Maximize Profit by Properly Quoting A Reman EngineMonday, April 1, 2013
At the dealership level, an engine overhaul job should be very profitable if managed correctly. However, if the quote is not created properly the dealership can give away the profits. This article will explain how to maximize profit by properly quoting a reman engine.
Every job begins at the quotation level. If the quotation is incorrect or incomplete it will obviously effect the job’s profitability. Two problems occur upon quotation: engine model identification and engine failure identification (or core charge acknowledgement).
From my experience in the reman engine business, proper engine identification is a common mistake for many dealers. The engine model should always be confirmed by calling either the forklifts OEM or your reman engine supplier with the relevant ID information. Quite often the parts or service writers use the technicians description of the engine. This may work sometimes but can come back to haunt you and eat away at the job’s bottom line if incorrect.
The other mistake more commonly made is not asking the correct questions about the customer’s engine failure. The most important question is: “What is the failure of the customer’s engine? Or, why are we replacing the engine?” If the engine is seized, if the technician can visually see a hole in the block, or if there is water in the oil, this gives the service writer great insight into whether the dealership will be charged for the core. Often, engine jobs are quoted completely excluding the core charge in the quote. If a core charge comes back the dealer has two choices: either absorb the core resulting in lost profit, or go back to the customer after the truck has been delivered which results in an unhappy customer. Neither of these two scenarios are appealing, that is, if your dealership cares about customer satisfaction.
Some would say that the correct way to quote the job is to include the entire core charge amount in the quote. This way, when a core charge comes back you are covered. This is better than not including the core charge but is still problematic. I will continually argue that the problem is not in the core charge amount or how it is displayed, but rather in the communication of the issue itself. Let me explain.
If the core charge is included in the quote it must be understood by the customer that a credit will be issued against the amount after the core is returned. If this is not communicated properly and a local repair company also quotes the job without a core, it may cause confusion between the two quotes. The local repair company may get the job simply because the customer feels more comfortable not having to deal with the large core charge amount or may misunderstand and think the local guy is less expensive. In this case, no profit exists when the job is lost.
Once you have identified the engine’s failure it is simple to call your reman engine supplier and ask them about core charges. At All Industrial Engine we make it a point to go over the common core charges that exist for that particular engine model and/or tell you the core charge for your particular failure. 95% of the time a core charge can be communicated at the time of quote instead of at time of final core inspection. Many times the engine supplier will state that on that engine model a core charge will not exceed a certain amount. Communication between all parties is the key.
With this information you can prepare the quote to explain the price of the reman engine plus the final core charge. When quoting the final core charge it can be explained to the customer up front, e.g. “due to the broken crankshaft an additional $$$ will be added to the cost of the reman engine.” When the competitor only quotes the engine your quote will stand out because the customer will know that you have done your homework and prepared a complete quote to include the customer’s specific failure. By quoting a job this way the customer will never receive a core credit or have to deal with any confusion related to core charges.
This method works on many levels. Most important is a profitable job concluding with a satisfied customer. Also, from my experience at the forklift dealership level, core charges are always a touchy area and most people feel abused when they are notified by the engine supplier of a core charge. However, with better communication of the engines failure between the dealership and engine supplier, a core charge will no longer be a surprise but rather a confirmation of what was discussed at the time of the quotation.
By properly quoting a reman engine with better information and communication between all parties involved you can maximize the profit of your next reman.
If you have any questions regarding this article or any other Tech Talk article please feel free to give me a call @ 877/303-LIFT (5438). As always, stay tuned to future helpful Tech Talk articles!