Service Advisor Pay structure

[imacdude]

I picked up a great tool from one of our BMW MNI seminars which was a worksheet on Special Order Parts Bins. (Off topic a little) The worksheet took the Parts cost of all Spec Bin parts, calculated sale dollars, had a spot for labor based on your parts:labor ratio, and then a spot to calculate the bonus paid to service advisors based on that labor. It gave the service advisors a PERSONAL view of what those parts cost them for sitting on the shelf.

Back to our subject. Several of our foreign makes have found the charging of Service Employmment expense to the Parts Department an acceptable practice. My personal issue is this; As a Parts Manager making my financial projections for year 2004, am I supposed to know whether the Service Department plans to hire additional advisors before I can make proper projections for next year? How am I, as parts manager, be held responsible for Employment expenses when there's no good way of separating parts & service employee expenses from the financial statements?

Your thoughts?
John Belen

[mjb]

Scot,
Years ago I owned an independent shop very close to the dealer I now work at and you are correct I never thought about charging any salary to the parts dept. because like myself and the rest of the independents do today I bought parts at wholesale and kept
"all" of profit. I didn't have to "subsidize" a parts dept. back then. As an independent you buy where you get get the best service and price, as a dealer you'd better hope you have a good parts dept. since you have no choice.
Having said all this I don't want you to think I work with a bad parts dept., actually I feel we probably have the best parts dept. around.
The real problem facing myself and others is for all these years we've had the tranfer and in Jan.04 we'll be faced with changing pay plans of service & body shop personnel
with a drop in gross profit.
Just one more thought. Do you ever wonder why the factory would want to change this?
I guess I'm cynical but I don't see why it would matter to GM where the parts profit is unless this is just to make it feel better for the next time they change policies and nibble away at the parts profit as they recently have done.

[robc]

Assigning why this is a concern to the factory is easy - they don't make money when you sell labor - only on parts. Therefore anything they can do to even encourage a slight uptick in parts sales is more money to them.

------------------
** Rob, Editor WD&S **
Help is only a message post away!
robc@dealersedge.com

[GROSSER]

As much as I LOVE the idea of fobbing off some expense to another department, I cant help but think that any service manager who thinks he has to do this to make money is not doing a very good job.

With the exception of expensive brands like BMW, most parts to labor ratios are in the 1:2 area. $2 labour dollars for every $1 part. Factor in the gross profit margins and you end up with the service department making 75% of the gross profit of every dollar spent CP.

This isnt enough? Maybe you should try and make some money yourself guys, instead of taking it out of your brothers pocket.

[PucHed]

Just my two cents, but as a Parts Manager I would have a major problem paying someone else's employee. We don't pay our wholesale customers for their people, and I don't think we should pay Service's. Again, I don't want to seem greedy or whiny, but by this logic, Service should help pay for my warehouse help and driver, since they are the ones that either put the parts away so that Service can "sell" them, or the people who have to go pick up parts for emergency purchases. Not to mention fuel and mainteneance on the truck. With the exception of Accounting, everyone pays whoever they supervise. I don't see any way of doing otherwise without having to look at each person in each department. Even without the split, I don't think it would work.

On the original topic, we pay our advisors on total service order dollars, less 243 and 244.

I am a firm believer in finding what you want to pay an employee on, finding how much would be fair, and making pay plans from there. I know this isn't a new concept, but if you want to pay your advisor, for instance 60k, then you find numbers that will aproach that number. If you want to get them interested in selling every aspect of the department, then you need to add parts into the equation. The ttal is still going to be the same, and based on what the Service Manager feels is fair, regardless of what the equation is.

[This message has been edited by PucHed (edited 07-25-2003).]

[This message has been edited by PucHed (edited 07-25-2003).]

[KVOGEL52]

HEY PARTS MANAGERS - THE HARD SELL USUALLY IS NOT THE LABOR, IT IS TRYING TO SELL PARTS AT A HUGE MARK UP. THE SERVICE DEPT SELLS MORE PARTS THAN ARE SOLD AT THE COUNTER AND PARTS EMPLOYEES DO NOT HAVE TO WORK FOR THE SALE. SO WHY NOT PAY THE PEOPLE MAKING THE SALES FOR YOU? ESPECIALLY WHEN ADVISORS HAVE TO SELL PARTS AT A HIGHER PRICE THAN THE PARTS PERSONNEL AT THE COUNTER AT THIS DEALERSHIP!

[joe r]

Is that the huge 40% to 43% profit margin on parts or the 70% profit margin on labor?
Are service customers not quoted per job at your store?

However, pricing should be consistant at both counters for retail customers.

My belief is that wages should be paid by the department the employee works for. Whether you pay advisors on parts or not, increased labor sales will generate additional parts sales.

Joe R

[This message has been edited by joe r (edited 07-31-2003).]

[This message has been edited by joe r (edited 07-31-2003).]

[PucHed]

KVOGEL, it sounds to me that you have an additional issue at your store. The only way that a customer should get a different price between parts and service is if they are a wholesale customer and the advisor dosen't know it.

Once again, we can't split up every job in the dealership and charge a percentage of the salaries to each department, it dosen't make sense. I didn't write my SERVICE advisors pay plan, and they don't work for me. If you look on a financial, labor only has about a 74% margin.With a 50/50 split, my internal margin is around 28%.

And again, by this logic, my back counter people should then be at least split with service, right? Are there any service managers out there willing to cover some of my back counter help's pay without supervising, or setting policy or schedule? That wouldn't be fair either.

[KVOGEL52]

40-43%? YOU SHOULD TALK TO OUR PARTS MANAGER. IT SURE WOULD BE EASIER TO SELL PARTS THAT CHEAP!

[MR GOODWRENCH]

KVOGEL, where do you get your statistics??
My guess is you are mis-informed or ignorant of the numbers on the dealer's operating report?? Have you ever seen one??
If you have a beef, check out the facts first before letting your emotions get the best of you.