Inflation and the parts shortage are crippling independent shops, while marketing presents a major challenge—and opportunity. That was the consensus from shop owners during a roundtable discussion held in late July by Fullbay, a maker of shop management software.
The conversation kicked off with a survey on how inflation was affecting the webinar attendees' shops.
While 3% said they had not experienced any issues, 68% found inflation a difficult challenge, and 29% noted rising prices were causing "a lot of issues."
The question is how shops can remain profitable in this environment? This webinar sought to help answer that by sharing stories of Luke Todd, president of The Service Company, a network of truck centers in southwest Ohio, and Jimmy Wall, general manager of Donahue Truck Centers, a California-based chain of Hino dealerships. Fullbay's co-founder and executive chairman Jacob Findlay, and COO Chris O’Brien led the discussion.
The core solutions revolved around managing inflation through increasing costs, focusing on technicians, and investing in digital marketing.
Managing costs in the age of inflation
In the second week of August, average U.S. diesel prices finally fell under $5/gallon for the first time since March, though for much of the summer were nearly double over the start of 2021. Largely due to higher fuel costs, Inflation also hit 40-year-highs, rising 9.1% in June YOY, according to the U.S. Bureau of Labor Statistics.
“The big takeaway is that we're all spending twice as much on fuel as a year ago, and somehow you're going to have to pass that on through either labor mileage, shop supply, or surcharge," Todd asserted.
He likened it to the recent "economic adjustment charge" he has recently incurred on his phone bill.
The Service Company has implemented its own adjustment charge, placing a set fuel surcharge per job, both for his mobile techs and in the shop itself.
"We're running, getting parts and everything to move these jobs through as fast as possible, and it just helps absorb some of that additional cost," Todd offered.
Donahue has not added a fuel surcharge, though Wall noted a competitor of Donahue's added a $1-2 extra charge for each part bought from them.
"We kind of look at our shop supplies as just a grouped in cost of all those miscellaneous items that come and if we need to raise our shop supply percentage, then we do so," Wall said. "I think we went up by 2% at the beginning of the year."
Fullbay's O’Brien recognized that shops can get even more granular while managing their shops’ inventory. “If you're spending money on shop supplies, towel, solvents, whatever, at the end of the day, you shouldn't be losing money,” he pointed out. “If those costs are going up, you would have to increase shop supply charges, or start itemizing some of those things.”
How to keep techs in the shop
However, inflation-driven fuel and supply costs aren’t the only facets leeching time and energy from independent shops. The panelists agreed that the tech shortage plaguing the industry remained a constant factor in the business, and to stay abreast of strained staffing, creativity in acquiring and retaining techs is required.
Such creativity extends not just to staff referrals and outreach at technical schools, but competitive payment, tools, and training. To continue the ‘pass on’ metaphor, shops that are able to share their physical resources and educational experience have a greater likelihood of keeping the techs they’re able to find.
“We started what we call a trainee program,” Todd explained. “We supply [toolboxes] to them and then after a certain amount of time [it] becomes their box.”
Wall agreed, especially as in California, where many of Donahue’s shops are located, shops are required to pay twice the minimum wage to techs if they require them to bring their own tools.
“Supplying tools, or having a tool Incentive program, or having a toolbox that maybe [technicians] own at the end of a certain time frame, is something that we've been playing around with and experimenting with,” Wall said. Additionally, such a program “increases efficiency by helping provide tools because it cuts down on travel time in the shop,” Wall added, describing how the two minutes it takes for a tech to trot back and forth for supplies adds up throughout the day.
Not only does this ‘pay-as-you-go’ model increase the tool efficiency for a technician, but a guidance structure that works along with it increases the shop’s efficiency by ensuring new technicians have adequate support.
“We have one person that monitors four trainees right now,” Todd elaborated. “And he's a seasoned tech and so he's able to help them with just making sure that when they do a PM that they have their eyes open, they are seeing what needs to be there.”
Acquiring parts during enduring supply chain issues
With lingering supply chain issues from COVID-19 complicating the landscape for drivers and shops alike, as much flexibility is required to acquire parts as it is to keep people who can install them.
“It’s available, and then suddenly, it’s gone,” stated Findlay regarding parts acquisition.
Both Todd and Wall described how they scoured the barren landscape of parts to meet their customers’ needs, and noted sometimes independent shops can do is seize as many assets as they can when they’re available.
“We just put a couple storage containers at one shop just because if you see the the parts available, and you don't know when they're going to be available again, you stock up,” Todd explained. "You want brake drums and nobody's got brake drums, so all of a sudden, you find out there's 10 skids available, you buy all 10."
Wall was confounded by the lack of components all over the cab, traveling up to four hours, over to Nevada for one part.
"We can't get seats," he exclaimed incredulously. "It's just a cushion and some thread."
This had Wall seeking even old-fashioned solutions, at one point ordering his team: "Call your grandma, whoever you need, find someone that can sew these things together."
Wall didn't end up hiring his or any of his teams' grandmothers, but found someone who could upholster the seats.
He said his truck centers also had to stock up on things you can't outsource locally, recently buying five trailers full of diesel exhaust fluid.
"That's a huge capital investment," he admitted, "but it either runs out or the next time you got to order it's two or $3 more per unit."
The dealer is not hoarding DEF, as Donahue also has a rental fleet and Wall estimates they will reselling all of it.
Digital marketing is a critical new landscape for shops
With parts running scarce and inflation running rampant, it’s clear to most independent shops that reaching new customers is a critical investment. Digital marketing via a shop’s website is a challenge to keep updated and consistent, but also represents an great growth opportunity.
For Todd, taking The Service Center online wasn’t just an opportunity, but a necessity. “To me, anybody that's researching anything that has to do with trucks in our area, I can't imagine why you wouldn't be online looking for looking for it,” he said. As such, he sees it as critical that any shop has an online presence, and a clean and updated one at that.
Wall concurred, arguing that a website should not only be simple and accessible, but serve as an opportunity to bring added value to visitors.
“I think it's like a drip campaign," Wall said. It's something that you want to give customers something of value, whether it's an ebook, or a blog, or a landing page.”
Wall’s digital approach aligns with his shop’s, in which they use one-time repairs as an opportunity to offer value-ad preventative maintenance that they help monitor through their online portal. In this way, a website isn’t just a billboard, but an invitation.
“It's enough to entice them to continue to come get content, but they eventually want the real thing,” Wall concluded in describing his perspective on digital entrepreneurship.
The ability to share a shop’s value among its customers or its tools among its techs is a valuable method by which independents, such as The Service Center, Donahue Truck Centers, and those like them can weather the uncertainties of the current commercial vehicle industry. And, ultimately, these kinds of shops are not ones the industry can afford to lose.
“Anybody that's able to maintain this cadre of technicians in a business that is executing on maintenance and repairs is increasingly special, and rare, and very needed by the fleets,” concluded Findlay. “They need you guys to not just stay in business, but thrive, so don't hesitate to do it.”
