Racing Past the Competition: The Unseen Tactics of Fixed Ops Pioneers

Imagine walking into your dealership tomorrow with a confident plan to transform your service department. The reality today for many service managers is a struggle with persistent challenges—pressure to improve profitability, recruitment and retention woes, customer satisfaction issues, and the constant need to keep up with evolving technologies. Statistics reveal that dealerships have lost 12% of service visits to competitors since 2018, a trend that points to a significant opportunity for those ready to step up their leadership game. But where do you start? How do you lift fixed absorption from a stagnant 64% to a thriving 85% or more without sacrificing customer satisfaction? How can you leverage the latest tools and insights to build a team that’s not only efficient but also motivated and loyal? This is where the art and science of fixed ops leadership come into play. In this comprehensive guide, we'll unpack the core strategies and practical steps that can empower you to lead with confidence and drive your service department to new heights. You'll learn how to harness key levers like effective labor rate, hours per RO, and parts GP that offer the fastest impact on fixed absorption. We’ll explore how AI automated inspections and video MPIs can reshape your operations, providing a clear path to increased profitability. And, importantly, we’ll delve into the staffing models that can reduce appointment lead times while boosting first-time fix rates. By the end of this guide, you’ll have a roadmap tailored to your dealership's unique challenges and goals, paving the way for a transformed service department. Let's dive into the details of mastering fixed ops leadership and setting your team on a course for sustained success.

Understanding the Challenge

To really grasp the leadership challenges in fixed ops, you must first understand the multifaceted problems plaguing service departments today. Declining service visits, high turnover rates among technicians, and the pressure to adapt to technological advances are just a few of the critical issues. For instance, appointment lead times are longer now compared to previous years, and a significant portion of repairs aren’t completed on the first visit, leading to dissatisfaction and lost revenue.

These issues are compounded by the technician shortage, an industry-wide problem that has created a bottleneck in service capacity and quality. Despite a 2.8% increase in the technician workforce recently, the demand continues to outstrip supply. This shortage not only affects service throughput but also impacts customer satisfaction indices (CSI) as delays and incomplete repairs become more common.

Furthermore, the competitive landscape is shifting as non-dealer repair shops capitalize on the aging vehicle fleet, drawing away customers seeking faster, more cost-effective service options. Dealerships have already seen a 12% drop in service visits to competitors, a statistic that underscores the urgent need for effective leadership and operational strategies.

On the technology front, the introduction of electric vehicles (EVs) and advanced driver-assistance systems (ADAS) has imposed new demands on service departments. With EV service satisfaction trailing internal combustion engine (ICE) vehicles by over 50 points, the pressure is on for service leaders to ensure their teams are equipped to handle these new technologies effectively.

Current Industry Landscape

The fixed ops industry is undergoing significant transformation, driven by technological advancements and evolving market demands. AI and digital tools are reshaping the service process, with systems like UVeye's automated inspections and TruVideo's service video messaging becoming essential for modern service departments.

These technologies offer substantial benefits, such as enhancing transparency with customers and improving workflow efficiency. For example, TruVideo's new Video Quality Score (VQS) model correlates high-quality videos with an increase of $59 in parts and labor per repair order, showcasing the tangible benefits of embracing digital communication tools.

Besides technology, market dynamics are shifting as well. The aging vehicle fleet in the U.S., now averaging 12.8 years, presents both challenges and opportunities. While older vehicles often require more repairs, they also drive more consumers to independent shops unless dealerships can offer competitive service options.

To compete effectively, dealerships must not only adopt new technologies but also refine their operational strategies. This involves reevaluating service capacity, technician training, and customer engagement tactics to align with current trends and consumer expectations.

The Solution Framework

Developing a robust solution framework requires a clear understanding of the levers that drive fixed ops success. Among these, effective labor rate, hours per repair order (RO), parts gross profit (GP), and capacity mix are critical components.

Effective labor rate is a direct indicator of service profitability. By optimizing labor rates without compromising customer satisfaction, you can significantly improve your department's bottom line. This involves strategic pricing adjustments and careful monitoring of labor efficiency.

Increasing hours per RO can also lift fixed absorption rates. By focusing on thorough inspections and proactive service recommendations, you can boost both revenue and customer satisfaction. Implementing AI-assisted inspections can be a game-changer here, offering precise assessments that build customer trust and enhance operational efficiency.

Parts GP is another vital area. Strategic parts pricing, informed by elasticity testing and competitive analysis, can maximize profits without driving away customers. Consider implementing pricing matrices that align with market expectations while safeguarding your margins.

Finally, capacity mix—balancing warranty, customer-pay, and internal jobs—ensures optimal resource allocation. An effective mix helps maintain service flow and prevents bottlenecks, ultimately improving customer experience and retention.

Implementation Guide

Implementing the solution framework effectively requires a structured approach. Start with a thorough assessment of your current operations, identifying strengths and areas for improvement.

Begin with labor rate optimization. Conduct a market analysis to ensure your rates remain competitive while reflecting the quality of service provided. Develop scripts and training programs for service advisors to communicate value effectively.

Next, focus on increasing hours per RO. Leverage digital tools like video MPIs to provide customers with detailed insights into their vehicle’s condition, encouraging them to approve necessary repairs.

For parts GP, implement a dynamic pricing strategy. Regularly review your parts pricing against market benchmarks and adjust as necessary to maintain competitiveness and profitability.

Capacity mix optimization involves setting clear targets for warranty, customer-pay, and internal jobs. Use scheduling tools to manage workload distribution and minimize appointment lead times.

Throughout the implementation process, ensure continuous communication and training for your team. Leadership coaching and daily huddles can foster a culture of accountability and high performance.

Measuring Success

To ensure your leadership strategies are delivering results, it's essential to measure success using well-defined KPIs. Fixed absorption, first-time fix rate, and appointment lead time are pivotal metrics to track.

Fixed absorption, ideally at or above 85%, indicates the extent to which service operations cover dealership overheads. Regularly monitor this metric to gauge the financial health of your department.

First-time fix rate (FTFR) measures the efficiency and effectiveness of your repairs. A higher FTFR correlates with increased customer satisfaction and loyalty. Aim for a FTFR above 88% as a benchmark of operational excellence.

Appointment lead time reflects the accessibility of your services. Shorter lead times enhance customer experience and retention. Use scheduling and capacity management tools to optimize this metric.

In addition to these primary KPIs, consider tracking behavioral metrics like coaching hours and video quality scores. These provide insights into team engagement and customer communication effectiveness.

Advanced Strategies

Once foundational strategies are in place, advanced tactics can further enhance your fixed ops leadership. Consider expanding your service offerings to include express lanes and mobile service options, catering to diverse customer needs.

Express lanes can reduce lead times for routine maintenance, increasing throughput and customer satisfaction. Implement a dedicated staffing model to prevent main shop disruption and ensure seamless operations.

Mobile service is another avenue for growth, offering convenience to customers who prefer servicing at home or work. Analyze the cost-benefit dynamics to determine the feasibility and potential ROI of this service model.

Leverage AI and digital communication tools to streamline advisor workflows and customer interactions. Automated inspections and video messaging can differentiate your service experience and improve operational efficiency.

Finally, foster a culture of continuous improvement through leadership development and staff training. Regularly update your team's skills to keep pace with technological advancements and industry trends.

APS Blog