Highlights from “Improving Service Shop Profitability and Enabling Growth”
Maybe it’s just a sign of the times. But I was a bit taken aback by the enthusiastic applause that followed the TBM presentations at the Caterpillar Dealer Finance Conference last month.
I had the privilege of sharing the successes of two dealers TBM has been supporting. I explained how the fundamentals of operational excellence—things like process and space optimization, management system implementation, and standard work—quickly led to improvements in critical KPIs and generated notable bottom line results for both businesses.
The message was well received. Perhaps that’s because in many ways, the challenges that have been plaguing large equipment sales and service dealers for so long seem to have no easy answers. Difficulties with attracting and retaining skilled technicians remains a top source of frustration for operations leaders. Parts availability complicated by supply chain disruptions is another ongoing challenge. For Caterpillar dealers that have been charged with meeting aggressive growth goals over the next several years, these issues present serious headwinds.
Operational excellence clearly delivers solutions that work despite the challenges.
At its core, op ex is about doing more with what you have available. It’s about pulling the levers that remain in your control, even when external factors are stacked against you. When people and parts remain hard to come by, op ex is absolutely essential to optimizing the resources you do have so you can stay profitable and capitalize on opportunities for growth. And the examples of its success among companies just like yours are many.
Here are some of the takeaways from the examples we presented at the conference:
- Better utilize your existing space to delay capital expenditures.
One of the success stories we shared was about a dealer that was facing significant space constraints due to rapid growth. The dealer was considering buying or building more space. However, through a detailed operational diagnostic, we were able to help leadership determine the best possible layout to accommodate additional service bays and liberate space within the existing facility, thus freeing up capacity. Ultimately, this helped the dealer more profitability achieve its growth goals by deferring the need to invest $2 million in capital for at least three years. - Focus on employee engagement when you can’t appeal to loyalty.
Like so many other organizations, the dealers we spoke to at this conference are struggling with high employee turnover. Technicians will leave for only a slight bump in pay from another organization. While companies have tried training and increasing tool allowances to retain people, they often end up training people for their competitors.
What does work is to create a more engaged and motivated workforce through the fundamentals of operational excellence. Standard work, daily management practices, and problem-solving skills can make the existing team more productive—typically by 20-25%, eliminating the need to hire more people. Such practices also go a long way in increasing employee satisfaction and reducing turnover when people feel like they are contributing to the company’s success in meaningful ways and their accomplishments are being recognized on a daily basis. One way dealers can accomplish this is through daily Safety, Quality, Delivery, Cost, and Team (SQDCT) board reviews. The boards visualize the previous day’s performance against targets and standards and allow teams to understand and celebrate successes, thus closing any communications gaps and making all contributors feel more empowered. - Use a change readiness assessment to understand the root causes of your people problems.
Another key to employee engagement and satisfaction is to invest in truly understanding what motivates or demotivates your people. A change readiness assessment can identify the underlying contributors to employee dissatisfaction and deliver insights that can lead to improved practices and policies.
One of the organizations we featured in our presentation successfully increased employee engagement scores from 56% to 88% largely based on changes it made as a result of its change readiness work. For example, the assessment signaled to employees that management was ready to listen to their concerns. The employees, in turn, revealed that they needed better tools to achieve quality goals. Leadership responded appropriately by increasing the personal tool annual allowance. Employees felt validated, and the decision will also help the company avoid expensive rework claims as its employees now have the tools they need to get the job done right the first time.
Embrace OpEx to Build Your Own Success Story
Seeing real results from proven solutions that have moved the needle for peers is definitely good news for operations leaders that are facing no shortage of challenges right now. It was very rewarding to share some key successes at this year’s conference at a time when the message really resonated. We’ve been invited to present at the Caterpillar Dealer Finance Conference again next year. And our hope is that we will have new stories to tell about dealers in the network that will choose to implement operational excellence practices in 2023.
Of course, these strategies don’t just apply to large equipment sales and service dealers. They can be deployed by any operations team looking to grow profitably—even in the most difficult of times.
