Breaking Down The Innovation Barrier In Fixed Operations

Profitability within parts and service is clear. But why is it still relatively ignored?

If fingers point to the top, the lack of focus on fixed operations is a burden shared between both dealer/principals and manufacturers. The amount of effort directed at parts and service from either party is underwhelming compared to that of new vehicle sales.

Gary Simmons provides consulting services for managers in fixed ops. He says about 93 percent of dealer/principals come through the sales department. The statistic is similar for general managers.

This lack of front-line experience from the very top often results in parts and service kept at an arms-length from the dealer/principal and GM. Leaders within parts and service have similarly skewed understanding of the dealership operations as they are often promoted from their respective department. In turn, there are typically deficiencies in formal management education, sophisticated target marketing, and business model innovation.

Google “silo effect.” Lack of breadth in expertise within leaders is not exclusive to automotive retail. Countless businesses are exploring how to break down communication barriers that make individual departments less advanced and less efficient than their counterparts.

As we become critical of the manufacturer’s role, the lack of focus on fixed ops is obvious when comparing exuberant ploys to drive new car sales to the seemingly afterthought efforts in inefficient and restrictive co-op marketing programs.

Without manufacturer assistance, dealers are rightfully apprehensive about the costs associated with innovating service. Quick service facilities are just one example of the high-risk, potentially high-reward of dealer-driven innovation.

At the 2013 DrivingSales Executive Summit, DrivingSales founder & CEO Jared Hamilton urged dealers to realize the upcoming threats to fixed ops including increased service intervals and an aging fleet (decreased service retention).

According to Simmons, the industry average in customer retention (new car buyers that become service customers) is typically between 22 percent and 25 percent. The apparent opportunity has encouraged some manufactures to innovate in forms of prepaid factory maintenance programs and adjusting CSI to customer retention.

No matter how you look at it, there is certainly room for improvement within parts and service. In order to get the ball rolling, dealer/principals and general managers need to:

1. Commit to understanding fixed operations as a profit center.No more keeping fixed-ops at an arms-length. It’s time to roll up your sleeves and gain a deep understanding of your highest-margin department and the employees that drive it.
2. (Re) structure your team and facility for the business model and value proposition.Customer experience isn’t a buzzword reserved for the sales process. Does your current service model serve your customer’s needs? Where are the pain points for your customer: convenience, pricing, lack of product/offerings? Adjust your model and value proposition accordingly.
3. Provide appropriate training.“The service manager has the most difficult inventory to manage with the least amount of training in managing inventory turn,” Simmons shared.Without top-level involvement, it is unfair to expect a typical service manager to assess new technologies, originate marketing strategies, effectively manage teams, or innovate the department business model.

   Beyond management, does the department have the process training they need and are they able to accurately communicate the value proposition?

As we dive deeper into transforming the customer experience in automotive retail, fixed operations will become an obvious link in creating a virtuous cycle. Driving business model change takes accountability and discipline. For those who are up for the challenge, the rewards will pay over and over again.