Tune up your service department for a profitable summer

With summer coming, it is important to make sure your company has a few systems and processes in place to get the most out of your service department.

Make sure your service trucks are well stocked with the parts and tools necessary to perform a complete service and perform most service calls in one trip. Labor management is one key to operating a service department profitably, so you need to keep your unbillable time as low as possible. You will also want to reduce trips to suppliers, prevent callbacks, and raise your average ticket amount.

While there are numerous key performance indicators that are important to you, here are four good rules of thumb to live by when managing a service department.

1.     Your service department unbillable time should be less than 25%.

2.     Your diagnostic fee only service calls should be under 5%.

3.     Your average service ticket should be $350 or higher.

4.     Service technicians should produce an average of $650 or more in gross profit per man day.

For a service department to run smoothly and efficiently, trucks must be well stocked with a well thought out list of parts that are likely to be needed. These parts must also be replenished quickly. Don’t stop there. It is essential that your trucks be equipped with the proper tools to diagnose problems, detect dangerous conditions, and make fast accurate repairs.

Establish a Truck Stock List

Create a truck stock list that includes parts and supplies that each technician must carry. You might create a list for each technician or truck configuration. Certain trucks, due to their size or configuration, might be able to carry more inventory, and your truck stock list should reflect that capability. Your goal is to try and keep enough parts that you only need to restock one per week during the busy season.

Technicians will not sell parts they don’t have. Too often, a technician will see the opportunity to make additional repairs or upsell but won’t because they don’t have the parts. Rather than come back later, they just don’t mention the opportunity to the client. For example, a technician might replace a fan motor and notice that the humidifier needs a new water panel. If he doesn’t have that water panel on his truck, he will likely not mention that it needs to be replaced. Even if he does, your company may never have that chance again. Selling that extra part, at that moment, is one of the keys to service profitability.

Create a Tool Requirement List

Establish a clear written policy of what tools your technicians are expected to own and which ones the company will provide. You will need to write a procedure for regularly checking to be sure that each technician has all the tools on their tool list. You should also establish rules for who is financially responsible for tools that are lost or broken. Will you replace a technician’s personal tool if they broke it during the normal course of their job? What about your company’s tools? It all must be in writing.

Having the correct tools and diagnostic equipment can increase service sales. A megohmmeter and combustion analyzer can pay for themselves very quickly by detecting legitimate repair opportunities that may have otherwise gone unnoticed. Owning a good fan blade puller can save your technician a trip to the supplier. Even though that trip would mean selling an additional part, the cost of the trip will outweigh the sale of the fan blade. Be sure your trucks are equipped with all the necessary tools to be fast and efficient.

Create a list of tools that all technicians will be required to have in their possession. Tweak this list by title or job function. For example, your master technicians might be required to carry certain tools that your journeyman isn’t expected to have. Each job function will need their own tool list.

Track Inventory by Warehouse and Bin

It is important to track inventory by vehicle, warehouse, and bin location. Each truck should be organized as similarly as possible. HVAC business management software, such as Total Office Manager®, makes tracking inventory by warehouse and bin location easy. Knowing what parts are on what truck can reduce needless trips to your suppliers. Technicians should be able to see what parts (and equipment) are on which trucks. That makes sharing resources possible.

A Simple Reordering System

If you use mobile software, you should have some type of automatic reordering system or reports that make the process easy. Technicians should meet each week for a quick debrief, training, and restock.

If you are still using paper, here is an easy way to reorder. Label all your truck stock items with a removable (reusable) label. When an item is used, technicians will remove the stickers and place them on the back of their service invoices. Your office will transfer those labels to a page that will be faxed to your favorite supplier. At the conclusion of your weekly meeting, each technician will pick up their box of restock items.

For restocking purposes, keep at least one full truck list of parts in your office or warehouse. You will draw on that list as necessary to avoid ordering from a supplier more often than necessary.

A Time and Material Warning

If your service department charges by the hour, you should note that you are likely to see a decrease in billable hours. Generally, with T&M, the faster your technicians get, the smaller their invoices. Fast and efficient service technicians are a great compliment to flat rate pricing.

Achieving productivity and efficiency in the service department is a crucial (and profitable) task for any contracting company. For a complimentary Service Management Operations training package courtesy of EGIA Contractor University, visit www.egia.org/cbs-operations/

James Leichter is a longtime HVAC contractor, consultant, and public speaker. He is president and CEO at Aptora Corporation, a maker of contracting business management software. Leichter is the editor of blackbeltcontracting.com and a founding faculty member of EGIA Contractor University (EGIA.org/University).