Koenig Equipment is already well on its way to improving the labor efficiency in its service operations, but is there more that can be done to eliminate waste and maximize use of the facility?

Improving wholegoods sales has been the traditional approach for many farm equipment dealers when it comes to increasing revenues. But increasingly, ag machinery retailers have come to understand that improving the bottom line has to go further than simply selling more. That’s where increasing service sales and improving technician efficiency has taken on a more prominent role at the most progressive dealerships.

This was Matt McConnell’s challenge when he joined Koenig Equipment as its director of service operations. In the past 2 years, the dealer group, which includes 11 John Deere and Case IH stores in Ohio and Indiana, has improved its labor performance from 78% to 84%. What that means, says McConnell, is “We’ve sold 6% more hours than we had previously. Our target is 85%, so we’re almost there.”

At the same time, he says, the dealership’s work in progress has decreased in both dollar value and in time. “Our total transaction time frankly has been reduced by about 40% from start to finish. This not only improves workflow but cash flow, as well. We’ve also seen customer satisfaction scores go up.”

“As the wholegoods side has seen exponential growth over the last 5 years, producing crazy numbers, it has been difficult for us in service to catch up,” McConnell says. “To put all our stores together, we’re running about 85% parts and service absorption combined right now, but we know that 100%-plus is doable and that’s what we’re aiming for.”

But how does Koenig Equipment get there?

Eliminate Waste & Maximize Space

McConnell says at the center of all Koenig’s efforts to eliminate waste and make the best use of the space available in its service operations is to maximize customer value. “Ultimately, what we’re trying to do is to keep the labor rates as low as we can make them and still make a profit, minimize downtime, keep the schedule as level as we can throughout the year. One of the limiting factors in growth in a service department is the physical ability to do the work. For example, the longer the repair job is, the bigger the challenge because you’re taking up space in that work bay which means you can’t get the next job in or even start it.”

He says one of the questions they are asking themselves is “What can we do to minimize delays before a piece of equipment ever comes in for service? Once it comes through that door, the clock starts ticking and we haven’t even started working at that yet.”

At the same time, McConnell says, “We can manage the time but we also have to manage the space because the two are so interconnected. If I bring a machine in on Monday and do, let’s just say, a combine inspection, that’s a day just to look at all the components and systems on a combine. The best-case scenario is I’m going to look up the parts, I’m going to call the customer, and he’s going to approve or disapprove of however many work segments I quote him. Then I need to order the parts. If I airfreight them all in on Tuesday, I get them Wednesday. I’ve already lost one full day waiting for the parts and the thing is still sitting there. I’m not saying the activities that we’re doing aren’t valuable because they are, but the space is not being used in the most efficient way possible.”

So, McConnell says the dealer group is focusing on ways to maximize its facilities, specifically utilizing the square footage and eliminating waste in the facilities it already has in place.

“We’ve been looking at tech efficiency and so has nearly everyone in the industry, and we can manage that down to the second,” McConnell says. “But say we have a 15,000 square-foot shop, how much revenue are we generating there and how can we best increase it? For example, we’re looking at bay scheduling as opposed to tech scheduling; how much of each bay is being used efficiently?”

Add a Second Shift?

One way to do this, he says, is to add a second shift, which Koenig has done at one of its stores. The dealership is now looking at whether it should expand this to other locations and how to best do it. “Just because we can do it doesn’t necessarily mean we should, but we really need to looking at it closely because it can also drive increases in tech efficiency as well,” says McConnell.

In the case of creating shift work, McConnell says the technician on the second shift would necessarily pick up whatever work the first shift tech had underway and vice versa. “If they’re going to do their own work, we don’t need a second shift. Why? Because of the space. Now I’ve got to have twice as much space. Well if I had twice as much space, what would I need second shift for? Just double the number of guys on first. If you’re not going to shorten the turnaround time for the pieces you already have, you don’t need a second shift.”

In the case of a multi-segment repair, he explains, the first shift techs are assigned certain segments and the second shift other segments. “The idea is to get the machine in and out faster.”

In addition to bay scheduling and possibly adding second shift operations, McConnell says Koenig is also scrutinizing the financial efficiency of its field services. This, he explains, is another way to maximize shop or square footage efficiency, “but are we getting a financial bang for our buck? Is it cheaper to do it in the shop or is it cheaper to do it on the road. I think it’s cheaper in the field, but what I think and what the data says may be two different things. So we really need to look at all that before jumping to conclusions.”