If You Track One Metric For Your Service Team, It Should Be This One

Most office imaging owners and senior managers have a difficult time answering this question: is your service team efficient? Most dealers feel their team is competent, and their service technicians go “above and beyond” for the customers, but answering the question about how efficient you are, requires comparing your performance to other dealerships. Looking at your Service Cost Per Page (SCP,) and comparing that to other dealers, is the simplest way to measure efficiency—and if need be, focus on lowering those costs if they are high.

Shoot For the Top 20%, Not the Middle

At BEI Services our clients manage almost 4 million devices and over 850,000 service calls every month. That data gives us clear insight into the best practices of our customers. Our customers have the ability to tap into that data and help you benchmark your performance against similar companies. Benchmarking service can be a pain because there can be so many numbers to track. The simplest number that all executives should be aware of is the average SCP. Take a look at the graphs below.

SCP - Monochrom Devices

 

SCP - Color MFP

 

In simple terms, there is no reason for any dealership to have ongoing SCP costs significantly higher than the average of the top 20%. In the dealership world, your hardware costs and supply costs are predictable—almost fixed. Customers tend to print what they print, and when you average those numbers across thousands of devices, supply costs are similar from dealership to dealership. Why then does the SCP differ so much from dealers? When you compare the top 20% to the bottom 20%, the costs are almost doubled.

Hold Your Service Team Accountable

Far too often we let our personal relationships with longstanding employees replace our need for concrete measurement. You would not allow sales representatives to consistently underperform without acting, so why does the service team get a golden pass here? As an owner, you don’t need to micromanage the department, but a poor SCP number provides evidence that the service team is not using the tools they have from BEI to improve your numbers. Remember, lowering your SCP will flow directly to your bottom line profitability.

What Could Be Causing a High SCP Rate?

  1. A low First Call Success Rate (FCSR)
  2. A High Hold for Parts (HP) Rate
  3. A low percentage of billable hours
  4. A high Parts Cost Per Call
  5. Not doing a “Total” service call

BEI Services not only helps keep track of your performance, it helps provide executives with visibility on their service costs. It helps service teams pinpoint where performance can be improved, and profits maximized for your dealership. It all starts with one number, your SCP. What’s your number? Contact Us today to find out.

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Is your Hold for Parts number above 12%? Brace yourself. That number is costing your dealership.

In a typical month, BEI Services monitors over 800,000 service calls, performed by 14,000+ technicians. One statistic we watch closely is the percentage of calls a service team cannot complete because they don’t have the right part. That’s right, the dreaded Hold For Parts (HP) call status. What strikes us about HP is that almost 30% of dealers have their HP number below 12%. These dealers get an “A” on their report card when it comes to HP. You can never eliminate your HP because it would be impossible to have the exact inventory, all of the time. It’s a balancing act. But getting the right balance like our “A dealers,” can save you between $40,000 and $80,000 for every ten technicians you employ. Have you been asked to cut expenses lately? Read on.

If you are not in that group of A dealers, then it’s easy to quantify just how much your inventory issue is costing in terms of extra service calls per month.

The median dealer in our database has an HP rate of 21%. The difference, however, is not 7%, it’s 50% because the median dealer has to register a call as HP, 50% more often than an A dealer! How can we assign a cost to the difference in HP?

 

Hold for Parts Percentage

Consider:

1. Both dealers have a fully burdened hourly service rate of $60/hour
2. Both dealers average 80 calls/month per service technician

The A dealer will HP 9.6 calls, while the median dealer will HP 16.8 calls per month. So, if we multiply those extra 7.2 calls x $60 per technician that equals $432 per tech. If you have 10 technicians, then that’s $4320 per month or $51,840 annually.

We consider that 21% HP rate the threshold for a failing grade: F. One-quarter of the dealers we collect statistics for have rates that are double the A grade dealer—a whopping 27% HP! That level of performance should be considered unacceptable. At that rate, dealers are spending (at minimum) $80,620 per year, for every 10 technicians. Interestingly, that is also about the annual cost of 1.5 service technicians.

It’s Easy to Reduce Your HP Rate

The two biggest factors that determine your HP rate are in your control, car stock and proper territory management. The quick reaction when owners and service managers find out that their HP rate is high is, “well that wouldn’t work for us, our territory is unique, and we have such a diverse MIF…”

But, it is possible, because the top 30% of dealers do it every month. By leveraging the BEI WorldStats™ database, we can help you build manageable territories by predicting the amount of service the machines in the territory will require. Once you’ve created an acceptable territory, BEI will generate a list of required car stock for each technician. Managing the inventory and territory using this model, will reduce your HP rate and move your dealership toward an A grade.

Let’s face it; keeping your business profitable is getting more and more difficult. Increasing your profits by managing your service team’s territory and inventory better can have a huge impact on your bottom line. The best news is that it’s not an extra cost; it’s included in your BEI subscription.

What’s your HP number? Contact BEI Services today to find out.

Other People’s Money

As a business owner, you’d like to think that employees spend your money as if it were theirs. Especially in the imaging channel where parts, supplies, and field service operations are the main determining factors in your overall profit. “Other people’s money” is more than just a term, it’s the key term to measure your success. Your service organization must spend every dollar as if it’s their money, and not other people’s money. Here’s the bad news: most service technicians today are spending your money like it’s your money, and not theirs. The biggest factor here is inventory. The numbers should scare you.

Every month, BEI customers spend over $40 million on parts and execute over 850,000 service calls. Most managers know that the more often you can turn over inventory, the more efficient they are at managing your money. The problem is not so much the number of turns, it’s the inventory that doesn’t turn. Here’s a quick example: imagine you have a part that has not been used in any service call, nor any device for 18 months. Is it safe to say you will likely never need that part again? Keep in mind, that in our industry, devices are often turning themselves over, as new models are updated every 24 months or so. If you have not used it in a year and a half, it should not be in your inventory; if it’s ever needed, it’s okay to special-order it.

 

 

Here Are Some Numbers That Come Directly From Our BEI WordStats ™ Database

  1. Some dealers have a parts inventory value that is more than 12 times their monthly usage. They turn parts inventory less than once per year. An ideal target should be a parts inventory equal to about one month’s worth of usage.
  2. Once an inventory SKU has been left unused for 18 months, 83% of it WILL NEVER BE USED AGAIN.
  3. $22 MILLION, that is the combined value of inventory across our partner network that is over 18 months old! That number is increasing by $60,000 per month, so the problem is getting worse.

That last number is alarming. If you think of the initial number that we track, which is $40 million in parts per month, the $22 million in inventory that’s over 18 months old means that, at some point in the future, most of that inventory will be written off, and your money, and your profit, will take a direct hit. That’s not other people’s money. That’s your money.

 

What Can You Do About It?

The first step is to get a handle on your number. Service managers do not typically look at inventory as their number, after all, it’s other people’s money. You need managers to think of it like it’s their own money. A good estimate is that for every $100,000 per month you spend on parts, you have about $6,000 in obsolete part inventory. BEI can help immediately establish what your actual number is. From there:

  • Take steps to reduce the inventory. Car stock is a huge driver of inventory. It makes no sense to have parts rattling around in a service tech’s vehicle for six months or more, but it is common. When you monitor almost 4 million machines and 850,000 service calls per month, BEI knows what the right car stock for a service technician is.
  • Sell off excess and unused inventory. What’s remarkable about obsolete inventory is that it is useful to a dealer somewhere in our network. At the same time, you may need inventory that is obsolete to another dealer. We call this the Overstock Parts Network (OPN). While selling off obsolete parts at a low cost sounds tough, it’s way better than an auditor demanding you write it off. On the upside, with the OPN you can also buy the stock you actually do need at a great low cost as well.
  • Be smart about OEM “sales” and rebates. Loading up on OEM parts when they are on sale can be a great way to save money, but it can also be a great way to balloon your obsolete part inventory. Use BEI intelligence to ensure you are stocking up on the right parts.

 

Here’s the biggest issue with expecting employees not to treat your money like other people’s money: they need to be able to see how the current problems are costing money. They also need to know that you have a way to see just how well, or how poorly, they are doing managing your money. No employee is trying to waste money, but that’s not the point, they need visibility so they can make good decisions. They wouldn’t spend their own money without knowing if they were spending it wisely. Without visibility, it’s just other people’s money.

“During diligence to understand the facts emotions can hijack common sense so, beware of those who fight to hold on to yesterday instead of seeking the better way.”        

— R.J. Stasieczko