Leadership 2010 Program Provides Food For Thought
CHICAGO (Sept. 2, 2005) - The Northwood University's University of the Aftermarket recently published a series of reports as part of its Leadership 2010 program. Collectively, the reports provide much for the aftermarket service industry to consider - both in the market of today and the one cresting the horizon. A brief synopsis of several of these reports follows, with some of their key findings.
Report 1: Repair Shop Participation in the Use of Electronic Cataloging and Connectivity This report's objective was to assess aftermarket shops' current and future use of computer technology. Issues such as connectivity with distributors and what computers were used for were specifically analyzed. The survey attempted to assess the level of connectivity, the comfort level that service professionals had utilizing computer systems and the barriers to progress faced by shops.Just as technicians have had to improve their skill set to include computers and more sophisticated tools, shop managers, service writers and owners have also had to belly up to the bar of progress. Using computers as business tools to optimize efficiencies, reduce costs and thereby increase profits, the shop's back office has had to make initial investment in computers, as well as upgrade to keep pace with change.
In addition, the report found that:
* 88 percent of shops said their technicians had access to shop computers, putting more timely information into the service professional's hands. This compares with just 61 percent in 2003.
* 84 percent of shops say they upgraded their computer systems within the last two years. Combined with 50 percent of shops indicating they planned to upgrade within the next year, this showed that shops recognize the need to stay current with computer technology and functionality.
* Jobbers were cited by 73 percent of the respondents as the main source of parts, followed by wholesale distributors at 12 percent. In addition, 70 percent of shops prefer to look up parts themselves.
* Catalogs were updated on a continual real-time basis in 51 percent of the responses. The remainder is provided by batch updates, usually by CD disc. Real-time cataloging was preferred by 67 percent of shops.
* Suppliers were helping shops with online cataloging in 48 percent of responses and with ordering in 52 percent of the replies.
Inventory management via streamlining the process of finding the right part at the right price and having it delivered to the shops in a timely fashion directly improves bottom-line profit. So, too, does quicker and more real-time access to new products and programs. The push towards uniform and compatible connectivity within the supply chain, from shop to distributor/manufacturer, also can impact more savvy shops to access just-in-time, current inventory without having to waste time or dollars. Simply put, those who can do this achieve gain a distinct competitive advantage.
Not only are shops willing to be connected, they are committed to staying current with technology. Shops prefer to look up parts themselves, and efficiencies can be gained as suppliers facilitate more real-time cataloging and ordering protocols. In addition, given the gap and extra markup between use of jobbers verses wholesalers, there is an opportunity for upstream suppliers to work more directly and timely with shops.
Report 2: Understanding the Independent Aftermarket Technicians' Buying Decisions Trying to make sense of the parts buying decision was the focus of this report, and in particular what factors influenced decisions to but lower quality economy parts or more expensive premium brands. The challenge faced in the industry everyday in weighing economy-priced parts verses premium parts not only is one of discerning consumer preference, but also the service professionals and their shops as well. In their need to capture business from shops, parts manufacturers and suppliers also wrestle with this paradox as well. And more recent pressures from automakers to meet reduced supply costs together with the threat of offshore parts sourcing factor in as well.The report provided the following insights:
* Factors in the technician's buying decision - Part quality is still the number one factor in decisions made by professional aftermarket technicians when deciding which parts to install. Speed of supplier delivery is the second most important, followed by brand, price and supplier relationships. The survey indicated that import specialists were more aware of quality differences and also were more price conscious than domestic specialists.
* Quality - There is a universal belief among technicians surveyed that the quality of economy parts has become acceptable; 85 percent of respondents said quality was "fair to excellent." There was some acknowledgement, however, that there were differences between product categories. Brake pads, belts and ride control components were seen as having greater differences in quality between premium and economy parts than brake rotors/drums or exhaust systems.
* Experience - Less experienced parts buyers (five years or less) are more likely to react to outside influences, such as customer and/or competitor pricing pressures. They also are most open to supplier suggestions. The study found that more experienced parts buyers are trending towards buying more of their parts from the OE dealerships.
* Branding - More experienced technicians tend to use branded parts. Add to this finding that research says that for every three technicians entering the business, 10 are exiting.
* Dual product lines - While the majority of parts purchased are premium brands, there is enough demand for economy parts to make it necessary for parts suppliers to dual line most product categories.
* Choosing a parts supplier - Service from suppliers was far and away the most important factor in deciding which supplier to buy from. This was followed in order by brand, pricing, relationship, speed and quality.
The report recommended several actions for the industry to consider. Suppliers need to communicate the quality message with technical information denoting product differentiation. That is, why this part? Secondly, giving the high attrition of experienced and aging technicians from the industry, more education in vocational schools, high schools and technician clinics is paramount. Third, shops and associations need to invest in improving awareness of both technicians and consumers at the shop level. Finally, rewarding consumers and shops for continued use of branded products can help strengthen the customer-shop-supplier bond. Service is still universally appreciated.
Report 3: How Does the Aftermarket Service Dealer Compete With the OE Dealer to Obtain/RetainProfessional Technicians? This report was motivated by concern over the growing shortage of service technicians that exists today. Also, according to a Denver Post article that was published in 2001, for every three technicians entering the industry, 10 are retiring, and nearly two-thirds of the 860,000 technicians are more than 40 years old. Most technicians retire in their early 50s. Finally, with reported statistics from Aftermarket Business that 34 percent of repair shops and 36 percent of dealerships are looking to hire professional technicians, it is clear that the aftermarket will need to compete effectively with dealerships for competent service professionals going forwards.
The immediate goal of report was to provide the information that the aftermarket service dealer can use to compete against the OE dealer for capable technicians. Below are the factors that surveyed technicians ranked in order, as to what influences their choice in where to work. The percentage of respondents selecting each factor is showing in parentheses.
* Salary and benefits (42%) - The aftermarket service dealer is able to compete on the basis of salary; however, this service dealer must be geared toward earning more sales and a higher gross profit percentage on labor over parts. OE dealerships generally offer larger benefits packages than aftermarket service dealers, with better health care packages at lower rates along with paid holidays and vacations. Recently proposed association healthcare legislation, if enacted, will narrow this gap.
* Respect from management (39%) - The survey concluded that technicians felt that respect from management was one of the two most important areas that influenced them to work at their current place of employment. Forty-seven percent of the survey's respondents indicated that this characteristic in the workplace was "very influential" in the reasons why they work where they do today.
* Organized and well-maintained equipment (37%) - Keeping larger pieces of equipment operational, well maintained and found easily is critical to those trained technicians who operate and produce income for the service facility.
* Up-to-date tools (36%) - According to the survey's findings, shops should supply items such as electronic diagnostic scan tools, transmission or air conditioning recyclers, air compressors, shop vacuums, hydraulic lifting devices and bearing pressesIn other words, if it is too large to be placed in a technician's tool box, respondents said the shop should supply it.
* Access to new vehicle information (32%) - Modern cars and light trucks contain advanced technology that monitor or control virtually every function of the vehicle including brakes, steering, air bags, fuel delivery, ignition, lubrication, theft prevention, emission controls and in some cases, tire pressure. Technicians must have full access to the information and tools necessary to accurately diagnose, repair or reprogram these systems. Aftermarket shops need to at lease keep pace with OE dealerships to compete.
* Facility condition (29%) - Having a state-of-the-art, clean, well-equipped facilities as an attractive showplace attracts customer traffic, increases the opportunity for a technician to make money and improves employee morale. Such an appearance conveys a sense of expert professionalism.
* On-going training (28%) - Given the accelerating pace of change in automotive technologies, ensuring technicians can stay current through ongoing education and training is in the best interests of both the technicians and the shop manager. The study found this was one area that dealership shops had a distinct edge over aftermarket shops, both in the provision of education to existing technicians and also in attracting interest and awareness from graduates by funding and promoting training at that level. These programs are helping dealerships to identify the best and brightest earlier.
* Variety of repairs (27%) - Aftermarket service shops deal with a broader range of makes and models than the OE dealerships Whereas a dealership technician can become more productive simply by working on and becoming more familiar with a smaller number of models, general aftermarket shops can achieve the same ends by having technicians specialize in different service areas - keeping in mind they can ill afford to have idle technicians.
* Product decisions (26%) - Aftermarket shop owners have a number of motivators and less restrictive parts ordering policies than OE dealerships. They will get on the phone and locate a part to get it shipped to the shop in a timely fashion - all to keep the technicians working, to get the job done, to make money, to keep the bays turning and to satisfy the customer.
* Flexible hours (17%) - Most service facilities are open six days a week, from 8 a.m. to 6 p.m. Some offer longer hours and are open seven days a weeks; these are very demanding hours. Today, many technicians are family-oriented. Therefore a flexible schedule is increasingly more and more important.
In attracting and retaining technicians, essentially the question each shop owner/manager has to answer for the technician is, "Why should I work for you?" Shop owners and managers do have their own list of criteria in attracting and retaining technicians. But shop owners and managers also need to be conversant and in synch with the priorities of technicians. Being out of step, or not even in the same ballpark, cannot only lose the battle for quality help, it may well cost the war.
Each report in a Adobe Acrobat pdf format can be viewed in full by visiting www.univaftmkt.org. Go to the Industry Reports section.(Source: University of the Aftermarket)
