It’s more expensive than you think.

Over the years since founding ihiji, I have seen a repetitive theme in thousands of conversations with dealers all over the world – most businesses don’t fully comprehend the true cost of a truck roll. Integrators of the “Internet of Things” often include a free warranty support period, ranging from 90 days to as long as a year. During this period of time, the cost implications to roll a truck out to a customer site have an even greater impact. That’s because for warranty calls, it’s the integrator that will be eating the entire cost themselves.

Our history in speaking with our customers is that this expense can easily exceed $150 for each and every truck roll

Many forward-thinking technology integrators have a proactive maintenance plan with their clients where they are charging a monthly fee. Others just charge the client for each truck roll they make, hopefully charging enough to make a profit, even on jobs that are further away or difficult to reach.  In either case, knowing what this cost really is becomes a vital element in helping determine how profitable a business you are running. Let’s start by looking at the variables.

On-Site Support Costs

  • Labor (including travel and transition time)
  • Truck (Fuel, Depreciation, insurance, maintenance, etc)
  • Opportunity Cost

Labor

Whether you pay your technicians an hourly rate, a salary or even if you sub-contract your service calls to a third party, the biggest contribution toward your cost is likely to be for your human labor. If you are paying an employee, you will also need to factor in any benefits and other working expenses in order to get the total monthly cost. Next, you can just divide by the number of calls each technician makes per month and you will have a simple straight line number. If you want to do some deeper analysis, it is also useful to break how many of these calls were for warranty, paid support, sales or for new designs.

Now let’s take a deeper look at the time component.  First, start with some more conservative assumptions:  the average time to drive to a site visit is 30 minutes (don’t forget to include the amount of time it takes for the technician to stop off at the local 7-Eleven).  Add in the 15 minutes it takes to get things started once the technician gets on site and then another 15 minutes it takes to complete the paperwork and transition to the next service call at the end.  This leaves you with a good 60 minutes of totally unbillable time that the technician has spent on a support call, without even stepping foot inside the client’s door.

Truck

This part will likely require your accountant, but if you own or lease anything, from a single set of wheels to an entire fleet, you are going to be paying someone for the right to use them. In addition, you also pay monthly insurance and you probably fill up the tank a few times per week, per van. Maintenance costs may need to be averaged out over a longer period, but with a little effort you can get to an average monthly dollar amount you are spending on truck maintenance. Now take this monthly cost per vehicle and divide by the number of times each truck drove out of the lot on a call.

Opportunity Cost

If you are like most technology integrators, your technicians take service calls of all kinds. They may be deployed for an emergency warranty repair followed directly by a new site installation. Many smaller teams are even doing system design and selling on any given call. The bottom line is that there are probably a lot more profitable and productive things you’d rather have your team doing than servicing one of your clients for a free warranty repair. Think about how the diverse skills and talents of your technicians are best applied across a given month of work. Consider what kinds of calls you are scheduling. Which make money and which cost money? Estimate a rough number as a monthly opportunity cost you might be seeing per person.

Once you add up all of the little pieces that contribute to the total cost, you will most likely be shocked to see what it is costing you to send out a truck. Our history in speaking with our customers is that this expense can easily exceed $150 for each and every truck roll.  Several research groups, including the Technology Service Industry Association, have produced reports that placed typical truck roll costs upwards of $1,000 each time.  I think you will find that this quickly turns into some real money.

CE Pro found 38% spend at least $1,500 per month on service

Let’s take a minute to extrapolate that.  According to a CE Pro survey, most dealers have more than 6 site visits per month and almost 40% of dealers have more than 10 site visits per month.  Furthermore, lets assume a very conservative $150 cost for the truck roll.  This means that your monthly cost of delivering service to your customers is at least $1,500 per month.[/vc_column_text]

you can easily see technicians losing more than 10 hours per month in time that is not generating a single penny of revenue for the company.

Multiplying that out by the 10 or more truck rolls per month, you can easily see technicians losing more than 10 hours per month in time that is not generating a single penny of revenue for the company. The upside of the downside? You are keeping your customer satisfaction levels high and yes, warranty support is just a cost of doing business. However, this should probably make you start thinking about how you might keep those costs per call and total number of calls to a minimum.

Calculate it For Yourself

Take a minute to estimate the impact of site visits on your business by filling in these simple formulas.  If you don’t know the numbers for your business, start with your best guess.  You can (and should) revisit these numbers periodically so that you can increase the profitability of your service organization.


Cost of Providing Service:

_____ Service Calls Per Month X _____ Cost Per Truck Roll = _____ Cost / Month to Provide Service

Lost Productivity:
_____ Service Calls Per Month X ( _____ Average Travel Time + _____ Time for transition ) = _____ Unbillable Hours Per Month

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