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Anthony Greenhalgh

Anthony Greenhalgh Director of Marketing & Sales Operations

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Fostering Quick Decisions between Fixed and Variable

By Keith Brice

The time value of money states that a dollar today is more valuable than a dollar tomorrow. Fixed Ops managers live in the present. Their focus and sense of urgency are on the current month and, because a portion of their monthly income comes from the gross or net they generate, they want to close as many repair orders as possible.

More hours are turned, and more repair orders are closed when repair decisions are made while the car is racked.

Approval time determines whether the work your team is performing flows smoothly forward or creates snags and delays. Approval time risk can create workflow bottlenecks in a service department, especially where no clearly defined workflow processes are in place.

We see similar delays in the manual reconditioning function, where techs typically submit the inspection and estimate and then remove the vehicle from its stall to wait for the repair approval. They get started on another car and, too often, the cycle repeats.

What works better? Using work items in the automated reconditioning software for estimate approval. Depending on the system, this keeps everything in ONE central record — notes, vehicle images, estimates, safety recall, website photos, and other information and costs. This action alone speeds approvals, as critical information for the decision is immediately at hand.

Lagging approvals are an avoidable frustration for your fixed operations. Delay erodes internal labor efficiency, and, eventually, sales margin and sales opportunities are lost when these vehicles aren’t ready to sell. Consider these facts:

  • Costly decision delay is unnecessary — and avoidable. Faster approval time results influence the time to line — the time it takes the shop to get cars from off-transport through reconditioning and ready to sell. More rapid approval decisions will get a vehicle from acquisition to sale-ready — time to line — which means a gross margin savings of $40 to $85 per car, depending on make, when the vehicle is sold. 

 

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  • Faster time to line also results in more internal repair orders closed and more Parts and Service gross realized. 
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So, why is it so hard to get fast approvals? When I was a service manager, getting responsive action on approval requests was a significant bottleneck. Reasons that slowed down a quick response included being unable to:

  • Find an approver when the estimate review is needed to keep technicians working, and, provide the detail needed to make an informed repair decision.

 

Approvers are rarely at their desks. They’re at the auction, on the lot appraising vehicles, in the showroom negotiating a deal, or away at lunch or on vacation. Mobile inspection apps can help bridge this location gap.

In my experience, the approver can approve/decline or ask questions within minutes, if not seconds, from receiving the push notification on their mobile phone. The message can include the entire vehicle record — including estimates, notes, supporting photos, and NHTSA safety recalls, if applicable. It can also include pictures of tire wear or oil pan seepage to help the approver better evaluate the situation without a physical visit to the tech’s bay.

The more information the tech can add to the vehicle record using such a tool, the better. The goal is to keep the vehicle in the stall or on the lift, continuously moving the work forward — never backward.

The financial consequences of delay are staggering. Every month, I would look at an open repair order report and see how much gross profit my department could not recognize because a used vehicle was not completed. And not only that financial impact, but the delay in getting that vehicle sale- or delivery-ready constantly eroded the gross profit realized on its sale. 

Some such decisioning tools feature real-time reconditioning costs per vehicle. Now, a service director can see repair items approved or disapproved, as well as how those decisions are trending. A study of declined brake work, for example, may point to a pricing issue.

The used car department is Fixed Ops’ best customer. If too many brake repairs are disallowed, perhaps it’s time to investigate your sourcing, prices or both.

Keith Brice is Director of New Business Development for reconditioning software company Rapid Recon. Before joining the software company in 2016, he spent 30 years in automotive retail, as Comptroller and in fixed operations for Texas dealerships.

 

 

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