Posted on November 30, 2023 by Travis Peterson
When I think of Fixed Ops, I think of “slow and steady wins the race.” Sure, sky-high prices for the few and far between new vehicles on the ground are pushing profits up now, but fixed ops has always been the workhorse responsible for nearly 50 percent of a dealership’s gross profits. I believe you can push that percentage even higher with a 4-step process to optimize service operations and modernize service offerings.
You always want to earn more business, even if in today’s market your bays are at capacity. Looking forward, it’s always a good idea to set up your shop for future revenue growth. Lucrative opportunities exist if you work to optimize processes for more money back in your pocket and modernize operations to leverage technological advances and the coming transition to electric vehicles.
The following four strategies will help increase gross profit and position your shop for the future with perpetual benefits. Here’s how.
Optimize warranty labor rate increases.
The warranty process is complex, and the total disruption caused by COVID-19 made it worse. I’d venture to say a lot of dealerships put the submission process on the back-burner last year. Or, the person in charge of the process quit or was laid off and information about the anniversary date went out the door too. It’s time to get back on track.
Submitting for optimal reimbursement rate could add tens of thousands of dollars to your bottom line. However, the process can be tedious and time-intensive. Every OEM has its own set of rigid and complex rules that must be followed. Each state also has specific laws regarding submissions. You’ll likely need to pull several hundred or even thousands of repair orders to make your case.
The complexity is why many dealerships choose to hire a third-party expert to help. Reputable companies won’t charge you until you get paid and will help advocate for the most optimal result.
Invest in electronic document storage.
A big-time saver (and one that will positively affect gross profit through fewer chargebacks) is to invest in web-based software that allows you to scan and store service documents electronically. All documents are instantly available with a quick VIN search so you, or an outside expert, can compile required materials in seconds instead of hours.
Overflowing filing cabinets and stuffed document boxes are a recipe for disaster – especially if your manufacturer signals your shop out for an audit. Just one missing document could cost your dealership an expensive chargeback.
Keep in mind that an electronic storage system is only as good as what you put into it. Even the best storage system can’t compensate for sloppy scanning. The majority of dealerships are struggling to hire right now, but I still think it’s important to hi
re a scan operator. If that’s not possible, the next best choice is to promote someone from within who can dedicate a
couple of hours every day to scanning (with a compensation bump).
The scanner’s role has a direct impact on fixed ops bottom line and dealership health, so it pays to choose a seasoned employee, not a low-level clerical employee.
Enlist a DVA for inbound service calls.
Another technology solution that deserves consideration is a Digital Voice Assistant (DVA) to answer your inbound service calls. The benefits are numerous. First, you’ll achieve 100 percent call connectivity. Studies show that the average shop doesn’t answer 3 out of 10 service calls. Very rarely do those unanswered callers call back. In a crowded service market, it’s easier to call the next shop ranked by Google than play phone tag with you. That revenue is likely gone forever.
Second, a DVA that is deeply integrated with your online scheduling tool and DMS can set service appointments, handle cancellations and re-bookings, and answer routine questions such as hours of operation. This frees up your service advisors to spend more time with customers in the drive, upselling service, and making your shop more money.
Finally, a DVA allows you to reduce staff for bottom-line savings or reallocate resources for proactive growth. Instead of answering ringing phones, staff can focus on areas commonly neglected like outbound calls to your database, first maintenance calls, and manufacturer recalls. This drives revenue today, but also revenue moving forward.
Modernize service offering.
Automakers are launching electric vehicles left and right and forward-thinking dealerships are already getting on board. Roughly 2,300 Ford dealers have volunteered to become EV-certified, which includes service training.
There was a lot of discussion about EVs at NADA this year with the consensus that they are the way of the future. However, setbacks including battery fires, infotainment snafus, and the ongoing chip shortage have delayed wide distribution. That doesn’t mean you shouldn’t get a jump on the competition and start preparing today.
I know there’s a lot of talk in the dealership world about whether service business will suffer once more EVs hit the market, but EVs need tires, brakes, batteries, lights, and steering and drivetrain maintenance. If you’re going to play in the EV sector, now is the time to start thinking about adapting for it. An onsite charging station is an economical place to start.
You can also start training a few, high-level technicians to work on EVs. Most OEMs require intensive tech training. The GMC Hummer EV, for example, requires at least 14 courses before techs are ready to work on the vehicles. Courses include instruction on everything from how to remove a battery to repairing the thermal management system and high-voltage system safety.
Currently, up to 70 percent of aftermarket services of traditional vehicles are handled by independent shops. Don’t cede EVs to them too. Get a jump on preparing for this transition and your shop will become the service center for EVs in your market. Early marketing positioning yourself as a market leader for EV servicing will pay dividends in the future as they continue to grow in popularity.
Your slow and steady fixed ops department is a hero when it comes to gross profits. Maximize its effect even more by optimizing warranty labor rates and modernizing operations with digital documents, the help of a DVA, and embracing the ever-growing EV market. Don’t let your competitor down the street beat you to the punch. Start planning today.