This being the season of good tidings, following is what I call “The Demanding Dozen,” a list of items, which, if looked after properly, will produce success.
1) Machine population. If you don’t know your machine population, you don’t know your business. See the model in AED’s Product Support Opportunities Handbook to determine your market opportunity based on the working machine population.
2) Market segmentation. Understanding that your customer list is a critical asset of your company is one thing, it is another thing altogether to have your customers segmented according to opportunity and relation, as well as needs and wants.
3) Cover 90 percent of the product support sales volume with an assigned person.Have either a product support sales person or an in-store sales person covering all parts and service customers that together represent 90 percent of the parts and service sales volume.
4) Product support customer retention > 90 percent. With 90 percent of the product support sales volume assigned to a specific individual, the expectation is that customer retention will be 100 percent for all of those customers. It is when the customer is not assigned to a sales person that we are vulnerable to customer defection.
5) Parts availability – find every part for every customer the same day they order.This is my No. 1 Rule in the parts business. We must know where the part is located and tell the customer, every day.
6) True parts inventory turnover > 6. We have daily stock orders from most major OEMs and a replenishment cycle that is less than a week. There is no justified reason that we can’t have a true turnover greater than six times. True turnover does not count backorders in the sales number.
7) Parts return on capital employed (ROCE) > 90 percent. The net income percentage of the parts department multiplied by the inventory turnover is the calculation. Don’t forget, all sales have to be at customer retail prices.
8) Flat rate, standard time > 90 percent of all shop work. We must give a fixed price and a completion date for the work – prior to starting the work. We cannot consistently do this without standard times and flat rates.
9) Maintain labor efficiency > 90 percent. This is the performance of the technician and the supervisor. For all of the hours that a technician is available to work we can realize 90 percent of the work hours multiplied by the labor rate in monies collected for the work done.
10) WIP turnover > 52. The service group is subject to the same asset management rules as the parts business. With a turnover of 52 times there is less than one week of labor in WIP at any point in time. That is more than enough time to close and invoice a job.
11) Labor quality < 15 hours of acceptable service failure per technician per year.Many people measure redo or service warranty as a dollar value. One percent of labor sales is normally the standard, and 15 is my translation into maximum acceptable hours.
12) Completion dates met 90 percent+ on all shop jobs. One of the biggest disappointments in my career is that I have not been able to get completion dates viewed as one of the critical performance measures. If it were possible to offer a rebate, a reduction of $250 per half day over the missed completion date, I would do it. If the completion date was offered in that manner the market share in labor would rise dramatically.
And for a true bakers’ dozen:
13) Have 50 percent of the active machine population on a maintenance agreement. If we had 50 percent market share in maintenance, our repair market share would also rise dramatically.
Finally, after more than 18 years and over 200 columns and articles in this magazine, it is time to move aside and let the mantle of Product Support/ Aftermarket Commentator be passed along. In most everything that I do and have done I like to think of John Wooden, the legendary UCLA basketball coach, who said, “Success is having the peace of mind that comes from knowing that you made an effort to be the best you could be.” I thank all of you for your attention over the years and I wish you this same peace of mind. Au revoir. The time is now.
by Ron Slee
About CED Magazine
Construction Equipment Distribution is published by Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada.
With CED, content is king. No fluff, no advertorials – CED just gives AED members what they want to read: business information, industry and association news, plus fresh, original and useful feature articles that they share with their management teams. Our subjects range from rental, product support, sales strategy and customer service to technology, construction markets and legislation – and much more.