This series of articles addresses common situations that can cause a dealership to lose money (money leaks, fraud situations, and untapped sales opportunities), and the strategies you can implement to address them.
In this article we will analyze some of the most common situations through which a dealership can lose money in the Service Department.
We tend to think that money leaks and fraud situations are focused in the Finance and Administration Department due to the inherent movement of money, but working with dealers over the past year we have detected that many money leaks occur in the Parts and Service areas. Here are some of the most common cases:
Open repair orders
A repair order can be open due to valid reasons: pending jobs, pending parts, acceptable delays… However, an open repair order can also be a possible money leak, intentional or not.
According to our analysis, over the span of a year, an average dealer has 100 open repair orders with unacceptable reasons.
In some cases, repair orders were left open unintentionally; in other cases, they can be a sign of possible fraud.
- Management should periodically audit the repair orders that remain open for an abnormal period of time.
- This task can be simplified if the dealer’s DMS has automatic reports that identify open repair orders.
Parts transfers between stores
A lack of control of parts that are in transit can be used by an employee to obtain benefits at the expense of the dealership. One example is the delivery of parts from one warehouse to another, that remain in transit indefinitely; the other store never receives the delivery and the parts are “lost” on the way.
This can also occur unintentionally, simply because of a failure in the processes or an operational mistakes. The damage is the same.
- Control all parts transfers between warehouses by using DMS reports.
- Control that each outgoing parts voucher has a corresponding incoming voucher in another warehouse.
Lack or excess of parts inventory
The Parts Department is at risk of suffering two critical situations. Both signify losses for the dealer:
- Lack of inventory: This causes lost sales as well as dissatisfied (and potential loss of) customers.
- Excess inventory: Many parts remain unsold, become obsolete, and must be scrapped.
- Identify current dead parts inventory and adopt strategies to reduce it: promote them, offer them to customers who have purchased them in the past, transfer them to a warehouse with higher possibilities of selling them. This will allow you to recover at least part of your investment and free up warehouse space.
- Establish a purchase policy based on statistics and analysis of parts transactions, so as to make intelligent purchases.
- Avoid purchasing a part that may be in another warehouse.
Unmade service calls
One of the main trends we observed during our participation in NADA 2016 (the most important convention for vehicle dealers in the world) is the need to maintain a commercial relationship with each customer throughout their vehicle’s lifecycle.
The most successful dealers take advantage of the full potential of jobs and parts that can be sold to each customer, while increasing customer loyalty.
Many dealers don’t know how to carry out this kind of strategy, known as “Service Marketing”. They don’t call their customers, who many times obtain their maintenance services from another dealer or an independent workshop. As a consequence, not only are dealers missing the opportunity to sell services, but their customers start building a commercial relationship with another dealer.
- It would be ideal if the dealer’s DMS includes service marketing tools to automatize contacts with customers at the right moment, e.g. to remind them of upcoming maintenance services, to offer seasonal services, etc.
In the absence of these tools, the dealer should analyze the DMS reports that allow them to detect all unmade calls in order to start making them. It is essential that the dealer has a policy that monitors calls so as to avoid delays which are enough reason to lose a sale.
The Service Manager that adopts these strategies to control what happens in the workshop on a daily basis will reduce the possibility of their department losing money.
With continuous auditing and continuous monitoring tools, such as Autologica Awake, you won’t have to worry about being alert 100% of the time, as the system can automatically monitor transactions to detect possible money leaks and fraud situations.
Contact us if you are interested in learning about Autologica Awake, a tool for continuous auditing and continuous monitoring.