Tablets, PDA’s and Laptops

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Over the years we have collected labor to apply to work orders in a myriad of manners. We started from an attendance time card which the mechanics completed at the end of the day telling us what times they worked on which jobs. Then we moved to individual job time cards while still retaining an attendance time card for payroll. Then some of the companies got racy and had only one time card which fed work in process but was data entered to the payroll system. Can you imagine? Then we had one card feed both systems – think of that some efficiencies arriving. Finally technology showed up and we had scanning devices either hand held or bar code scanners to record time. A long road travelled over forty years.

The objective is still the same isn’t it? We need to collect time against a job so that we can update standard job times, record time to create an invoice for the customer and provide an entry into the payroll for the technical so they can be paid.

So now we have laptops and tablets and PDA’s. And each of these devices can be used to collect labor information.

So why not take the leap and get labor entered by the technician and give them a device with which they can place their own parts orders? I have no idea why we can’t get this done. So contact your business system supplier and tell them you want the technician to be able to use a laptop or a tablet, an iPad, Galaxy or any Android device or a Thinkpad Tablet, like I use, any of which can be connected to the internet to have access to the electronic parts catalogues and service documentation. They can get that done for you. Then both you and the technicians will be much further ahead than with what you are using today. The time is now.

The Most Important Part

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The first article I wrote for an Industry publication I called “The Only Part That Matters.” This is of course the part that you don’t have available.

I was referencing the fact that too often we are driven by metrics. Off the shelf availability has to be more than 90% of some such number. That is all well and good – but what about the 10% that you are programming yourself to accept?

Early in my career I got a call in the wee hours on a Sunday morning. It was the Vice President of Parts and Service. There was a Department of Defense station in the Arctic that needed a part for their source of power – a Caterpillar Engine. Of course we didn’t have the part. We found the part in Europe. We sent an employee on a plane to go and get it, bring it back, and then we shipped it to the customer. That gentleman’s name was Rod Boileau and although most of you won’t know Rod he is one of the men that I blame for continuing to be in this Industry some 42 years later. He provided a lesson I have never forgotten. He said “if the part you don’t give me keeps my machine down – you have given me zero.” And this simple example made his point. No part – no power – no power death.

Ever since I have been harping on the fact that no matter what you goal is for off the shelf service you are programming yourself to accept to tolerate a level of shortages. That is why my first rule in the parts business is to find every part every day before you go home. No it is not acceptable to place the part on a backorder at a supplier but you need to know that the part is available and can be shipped that day. That is parts availability. The time is now.

Maintenance

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Over the years more and more people have realized that maintenance on a piece of capital equipment is one of the more critical activities to conduct to reduce the owning and operating costs of that piece of equipment. This is true for your vehicle or washing machine just as much as for your machine.

There was a sudden recognition some time ago that the “customer” didn’t really appreciate how important maintenance was in extending the useful life of that machine. They felt, in many cases, that maintenance was simply dropping fluids and changing filters. As most of you know it is far more than that. Along with this recognition the various suppliers started to make it easy for the customer to maintain their machinery. They sold maintenance agreements and extended warranties offering the customer piece of mind and a reasonable price. But there still remained one serious stumbling block – Service Management.

Yes, in many cases, the Service Managers are in the way. You see they are very busy people. They don’t have enough people in their organization to support the current service workload. This service organization is a subject of one of our webinars next week. Check at www.rjslee.com under the learning tab for more information.

I am struck by the fact that everyone knows how to run a parts department or a service department except of course the people that actually do run the parts departments and service departments. This is one of the major challenges facing management in equipment dealers. How do we get professional management into parts and service when we don’t have sufficient respect for the work that is being done in these departments?

A new discussion on market share

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Al Wiley, an executive of Xpectmor, sent us a comment on our recent Market Share post. He says that “market share is the definitive measure of customer satisfaction.” Of course he is right. The measure of market share, however,  is what causes the dilemma for many of us.

In the equipment market it is reasonably easy to define market share. There are a finite number of transactions and everyone knows what everyone got. For instance, we have five different suppliers in the market with sales last month. Supplier #1 got 4 sales, supplier #2 got 1 sale, supplier #3got 2 sales, supplier #4 got 2 sales and supplier #5 got 1 sale. The market share is a simple matter of arithmetic. Supplier #1 got 40% market share and so on.

With the parts and service business it gets more complicated. The various suppliers into the market don’t know what the other suppliers sold during any particular period. So how can we possibly calculate the market share of any particular supplier? That is why there has not been any real definitive publication for market share.

When I first started in the Industry in the late 1960’s some suppliers used to conduct a personal survey with each and every one of their customers worldwide. Can you imagine the time and cost for such a survey? Well they did them and they published the results within their distribution network. It was not precisely accurate but it was a very good indicator of where you stood as a dealer in parts and service market share.

As more and more machines get GPS equipped and the dealers/distributors, manufacturers and customers become more adept at understanding telematics and their use we have a terrific opportunity. We can calculate what the consumption of parts and service “should” be on a machine.

This is the first problem. The customer doesn’t always follow the recommendations of the manufacturer of the machine for the maintenance intervals nor the maintenance items to be dealt with for a particular service. Similarly when it is obvious that a repair should be made with a “new component” sometimes a repair that I call “bubble gum and band aids” will be performed. You might be wondering why this is important. Well it is due to the fact that all we can do is calculate the “potential” consumption of parts and service for a particular machine in a specific application running a specific number of hours. It is this potential that we have to use to calculate our “market capture” rate. See now we change the word. It is no longer market share it is market capture.

The dealer captures the potential business based on their actual sales of parts and service. Once we have these facts nad have them for a sufficient period of time we can make a clear statement about capture rates are the success and/or failure of the particular strategy that a dealer is following. The time is now.
 

 

 

 

Customer Retention

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In the 1990’s, three professors, Sasser, Hesketh and Schlesinger from Harvard Business School wrote a book called “The Service Profit Chain.” It was for me the definitive book on customer retention.

They posited that in the Industrial Distribution world if you increased customer retention by 5% you would increase the profitability of the business by 45%. That is very impressive.

With that said everyone in America should be trying to increase customer retention. In fact the Japanese taught us that with their – Customers for Life philosophy. Carl Sewell the renowned “automotive dealer” in Dallas, TX wrote a famous book with a Yale co-author called Customers for Life which still holds a lot of sway in the customer service world, and rightfully so.

The trick is it isn’t that easy to increase customer retention. We should be using the traditional tools of an “exit” interview as we do with employees. Talk to customers who have defected from you and find out where they went and what they like about that supplier. That will tell you what you need to do. Don’t ask them what you did wrong they will never tell you. Ask them what they like about doing business with the new supplier and they will gladly tell you that.

One last hint – don’t start asking questions like this unless you intend to start changing things. Better not to raise expectations that you have no intention of meeting. The time is now.

Market Share

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If you had to choose between customer satisfaction and profitability, what would be your choice? I would take customer satisfaction as without satisfied customers the ability to make profit is going to have a short life.

 

How to measure customer satisfaction becomes the challenge. Some people define it as repeat business; others measure the change in sales from one period to another; still others use surveys. What is your choice? How satisfied are your customers? One of my favorite indicators of customer satisfaction is the market capture rate. How much of the parts and service business that is available do you in fact receive on the machines that you sell and service? What is your parts market capture rate? What is your service market capture rate? I will put parts at around 35% – 40% and service in the range of 15% – 25%, which by nearly any measure is not very good. The interesting thing about the parts and service business is that management has been held harmless as there is no precise authoritative measurement by which this is reported. It is an opinion. That means that we don’t have a high standard of market capture rate against which we are measuring the performance of the parts and service departments. That is about to change. With the advent of machine telematics some years ago we can now track the hours of each machine and start to evaluate parts and service consumption rates across machine models and applications. This will be a great advance as we will finally know on which machines we are losing the product support business and on which type of products and services. This will be a tremendous change and opportunity for everyone in the parts and service business. I look forward to his type of challenge, shouldn’t you? The time is now.

 

Lead Times in Inventory Management

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With JIT (Just in Time) supply chains we really have come to a point where customer service is in jeopardy. The problem is our cavalier approach to the lead time component of order points.

The lead time is the total elapsed time between when a part reaches the order point in the warehouse location and on the computer and when the warehouse location and the computer system have been updated with the receipt. This time is broken down into several component parts.

  1. Order Lag Time
  2. Order Review Time
  3. Placing the Order
  4. Supplier Processing Time
  5. Shipping and Transportation Time
  6. Physical Receiving Time
  7. Record Updating Time

Each of these elements has a discrete time consumed in their execution. Yet even with good information on each of these elements we still have a problem with the lead time.

We use ONLY one lead time for each vendor in our business systems. You might be saying to yourself “so what.” Well we can have parts that are regularly available and have a stock replenishment time that is consistently within a week. At the same time we will have parts that are in short supply, for whatever reason, and the replenishment time can be a month or two. With only one lead time per vendor we will either have too much of the readily available parts or too little of the parts that have supply irregularities. There is, however, a simple solution.

Calculate the lead time for each and every part not just for the vendor. This means that you will match the supply chain performance with your performance and can accommodate variations of delivery so that you can supply good availability to your customers. Think about it.

There have been substantial changes in inventory management software and tools yet we have lagged behind with this one simple item. Calculate the lead time for EACH part and not just for each vendor. You will be pleasantly surprised by the results. The time is now…

Service Technicians

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The complaints are still out there- “I can’t find any experienced equipment technicians.” Isn’t it obvious by now that anyone worth anything that has experience is going to be working already? If there is a technician available and they apply for work I am sure that you will give them a very thorough interview and background check.

We need to develop our own technicians. As obvious as that seems to be we continue to be in denial.

Hire willing young men and women (yes women) who have a mechanical aptitude and get them into a development program. Start as we did in the old days with one “help/trainee” for every two technicians. Set up a training program. Work with local technical schools and unions and customers who offer technical training. Establish a “career path” training program. It will take roughly three years to create a market ready technician.

There are wonderful programs at Oklahoma State University in Okmulgee for one which works with dealers and manufacturers to offer specific brand training programs. Caterpillar, John Deere, Toyota and Ditch Witch to name a few work with schools around the country on these programs. Check out your local area to find the schools that you can partner with in this area.

Caring about your employees, providing training and a safety aware work place will go a long way to retaining your employees. Some dealers, and extremely success dealers, have never had a layoff of technical employees. Imagine what that says to the employee.

The time to complain has long since passed – don’t you think we should start developing our own? The time is now…..

Dashboard Management

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In the January issue of the Construction Equipment Digest, the monthly magazine of the Associated Equipment Distributors, my monthly column focused on the use of Dashboards as a management tool. You can see the article at www.rjslee.com under the Articles tab, CED January 2012.

I suppose the promotion of Dashboard management started with Jack Welsh’s book “Straight from the Gut – although where ever it got its push to get into the mainstream of management it really doesn‘t matter other than the fact that it got there.

The old management by walking around style is still with us and useful. That haviong been said the current group of professional managers needs different tools for different times.

What has been your experience with Dashboards?

Can we make a difference

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The transition to team management while still encouraging curiosity is struggling as management doesn’t know how to encourage risk taking without contradicting the work of the team.

The story of the ages is that people will take risks when they have less to lose and be risk averse when they have a lot to lose. How to break through this paradigm will be a challenge.

To lower parts inventories while improving customer availability.

To guarantee completion dates on repairs while embracing employee satisfaction.

To retain customers while payment patterns change.

All of these challenges exist because we have been rather timid over the past years to tackle changes necessary in a meaningful manner. Now is the time.