Prior to Columbus, people firmly believed that the world was flat; they had been taught that all of their lives. In the copier service business, we have our own version of the flat world theory. People are constantly repeating the notion that 4.5 calls per day and some fixed parts cost per call are metrics that a service manager should try to achieve. Those numbers have no value and are in fact dangerous to the profitability of a dealership.
To prove that point, consider two technicians that manage the exact same fleet of equipment, and generate the exact same revenue. One technician does two calls per day, and his parts cost is $75 per call, and the other technician does six calls per day, and his parts cost is $28 per call. The technician that does the six calls per day is spending $168 per day on parts compared to $150 for the other technician. The six-call tech is also driving more, and that is an additional cost. The six-call technician will also have significantly less satisfied customers.
Several major copier companies that used those metrics to measure technician performance and as management goals no longer exist. Measuring the wrong metrics most probably was a significant factor in their demise.
When a technician is evaluated on calls per day and on parts cost, it creates a behavior that adversely affects the company. Technicians become reluctant to put parts in equipment and so they try to stretch the part life. They also try to complete service calls as quickly as possible. The combined effect is a significant increase in the number of repeat visits to solve an initial issue. This causes additional service calls, increased response time and lowered customer satisfaction.
Another danger is the concept of trying to manage parts cost as a percentage of revenue. If you measure parts as a percentage of revenue, and compare year over year, you have no way of knowing why it changed. If copy volume goes up at a greater rate than service revenue, parts cost as a percentage of revenue will go up as well. How so? If the normal rate is .01 for a click, and the parts cost per click is .0014, that would yield a 14% parts cost. If you discount the service rate to .008 and the parts cost doesn’t change, parts cost as a percentage of revenue would be 17.5%.
What to Measure
In our industry, we sell clicks, and therefore, everything should be measured in clicks. This enables accurate and significant analysis of the performance of equipment, technicians and service departments. A thorough understanding of the cost of a click enables service contract pricing that meets the profitability standards of the dealership and facilitates sales.
The metric that matters most from every aspect is Mean Copies between Calls (MCBC). This is the main factor in customer satisfaction. It is the number one factor in determining the profitability and staffing requirements of the service department. It has a profound impact on response time as well.
Measuring parts cost per copy enables accurate measurement of the performance of both the equipment and of technicians.
Focus on Mean Copies Between Calls
The largest service cost associated with any copy is the cost of labor. This cost is affected by the amount of time spent on a service call and the frequency of each service call. In my experience, and in the experience of the most successful dealers that I have worked with, increasing the amount of time spent on each call typically increases the MCBC.
In the examples below, you can see the impact of increasing the MCBC on staffing requirements.
A 20% increase in the MCBC resulted in saving approximately 687 man-hours. With the additional available time, response time would decrease.
One of the biggest factors in MCBC is the number of times a technician has to visit a customer to resolve a single service issue. Some of the causes of multiple visits include parts availability, technician skill, and available time. The measurement of these factors is First Call Efficiency (FCE) and available data indicates that the national average is below 50%, meaning that most service calls require two or more visits.
Focusing on MCBC can have exceptional results. One dealer that I have had the privilege of working with was able to more than double the number of copies per tech. This saved the dealer from hiring 10 technicians, and contributed significantly to their success and profitability.
In subsequent articles, we will examine strategies to improve the FCE and increase the MCBC. We will also look at other factors influencing the profitability of both service and the dealership.
