Is the Preventative Maintenance Business Part of Your Business Plan?

Is the Preventative Maintenance Business Part of Your Business Plan?

Guest writer Bill Pyles writes this week’s blog post on preventative maintenance: is the preventative maintenance business part of your business plan?

I sure hope the answer is a resounding yes! The PM business adopted by OEM equipment dealers goes back to the 1980s and is a win-win for both dealers and contractors. A properly maintained machine, that’s documented, is worth more when the time comes to replace it.

I can still remember the day the subject of our dealer doing in the field PMs was brought to the table. I had a strong objection that contractors would not pay the dealer to do their PMs. PMs were perceived by many as a necessary evil not requiring a higher-level tech from a dealer. By the way, this type of thinking was also applied to undercarriage management; more on this in another blog. 

Not taking the PM program seriously can lead to unplanned downtime and poor machine availability, which could be a perceived reflection of the equipment and the dealer. A machine model with poor availability will more than likely not be considered when replacement time comes. 

PMs were something the contractor would take care of on the weekend or after hours. Unfortunately, too often, due to the demands of the job the machine was on would delay getting a PM completed on time. I have seen engines go 300 to 400 hours past due on a PM service. Unfortunately, the additional wear caused by the contaminated fluids and excessive hours cannot be put back into the engine. And if this trend continues, the engine is certain to fail at an earlier hour meter reading than expected. Times this scenario over the entire fleet and you’ll quickly realize that PMs are critical to your operation and machine availability. This applies to contractor’s and dealer’s rental fleets. 

So how do we make sure your PM program is on track? The first thing you’ll need is a good PM scheduling tool. It will take some time to load all the equipment into a scheduling tool, but it’s time well spent. A good scheduling tool will keep track of the machine hours, create alerts, list the items to be serviced on each PM along with a parts list when a machine is coming due as well as keep maintenance history and oil sample reports in one convenient place. It will also interact with your telematics to keep hours current. A good place to start is to flag the machine when it’s within 40 hours of being due. This should provide ample time to schedule the PM due. I would also flag a machine over 40 hours due as a past-due PM for tracking purposes. Your goal should be 95% or higher for on-time PMs. 

Next, you’ll need a dedicated PM vehicle. If you try to do PMs out of a service truck, hauling buckets of oil, you’ll have issues capturing the drain oils for proper disposal. The size of the truck will depend on the number of machines you’ll be servicing. Your vehicle could be a smaller truck with a lube skid. A lube skid works well in a rental operation with smaller machines, skid steers, small rollers, loader backhoes, etc. 

If you have a medium fleet of small to larger equipment you may want to look at a dedicated PM truck. These trucks can be custom-made to provide you with adequate new fluids as well as waste oil tanks. Oil recovery systems that pick-up waste oil quickly and efficiently and metered oil reels to quickly refill lubricated compartments. Be generous with external lighting around the outside of the truck; required for doing PMs at night. Be sure to add an air compressor to blow out radiators and some air filters. Work with a reputable truck vendor for building a truck that will fit your needs. I’ve worked with a few truck vendors thru the years and the one I could always depend on was Nichols Fleet Equipment in Chattanooga Tennessee. Experience does count! 

So now we have a scheduling tool and for the vehicle to do the PMs we’ll need to add the PM Tech. This person does not need to be your number one technician, nor should this person be right out of technical school. The PM tech needs to understand all the items that make up the various levels of PMs. A 500-hour PM is much more than changing the engine oil, and fuel filters and looking at the air filter, lots more! The tech needs to understand how to properly take an oil sample. I suggest taking all the oil samples at each service. Some suggest taking an oil sample only when the fluid is changed. I do not see much value in taking the first hydraulic oil sample at 5,000 hours. An incorrectly taken oil sample will result in erroneous results. Erroneous results lead to bad decision-making and could result in catastrophic downtime. Taking oil samples at the time of a PM service will create a history of the components of the machine that will show trends, good trends when the oil sample report comes back with no alerts, and bad trends, for example when sodium in the engine is trending upwards. Sodium in engine oil could be an indication of a small coolant leak into the engine. You can schedule the machine down, fix a minor problem and go back to work. Or you can ignore the sodium in the engine and have unplanned downtime, a possible engine failure event that usually happens on an important time-sensitive job. Be sure to have someone on staff that can interpret oil sample reports!

Most equipment OEMs market their brand of fluids. This presents a problem if you have a large mixed fleet. Substituting Cat Drive Train oil for hydraulic oil is not recommended. Mixing different types of hydraulic fluids can cause serious damage to the hydraulic system. Mixing different types of long-life coolants can cause problems. When setting up your PM vehicle be sure to review the correct fluids needed for your fleet. You do not need to use the OEM recommended fluids if the fluids you are using meet the OEM spec. I suggest using quality fluids and fuel to maximize your PM intervals. You will notice most OEM PM intervals are “recommended” intervals. If you have a machine working in a quarry, transfer station, or any other domiciled location, you can extend the PM interval if the oil samples indicate no issues. Remember, the oil does not wear out, rather the additives deplete causing the fluid to not perform as it should. A good oil sampling program keeps your fleet in good operating condition. 

Your PM tech should do a walk-around inspection and a safety inspection during each PM interval. Therefore, the PM tech must be familiar with the machines he or she is servicing. The inspection form can be custom-made and part of your PM scheduler or work order system. The intent is to keep small problems small, document all machine issues and follow up with corrective action. If there is an issue that can wait till the next PM, it should be noted in the scheduling tool and pop up as a reminder at the next PM interval. Pictures are very helpful in documenting machine issues or damage. I recommend the PM tech also take pictures of the filters replaced during the PM service clearly showing the date and hours the new filter was installed. And while we are talking about filters, I do suggest using genuine OEM filters. Experience has shown me that many filters look the same on the outside but are a world different on the inside. Installing an aftermarket filter with the wrong micron rating will allow larger wear particles to pass through damaging critical components. OEM filters are specifically designed for your equipment! 

The PM tech should also look at and document all machine fault codes. Then the codes should be cleared allowing the tech to determine if the fault codes are active or logged. Reacting to an insignificant code could prevent the machine from going down hard tomorrow. It may be a good time to do a forced regeneration to keep your diesel particulate filter operating normally.

Bottomline, be sure to put a person who is knowledgeable of your equipment, fluids and coolants, oil sampling and oil sample interpretation, and a repair before failure attitude in charge of your PM program. Set machine availability goals to measure the effectiveness of your PM program. Set on-time PM goals. Keep electronic records and make them available to a potential buyer of your used machine. This is especially important for a dealer’s rental fleet. It would send the wrong message if a potential buyer of a dealer’s rental equipment asks to see the PM history and oil samples and there are none or hit and miss.

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Entry Level Technician Needed

Entry Level Technician Needed

Guest writer Bill Pyles tackles more staffing shortages (hint: it’s not just teachers and nurses) in today’s blog post, “Entry Level Technician Needed.”

Most segments of the country are enjoying growth in the construction area, which translates to growth among construction equipment dealerships and other companies. A couple of challenges for the equipment dealers are the availability of new equipment and the severe shortage of equipment technicians. 

I can recall this economic cycle back to the early 1990s when most dealers began to realize the tech shortage was real. A heavy equipment technician was not a glamorous job, and more of the younger generation was moving to the new dot com boom. Around this time, major equipment OEMs, Cat, Deere, Komatsu, and other companies began to partner with local colleges to implement technician educational programs, offering a tech certificate or a two-year degree. Even the military changed their recruiting ads showing soldiers, sailors, and Marines staring at computer and radar screens, launching high-tech armament, no longer the recruits crawling through mud pits. 

Technical schools such as Universal Technical Institute, Nashville Auto Diesel College, Lincoln Technical, and others were utilized by equipment dealers looking for entry-level techs to bring on board. 

I’d like to use this opportunity to discuss what’s worked for me in recruiting and retaining entry level-techs. It’s always a great day to have a resume cross your desk presenting a tech with years of experience with the equipment your company represents. Unfortunately, those techs are gainfully employed and do not move around. Today tech recruiting begins at both ends and in the middle of the technician level of experience. Companies that neglect to grow their entry-level techs will likely pay the price over the long term. 

But what is considered entry-level? What is a good hourly wage? What do I, as the hiring manager, need to know or do to successfully hire entry-level technicians? 

I have always felt if you gave me a motivated individual with a strong mechanical aptitude, basic skills, and a willingness to learn, over time, he or she can be developed into one of your go-to technicians. All it takes is dedicated time, training, coaching, and encouragement, all things I bet your company is currently using! Carefully planning and reviewing your entry-level tech process will normally transform a new tech into a loyal, dependable employee. Keep in mind that I have hired numerous techs over the years who left their last dealer due to a lack of training and direction. 

The first bridge to cross with the new entry level-tech is what do you pay them? Salary.com lists entry-tech wages between $20.00 and $27.00 per hour. Of course, this will vary depending on where you do business and if you are a union shop. Base your entry wage on experience and certifications (for example, A/C; Welding). Another financial aid the dealer can offer is the new tech’s cost of technical schooling. Perhaps you can offer a tuition reimbursement amount to help offset the training debt the tech has already accumulated. Of course, other benefits such as medical insurance, paid time off, paid training, tool allowance, the opportunity for advancement, and a good 401K add value to the new tech’s wage structure. Sell the entire package your company has to offer, not just an hourly wage. 

Before agreeing on an hourly wage, be sure to have a copy of your training program to share with the candidate. Basic tech testing should be used to measure the level of experience (and helps structure the new tech’s training path if hired). I would have a copy of the training outline the company has developed (both online and instructor-led) based on the OEM’s and dealer’s training requirements. This outline of required training was usually spread across a three-to-four-year period. Usually starting with basic safety training and an expectation of quickly completing the basics within a given timeframe. At the successful completion of the required training modules and mandatory on-the-job-training, there would be an increase in the hourly wage. 

The first 90 days are critical in bringing the new tech into your process and procedures. I highly recommend the new tech be partnered up with one of your experienced techs who is willing to be a coach and mentor to the new tech. I would appoint one or two coaches/mentors in each shop. These more experienced techs take pride in knowing they are helping to develop another tech. I can remember when I started my career as an entry level-tech. It’s scary realizing you’re surrounded by trained, competent techs, and I’ve just broken off three bolts because the impact was set to install, not remove the bolt. But I had a great coach/mentor, a man named Tom Kennedy. Tom was the lead tech for the shop, and I swore the man was a wizard. No matter how deep I got into a problem, Tom would never lose his temper or chew me out for screwing something up. He’d then show me what I did wrong and instruct me on how to properly make the repair. Yes, I was truly fortunate to have a great mentor early in my career. Without a doubt, it helped shape the rest of my 48-year career. Thanks, Tom! 

Depending on your dealer’s onboarding process, a new tech should not pick up a wrench for at least five or more working days. One of the best suggestions I can offer is to carefully create and constantly review your on boarding process for all employees. During the first days spent onboarding, introduce the new tech to the safety rules and policies, and meet with shop and parts personnel and those he or she will be interacting with. Cover the basics, what your expectations are, break times, lunchtime, writing service reports, etc. Make the new tech feel he is part of the team, not the “New Guy.” Please do not put the new tech on the shop floor and expect immediate performance. You’ll be very disappointed and have a very confused tech. 

Be sure to engage the new tech and ask how things are going, then listen. Sometimes a new set of eyes in your shop will see things you may have been overlooking. Several of my best ideas have come from other people, and new techs are no exception! 

If you’ve done everything correctly in hiring, training, coaching, and mentoring, you’ll see an amazing transformation of the new tech into a confident and contributing technician who may be your next mentor/coach. With a plan and the resources, it’s within your reach.

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Safety First! But, Why?!

Safety First! But, Why?!

Guest writer Bill Pyles tackles OSHA regulations in his guest blog entitled “Safety First! But, Why?!”

Summer is here and this time of year I’d put some notes together for the next team meeting to give a safety update; specifically, how to recognize heat stroke. I cannot say enough about OSHA’s excellent heat index ap. Go to your app store and download OSHA/NIOSH Heat Safety Tool. Do it today, now!!! 

Heat stroke is a killer that does not need to darken your doorway.  As I write this the outside temp in central Florida is 89oF. The heat index is 102oF and into the “danger zone”. Another day in sunny Florida! 

Here are some symptoms of heat stroke.

  • Confused, blurred speech
  • Loss of consciousness
  • Red, hot, dry skin or profuse sweating
  • Very high body temperature
  • Seizures 

 

If you suspect a person has heat stroke, call 911. 

  • Stay with the person until medical help arrives
  • Move the person to a shady, cooler area
  • Remove the person’s outer clothing
  • Cool quickly with cold water or ice bath if possible; wet the skin, please cold, wet towels on the skin, or soak clothing in cool water
  • Fan air around the person
  • Place cold, wet towels or ice on the person’s head, neck, armpits, and groin.

 

Through my 48-year career, the one constant is safety. Let your guard down for a moment and you may get an unpleasant safety reminder. The other constant throughout the last 48 years is the barrage of safety memo’s, fact & figures, testimonies, yellow lines on floors and more. What was missing is the “why”. Too many times a safety inspection will reveal some infractions such as garbage in front of the electrical panel, spray paint left out on work benches, spray containers on tech’s toolboxes not marked or labeled, bench grinder “out of adjustment” or no lid on the shop trash cans. The shop manager will get the safety write up, make the necessary corrections and life (pun intended) goes on. But has the shop manager or the people working in the shop learned from the experience? My guess is no; other than forming opinions that the safety guy’s job is to make everyone else miserable, slow down production and nit-pick. He needs to get a “real” job and leave us alone! 

Let’s look at some common safety infractions and discuss the “why.” 

Please note that some of the items noted may have different or more safety regulations than noted below.

  1. Full oxygen bottles are required to be stored with the bottle caps on and the bottle secured in a standing position.
    1. Why? A full oxygen bottle is charged with approximately 2,200 psi of oxygen. If the bottle should fall over and break off the off-on valve, the bottle becomes a rocket which will be capable of going thru cinder block walls, smashing anything in its way. Google “Oxygen Tank Rocket” and it should make you a believer!
  2. Electrical panels require a clear zone 36 inches to either side and 36 inches to the front of the panel. No clutter or nothing leaning against the electrical panel.
    1. Why? I was working in a contractor’s shop, pulling the steering clutches out of a Cat 977L. The contractor had installed electric overhead hoists in his shop. I had the Cat setting on stands with the tracks and roller frames removed (also doing the undercarriage at the time) and the bucket was raised and supported by a safety bar on the lift cylinder. The stands were at the four corners of the machine. As I was trying to feather one of the clutches out of the case, I noticed it was hung up on the steering clutch flanges and the back of the machine came off the stands. I quickly let go of the hoist button, but the machine kept going up. The up button was stuck! I had no idea where the electrical panel was that supplied the power to the hoist.  One of the customer’s techs working with me quickly ran over to the electrical panel, opened the door, and switched off the breaker just before the Cat was about to fall off the stands. You can only imagine the alternate outcome if there had been something blocking access the electrical panel. Fortunately, the only casualty this time was some soiled underwear!
  3. All secondary containers must be properly labeled. 
    1. Why? We have all seen techs work benched or toolbox will have spray containers on their work bench or toolbox. These secondary (secondary means the spray bottle was filed from another container) spray containers could have glass cleaner for cleaning cabs, solvent for rusted hardware, or plain water and soap mixture for tight seals. If tech sprayed a flammable near a heat source, there could be an explosion and or fire. If a tech was accidentally sprayed in the face, not knowing what the liquid was in the container could delay the proper remediation. 
  4. All flammables must be stored in a flammable safety cabinet.
    1. Why? Most shops also do welding (get those welding shields up) and cutting which create a fair amount of sparks. Most paint cans, PB Blaster cans are very thin metal and most oil containers in one gallon or less containers are plastic. Welding and or grinding sparks can ignite one of the containers mentioned above. And if it’s a pressurized can, you’ll have another bottle rocket to deal with.
  5. Bench grinder is out of adjustment.
    1. Why? I’m not sure why, maybe because this is a tool everyone uses but no one is responsible for. The shop bench grinder is almost always out of adjustment, but everyone keeps on using it. The correct gap of the tool rest should be 1/8 inch from the tool rest to the grinding wheel. Any larger gap and you’ll run the risk of pulling a finger or a tool in between the tool rest and the grinding wheel. 
    2. At one OSHA inspection, I was asked for the proper steps to change a grinding wheel.  Piece of cake I thought then proceeded to go thru the simple process of changing a grinding wheel. I thought I nailed it, but the OSHA person just stood there and looked at me, informing me I’d missed one of the most important steps. The “Ring Test”. What??
    3. Before mounting a grinding wheel, inspect it visually for any cracks or chips. The Occupational Safety and Health Administration (OSHA), which regulates worker safety in commercial and educational facilities, recommends testing the integrity of a grinding wheel by performing a ring test prior to mounting. 
    4. Support the wheel in a horizontal position on your fingertips and tap the wheel using the plastic handle of a screwdriver about 1″ from the edge in each of the wheel’s four quadrants. The sound of an undamaged wheel will give a clear ringing tone. If cracked, there will be a dead sound, and the wheel should not be used. Make sure the wheel is dry and clean before applying this test. After you test one side, turn the wheel over and repeat on the other side.

 

On a side note, I’ve seen the results of a grinding wheel exploding. It can cause serious operator injury. Usually, the wheel explodes due to being cracked or becoming unbalanced. There is no warning. 

I’ve visited hundreds of shops during my career and usually the shop knew I was coming to visit. It did truly bother me that at times, the shop would shut down a day before my visit or a high-level OEM visit, to get the shop presentable. This was an indication to me that safety was more show then go. I’d spend more time with the shop manager to help him understand safety is what ensures we all go home at the end of the shift in just as good of shape as when we came to work. I’d take the shop manager and the techs around the shop for a quick look-see safety inspection. When I’d find a safety violation, I’d point it out, explain what the hazard could be and why a safety rule was in place to prevent the hazard. I wanted them to know the “why.” Equipment, shop tooling, facilities have no concern for your safety. You are responsible for your safety and the safety of those working round you. 

Your family is depending on you!

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Staffing Guidelines

Staffing Guidelines

Guest writer Bill Pyles brings us up to the current situation in his blog piece, “Staffing Guidelines.” After being discharged from the United States Marine Corps, Bill started a lifelong career in heavy equipment dealer product support. Starting as an apprentice technician, Bill worked his way up to the General Service Manager for a multi-state Cat dealer. Bill continued to serve in similar roles as General Manager of Product Support to VP of Service for multistate OEM dealers. Coming up thru the product support ranks gave Bill an invaluable education of customer relations, dealer product support and an understanding of the dealers most valuable resource, the product support team. After 47 years of service, Bill has taken on a new career with Mechanics and Techs LLC, a recruiting company for all Product Support employees as well as Product Support Managers. Bill is living in Florida with his wife Diana and golden retriever, Shelby. Bill & Diana spend their time with their two sons and five grandchildrenBill can be contacted at LinkedIn; www.linkedin.com/in/billpyles or wlpz28@verizon.net

As we come out of the pandemic and possibly slide into a recession, I’m sure there are dealers who need to ramp up staffing or consider a reduction in staff.  Today I’d like to share some ideas that worked for me during the good and bad times. During the good times, I’d get daily emails from stressed out service managers needing more techs, today, now. But something seemed out of place after looking at the facts. Facts do a good job of removing the emotional side of decision making. I’m being told we need techs, now, today, but the revenue recovery was very low, no overtime to speak of and some other locations are looking for work. 

I’ll focus mainly on technicians for this discussion of adding or reducing the workforce. It seems we’ve had tech shortage issues since the early 1990’s. During the dot-com boom, more and more talent ignored the trades, opting for the glamorous work of internet related jobs. You may remember even the U.S. Army started running recruiting ads showing soldiers launching computer-controlled missiles, running high tech equipment, staring knowingly into radar screens. No more dog faces covered in mud crawling in and out of fox holes!  Equipment dealers also had to dispel the myth that the mechanic’s (before they were technicians, notice the upgrade in the title) knuckles dragged the ground when they walked, and anything could be repaired with a sledgehammer and a torch! But dealers got it together, had great tech recruiting plans and business took off!  

Until the last horrible recession hit in 2008-2009 and many dealers were forced to reduce technician headcount. A very strange phenomena happened; after the recession eased up, all the techs that were laid off were nowhere to be found when business did pick back up. They likely went into other trades as tech recruitment became more of a full-time job at the dealership. It was no longer build a shop or hang out the hiring sign and they would come. The rules changed, wages accelerated, sign on bonuses where generously offered, the promise of a free set of basic tools were offered after so many days / months of employment and many other hiring incentives. 

Trying to forecast a technician reduction is like playing the stock market. Move too soon and you will lose good techs who may not come back when business picks up. Move too late, and your bottom line could take months to recover. I admit I erred on the later side as I wanted to do everything in the company’s power not to lose good techs. But the day would come when the difficult management decisions had to be made. Here are some guidelines I think can help.

Before pulling the reduction in staff trigger, I’d expect to see these items as facts. 

  • Revenue recovery to be 80% to 85% and trending upward.
    Overtime averaging at least 10% in the last three-month period.
  • No other locations have techs to transfer over to the location needing techs, now, today.
  • Labor sales per day are trending at 90% of your street labor rate. 
    • This is a technician efficiency cross check. 
    • Gives visibility to reducing labor rates to keep revenue hours up.
  • Operating profit at or above the forecast. 

My goal was to support the decision of adding techs, not just adding more cost if not required. Adding techs can add revenues. But if your shop is inefficient (not meeting the requirements above), adding techs will only add to your cost. No need to add techs if another location is slow. 

Look at the larger picture, not one location.

I created a short form (regarding the points above) for the person requesting the addition headcount. This forced the person making the request to review and know their numbers and or realize it’s maybe an efficiency issue, not a headcount issue.

Hopefully (by the way, hope is still not a strategy) we will not be crushed by another deep recession. But if the time comes, here are some ideas that worked for me to support a reduction in staffing.

  • Recovery rate below 70 and trending downward
  • 0% Overtime in last 3-month period trending downward
  • No other local stores we can take technicians for the short term
    Labor sales per tech per day 60% (what your daily break-even rate is) or lower, trending downward

Downsizing is tough under any conditions. You should be doing everything in your power to keep the techs you have trained and coached on board. Good techs will quickly be picked up by a contractor looking to get a dealer trained and experienced tech at a lesser cost. One possibility is to go to a 32-hour work week. This keeps all your techs working although working one day less a week. This option is worth talking over with all your techs, get their buy in and no one loses their job.

If the downturn is looking like a short term, get your techs caught up on their training. I know you will already have marketing promotions out looking for work. Get your service trucks cleaned up and finally get to all those items in the shop that need repaired. It’s an investment into your dealership or business. Remember it’s your job to keep the shops full. Hopefully the downturn is short and soon your hair will be on fire (again) when the work picks up and you’re back in the tech recruiting arena.

Here are some ideas regarding support staff or as I called it an admin to tech ratio.

Administrative is defined as a Service Manager, Shop Supervisor, Service Admin, Service Writer, any employee charged to the service department as 100% expense/nonrevenue generating.

I suggest a starting ratio of one (service manager or shop foreman) administrative position for the first five technicians. At five techs, one person will be getting stretched to perform all the service department admin functions, i.e., quotes, labor entry, work order maintenance, customer calls, closing work orders.

Once a sixth tech is hired or being recruited, we can consider a second admin person in addition to the SM or shop foreman. Two service admins should be able to manage an additional 4 techs up to a total of 10.

When an 11th tech is required, consider a third service admin. This will cover the admin ratio up to 15 techs.

At face value, this ratio may look a bit on the high side. But I’d disagree, especially if your service administrative employees are doing all the functions required to keep a service department running smoothly and not burning out the service manager or shop supervisor. I’ll not try to list all the daily functions within your service department (but I bet there are many), but I’d suggest getting out a pencil and make a list of administrative activities being performed daily. And don’t forget to add following up after the work has been completed to ensure 100% customer satisfaction, after all, these customers are the ones who can keep your shops working when the slow down comes!

 

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Do You Really Need PRODUCT SUPPORT PSSRs, or CSAs?

Do You Really Need Product Support PSSRs, or CSAs?

Guest writer Bill Pyles shares all the ways we really do need Product Support SRs or CSAs.

Most larger equipment dealerships have a robust PSSR (Product Support Sales & Service Rep), CSR (Customer Support Representative) or CSA (Customer Support Advisor) that has been in the making for years. This group of Product Support men and women are an integral, value-added, sales and profit generating part of the entire dealer organization.

But maybe you’re a smaller dealer and looking to get to the next tier of the Product Support ladder. 

This blog is for you!

The CSA acronym is my personal favorite as I truly believe the words customer support advisor best describes the position. The CSA is the direct link between the dealer and everything Product Support related. A well-trained CSA offers the options that meets the financial and equipment requirements of the customer. Should a failed engine be repaired, rebuilt, or replaced? Is the machine a production machine or a backup? Is the machine scheduled to be sold out of the fleet within the next six months? While the machine is down, are there any other critical areas of the machine that need inspected and repaired before going to failure? Customers get very angry when a leaking final drive went to complete failure, resulting in a machine down situation just after leaving your shop.

If your dealership sells and services tracked type equipment (excavators, dozers and tracked loaders) I know your aware the largest cost of ownership is the undercarriage. The undercarriage is a system into itself. Your CSA should have a complete understanding of the undercarriage system. A simple proper track adjusting discussion with the customer demonstrates a knowledge that will save him dollars and downtime. Getting a customer maximum undercarriage life will save thousands of dollars over the life of the machine. 

You’ll also need a good machine population file. It’s tough to forecast sales not knowing your opportunity. A good machine population file will identify the aging, location, and hours on the equipment. By the way a good population file is beneficial to sales, many machines are removed from the fleet after so years and hours. New sales opportunities!

Typically, the 80/20 rule is the typical CSA customer list. The top 20 customers assigned to a CSA typically take of 80 percent of their time and resources. Dealers will need to develop the unassigned fleet customers and the “middle segment”, customers who have your equipment but do not purchase any parts or services.

You’ll need an annual CSA meeting to discuss trends, sales forecast, changes in the market and to celebrate over and above accomplishments (just picture your last whole goods sales meeting).  Is the GM or dealer principle attending? The GM and or dealer principle must make an appearance to show support and comment on the current business environment and congratulate the high performing CSA’s. A well-developed CSA program will give you much to celebrate!

But who does the CSA report to? The dealer principle? 

I once worked for a regional vice president who upon returning from an executive meeting was convinced, we should terminate the CSA program, all of it, today, now.

This executive meeting was held during one of the severe cyclic downturns in heavy equipment sales. Dealers were struggling to survive and expense control was job one. Elimination of the CSA program would save accelerating expense dollars. His rational was simple, if severely flawed. We have a good product and if a customer experiences a failure, he will simply pick up the phone and call us. And with our new snazzy web site, the customer will simply log on and make arrangements for needed parts and or service. After thinking this over maybe for 60 seconds I countered with the elimination of the whole goods salesmen using the exact same logic; we sell good equipment and if a customer needs a new machine or a long-term rental, he will simply pick up the phone and call us. Fortunately, neither plan was put into action, we survived the downturn and came out stronger on the other end.

The sales manager? Maybe not a good choice as the sales manager has enough on his plate with inventory, inventory aging, salesmen, OEM programs, order windows, financing and fleet deals. A CSA reporting to the sales manager may turn into a delivery driver for a bucket, gathering hours for a trade in or running out docs to be signed.

The parts manager? Maybe not a good idea as most part managers are outstanding at managing their inventory, over the counter fill, stock orders, counter activity but not managing a parts and service sales person.

The service manager? Not here either. Service managers have many balls in the air dealing with shop service, field service, training, warranty, the pothole in the parking lot (a little sarcasm) OEM’s and technicians. Not much time to manage a CSA. 

A CSA without a direct supervisor soon becomes a “floater” or Product Support orphan employee.

A better solution would be a Product Support Sales Manager or a position with a similar title. This person would have 100% accountability for a successful CSA program. He or she would work closely with parts and service management in writing CSA goals that are in alignment with company goals. The Product Support Sales Manager would do the CSA’s bi-annual and annual performance reviews as well administer incentive plans and salary increases, create annual sales forecasts and work closely with the OEM representatives regarding OEM Product Support programs.

A Product Support Sales Manager is the mentor, manager, and coach in developing a CSA. CSA’s must have a career plan with defined goals in sales and service activity. I worked at a dealer who had an outstanding Product Support Sales Manager, super high energy. I truly believed this man could inspire CSA’s to sell snow plows in Miami Florida! 

A CSA MUST participate in technical training for the products the dealer represents as well as management level training in negotiating skills and people skills. A successful CSA will have a basic understanding of oil sampling, why on time PM’s are important and an excellent understanding of repair, rebuild or replace options. These skills development can be better managed by a qualified Product Support Manager who reports directly to the dealer principle.

CSA Vehicle: Car or Pickup Truck.

I’ve had responsibility for CSA’s and have experience with both the CSA company vehicle being a car or truck; pros and cons for both. If you give your CSA a car allowance and he or she uses their personal vehicle, you’ll soon find the car parked and a company truck “borrowed” for the day to run out some rebuild pumps and a cylinder or two. Car allowance or not, the CSA will be reluctant to damage or have spilled oil in the trunk or floor. In my opinion a pickup truck sporting the dealer’s name and logo is your best choice. Graphics today look sharp on the job site and rolling down the highway. And when on site, if there is something that the CSA can help out by running something back to the shop, it will not be a problem. However, you’ll want to avoid your newly minted CSA into becoming a parts runner. I do suggest that when a CSA plans his day, he or she will check with will call to see if there are some parts he can bring out and check the service WIP (Work In Process) to see if the customers he’s calling on today have any equipment in the shop and get the status, the customer will ask, be prepared!

CSA Salary & Expenses

CSA salary and expenses are usually split 50/50 between the parts and service departments. I’ve heard arguments that a CSA will sell more parts than service and parts should pay more of the percentage. Most CSA programs are salary and commission based. Another responsibility of the Product Support Sales Manager.

But keep in mind, a dealer’s best margin comes from labor sales. It’s the responsibility of the Product Support Sales Manager to steer the CSA into higher labor sales. If a customer needs a reman engine and the CSA provides a quote for the reman engine, the labor to do the remove and install must be included. I think Michael Jordan once said he missed every shot he did not take. The same applies here; don’t quote the labor and you surely will not get it. Your competitors may be quoting the same reman engine AND the labor. The customer likes the turnkey repair and asks your competitor when they can start. Always provide a professional estimate/quote and follow up with the customer. Add value and close the deal!

Customer Support ADVISOR

When I was a newly minted Product Support Sales Manager, I thoroughly enjoyed customer visits and scheduled customer meetings. I’d wait for an opportunity to ask the customer if a recent issue, wrong parts, late service call, etc. he brought up was discussed with his CSA (I did not use the CSA’s name). If the customer replied “oh you mean the guy who measures our tracks” then we’ve failed to make the ADVISOR relationship with the customer. A good gap we need to close. CSA’s need to listen when the customer talks and suggest solutions to equipment problems. I know we’re providing value when the customer asks the CSA “what do you think?” When the customer says those words, the rest is up to you to deliver the outstanding Product Support that makes you the “go-to” dealer!

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Discounting

Discounting

Today, we are proud to introduce our new guest writer, Bill Pyles. His blog today is on the topic of discounting. After separating from the United States Marine Corps, Bill started a lifelong career in heavy equipment dealer product support. Starting as an apprentice technician, Bill worked his way up to the General Service Manager for a multi-state Cat dealer. Bill continued to serve in similar roles as General Manager of Product Support to VP of Service for multistate OEM dealers. Coming up thru the product support ranks gave Bill an invaluable education of customer relations, dealer product support and an understanding of the dealers most valuable resource, the product support team. 

After 47 years of service, Bill has retired, living in Florida with his wife Diana and golden retriever, Shelby. Bill & Diana spend their time with their two sons and five grandchildren.

Bill can be contacted at LinkedIn; www.linkedin.com/in/billpyles or wlp69ss@gmail.com

Discounting

Don’t Sell Yourself Short.

At one time during my career, I worked for a dealer with a very large and diverse rental fleet. The OEM we represented did not provide a full construction and paving line needed to support a large rental fleet, so we purchased new and used equipment from other dealers.

Now after being on the dealer side for many years, my role was now the customer with other equipment dealers and I thought I’d ask for the one thing many customers ask for, the dreaded, deadly discount.

During my career I’ve worked with a few very large OEM dealers who had customers on the international level. They purchased the largest sized equipment on the market. I had personal relationships with many professional purchasing agents who know little about the equipment but knew every trick in the book to secure discounts.

My involvement at the time was service (shop, field, rebuild) related and these large customers ran hundreds of thousands of dollars through our service departments. Back in the 70’s and 80’s many dealers were not using data to analyze customers buying, renting, parts purchasing for large, if any customers. When the data did become available, and available to all product support and sales management, it became painfully apparent the dealer, while moving millions of dollars through the dealership, overall profitability was minimal. Why? Each department, not wanting to upset the large customer trotted down the discount road. Service was busy discounting labor; parts was in a hurry to discount while the sales department was taking the skinniest deals possible. These larger customers consumed a lot of dealer time and dealer resources. Regular meetings to discuss equipment and or product support issues. Demanded a very high parts availability percentage, major components in inventory on hold for their use only, an on-site field tech within 4 hours of the machine down call, guaranteed machine availability with consequences, and generous dealer policy dollars when the warranty expired (but did not purchase the extended warranty).

Were they bad customers? Absolutely not. They were very organized, knew their costs and had highly trained and professional managers, especially the purchasing managers. They in fact were holding all the cards when it came to dealing with most equipment dealers.

Dealers were discounting in all areas of dealer support. While the revenues of the financials were outstanding, the margins and profitability were poor due to unmanaged discounting. But one lesson quickly learned, no matter the size of the customer account, discounting has the same negative impact.

Let’s look at what just a 10% discount in labor (the same concept works for parts) does to your profitability.

The known variables are your:

  • Current labor rate (sell)
  • The cost of the labor
  • The resulting gross margin (labor rate minus cost)
  • Your expenses, many are fixed
  • Your EBIT (Earnings Before Interest and Taxes)

You control the labor rate and the potential to discount it.

Your cost for the labor is the tech’s wage and I doubt if you’ll get the tech to agree to discount his wage! Subtract the cost from the sell and you have your gross margin and remember, labor sale dollars do not pay your costs and expenses, gross margin dollars do that!

Consider your expenses that the margin dollars must cover, uniforms, training, utilities, tooling, depreciation, rework, policy, vehicle maintenance, and many others. Several of these expenses remain fixed month after month and must be paid. Yes, training is a variable expense but I’m thinking you will not want to cut your training program to support discounts.

Knowing all the above let’s look at the discount impact.

 

Labor Rate at List 10% Discount   15% Discount
Labor Rate $150.00 Labor Rate $135.00   Labor Rate $127.50
Cost $30.00   Cost $30.00   Cost $30.00
Margin $120.00 80.0% Margin $105.00 77.8%   Margin $97.50 76.5%
Expenses $72.00 48.0% Expenses $72.00 53.3%   Expenses $72.00 56.5%
EBIT $48.00 32.0%   EBIT $33.00 24.4%   EBIT $25.50 20.0%
  EBIT Reduced 7.6%   EBIT Reduced 12.0%
EBIT Percent Reduced 23.6%   EBIT Percent Reduced 37.5%

 

A simple, everyday give away of one hour of labor at 10% reduces your margin by $15 to $105 or 77.8%, your expense dollars remain the same at $72 but now that $72 represents 53.3% of total sales and dropping your EBIT dollars to $33 or 24.4% effectively reducing profitability by 7.6% or a total of 23.6%. Ten percent off the top will cost you over 20% in your profitability.  And it only gets worse from there. You can run these numbers for one hour of labor, ten hours of labor or 100 hours of labor, the dollars will change but the percentages will remain the same. And now you must make it up somewhere else; do not dig the discount hole. I realize this is easier said than done.

Remember my story above working for a dealer with a large rental fleet of other dealers’ equipment? Whenever there was a repair on a piece of equipment, we did not have the tooling or training on, I’d send to the local dealer. I sent the machine to the local dealer and not a shade tree outfit. Why? I knew the shade tree outfit had lesser labor rates and would figure it out eventually, but the dealer had trained techs, proper tooling and OEM technical support if needed. I knew I’d get a good repair, faster turn around time and most importantly, a product support warranty I could count on. I’d call ahead to let the service manager know the machine was coming in, a description of the issue and a request for a written estimate as soon as possible. A day or so later the service manager or service writer would call and send over the estimate.

The estimate could have been well below what I was expecting, for example all the machine needed was a sensor and not the entire harness as our techs had determined. But no matter how high or low the estimate was I always said the same thing (I mixed up the words a bit not to be too predictable) YOUR KILLING ME!!  And almost immediately I would be offered a revision of the quote with some level of a discount. My expectations were the estimate I would be getting would be thought out, based on OEM time guides, the right amount of labor included along with any additional shop costs (consumables). Rarely did the person calling me try to explain the costs and justify the estimate. When a service manager or service writer immediately drops to a discount it may tell the customer that he or she just shot from the hip, or perhaps your tried to fat finger the estimate.

You are providing excellent product support to your customers. You pay dearly for OEM training. Your shop has the correct and very expensive tooling. You have the machine history and know where the weak issues are. My point is your customer knows this and therefore he’s calling you and not Sunstroke Tractor (a reference for some of the gray beards out there). He knows that Sunstroke will eventually look at his machine, have the wash rack guy throw parts at it until something works. Who knows if the repair is correct and will last, but that’s why Sunstroke is much less expensive then you the OEM dealer. My sincere apologies if there is a Sunstroke dealer; I’m sure this is not your Sunstroke dealer being referenced.

Promote your dealership, invite your customer into your shop and show him around. Be proud of your techs and the work they produce.

Is all discounting an absolute evil? You can show a discount on certain skill levels. For example, perhaps you have a lower undercarriage repair rate, but I’d think an entry or lower level (not fully trained) tech would be skilled in undercarriage R&I and therefore make less in wages as compared to a senior tech. Put together a killer PM program; again, lesser cost could relate to a lesser sell rate. Some dealers will reduce a rental fee if the machine is in the shop. Some dealers offer a discount on the invoice if paid within a certain number of days (do you know if your dealer does?)

Do not blame the customer for asking for a discount, it’s almost second nature. He is asking for the best price from the best dealer to get his machine back in service. Do not let him down and you’ll stop being asked for a discount.

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