by: Dean Landers, Landers Appliance
The most discussed phrase I’ve heard mentioned the last
few years has been “First Call Complete”, otherwise known
as FCC. The service industry has become obsessed with
this metric. Everyone wants to drive up their numbers and improve
their FCC percentage. AND this is a great thing to focus on, no
doubt about it! All of the financial models I’ve seen, both from
others and ones I’ve created myself show significant profit gains
when a service company can improve their FCC numbers.
However, these projections seldom show any increase to costs,
which is never the case. Achieving a higher percentage FCC is not
cheap, nor is it the end all for everyone.
Before doing anything to drive up First Call Completes, do an
thorough analysis of your costs and profits, specifically focused
on your call taking processes, scheduling, your COD vs. warranty
call mix, customer preferences and satisfaction levels, brands
serviced, parts ordering, returns (getting unused parts back from
technicians and getting parts back to PD within their normal 30
day return window), credit monitoring, order lead time, carrying
inventory, shrinkage, shipping costs, BMS cradle to grave parts
tracking, and (add in anything I’ve left off the list). This data will be
critical and necessary in being able to compare the NET effect of
implementing changes to your systems to improve FCC.
What you really want to know is if the added costs to improving
FCC percentages is offset by the higher revenue! In other words,
will your net profit go up, stay the same, or go down as a result of
your efforts to drive up your FCC numbers.
There are two very important aspects to improving First Call
Completes. One is anchored to your company’s parts handling
process and the second is the triage system you’ll implement to
help determine the parts most likely needed to provide a high
percentage FCC.
I don’t want to focus on triage in this article but confirm it is a
critical component to improving FCC, can be expensive and
should be tested and perfected with a serious cost analysis before
implementing any changes as mentioned above, as well as during
and after you’ve made your changes.
Let’s look at the parts processes that directly affect profit. Most
of us don’t have rigorous systems in place or don’t stay on top of
the systems we use to manage our parts processes successfully.
Case in point, many companies have a very large assortment of
dead parts taking up space in our warehouses that also show as
a hollow “inventory” asset on our balance sheet. And so therein
lies the issue with trying to improve FCC. “You can’t manage what
you don’t measure,” (thank you for the constant reminder, Paul
MacDonald and Otto Papasadero). So, follow me here. If we don’t
have a solid parts management system in place how are we going
to improve our profits from FCC when the formula for improving
percentages lies in pre-ordering more parts through our existing
parts process?
Consider this: Your current parts acquisition costs (Looking up,
ordering, receiving and assigning parts) are 30% of your parts
purchases, and your shrinkage is 5% (techs or office neglect to
turn the part back in, part gets lost in your BMS system, etc.) and
your PD rejects 5% of your returns (because the returns are
beyond the 30 day return window, the packaging is damaged and
they can’t resell the part, the part has been installed, lost or
misplaced, etc.). For every $100 of parts purchases, you actually
spend $140.
If you factor in the additional acquisition expenses including
triage, every $100 in parts purchases now actually costs $160 (or
more) assuming the other cost factors (shrinkage, rejects, etc.)
stay the same, which is very, very unlikely driving the acquisition
costs higher yet.
My point here is to encourage you to do your
homework! Don’t assume higher FCC numbers
equates to higher profits. Certainly try to improve
your FCC but keep a close watch on ALL of
your numbers.
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