service records, it extends that convenience to other dealership departments as well. Paperless workflow technology has been one of the automotive retailing industry s best-kept secrets, Sinanian says. Cloud-based paperless workflow, having been tested in dealerships now for several years, is getting Fixed Operations managers and their superiors speaking a language that both understand and appreciate. One such dealership group is Fields Auto Group. Its northern Illinois stores Fields Volvo of Northfield, Land Rover Northfield and BMW Northfield share paperless workflow benefits through the cloud. The technology is also now installed in 20 of the group s Florida dealerships, notes Brian Cullinan, Group Fixed Operations Director. Because Technicians are no longer wasting time walking to printers, fumbling to find toner or paper and handling paperwork, they re now productive for those 30 minutes, Cullinan notes. Here s his math: 20 Techs times 30 minutes per day equals 10 additional hours of productivity per day: At his $150/hour labor rate, that equals $1,500 labor gain per day. Using $1 to $1 Labor-to-Parts standard ratio, Parts revenue equals $1,500 per day. 72

5 JANUARY / FEBRUARY 2017 FIXED OPS MAGAZINE Total daily Service Department revenue gain equals $3,000 a day. (To calculate your potential ROI on such investment, try Canon s ROI calculator: PAPERLESS WORKFLOW However, as consultant White points out, when Service Advisors use mobile tools to interact with customers, dealers need to be sure that Advisors don t lose personal eye contact and interest in the customer as they input data into their devices. After all even the most productive shop equipment is worth less when retention takes a hit. Push Back Margin Compression TECHNOLOGY SUCH Paperless workflow technology such as this plugs unrecognized losses that are sapping many dealerships Service revenue potential. AS THIS PLUGS UNRECOGNIZED LOSSES THAT ARE SAPPING MANY DEALERSHIPS SERVICE REVENUE POTENTIAL. Digital technology brings tremendous efficiencies and conveniences to Service operations and detailed recordkeeping. This point was noted in a recent Automotive News report by James B. Treece, How Dealers Can Plug the Money Drain. He asked, Where is your dealership wasting money? The typical dealership is drowning in paper due to laws that require stores to save the documentation. For many dealers, it s out of sight, out of mind. No it s out of sight, out of pocket. Dealers that have converted their Service Operations to paperless Service Department workflow technology are not looking back. How big of a deal is this? asks Joe Cotteleer, General Manager at Fields Volvo, Northfield, Ill. Any time you can save time that enables you to service one or two additional cars a day or save a Technician 15 minutes per repair from fumbling with paperwork and not producing revenue that s a big deal. Jim Leman has been writing about automotive retail operations since 1992 and is retained as a media consultant for Canon Solutions America and other companies. Jeep SUBARU 73