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Drive-Time Charges to Rural Areas

We are a forklift dealership serving a very large but low populated area. We constantly evaluate how we charge for “drive time” for our techs. I have visited with other dealers, and it seems that everyone struggles with setting their rates. Our customers don’t like being charged for “drive time,” but there is a very real cost involved in getting to remote locations. How do you recommend charging for servicing rural areas?
                                                                   
Jerry Lindh, General Manager Anderson Forklift, Inc. (Billings, MT)

Ken MacDonald: Travel time has always been difficult. No one likes to pay for something that has no perceived value. However, there is value in having someone service a remote location, and you have a right to a fair return. Businesses that are in rural areas decided to locate there for a particular reason and they are aware of added cost. I don’t know why our industry struggles with this when other industries have no problem being paid for their services.

Marla Cope: It is very difficult to deal with “drive time” when you’re traveling long distances. We have set up “zones” with different charges based on the distance from our office. We try to balance it with what our competitors are charging, so we’re not too far out of line. While it doesn’t always make sense to set up a branch in a remote area, we have contracted with an individual in those areas to help cover the basic service calls. This greatly reduces the number of times we would have to send one of our techs there, and the customers are happy not to pay the drive time.

Greg Morrison: There definitely is a very real cost associated with “drive time,” and it’s unfortunate that some customers make us feel guilty that they should be charged for travel. Some good opportunities do exist in handling this situation. The key is to reduce the number of service calls to these rural customers. Getting the equipment on a PM program is essential. If the customer’s equipment is beyond the economic break-even point and no longer reliable, then new replacement equipment should be recommended. I guarantee that it will take some finesse on your part to convince your customer of this plan, but it is the right thing to do. Reduce downtime!

After a PM is scheduled, promote the same services to all the other users in the area. Sell the fact that you have a qualified service tech who will be at XYZ company on a certain date doing PMs and the sense it makes that he perform the same service on your equipment while he is in the area. Show them that you can reduce downtime and save them “drive time” because they will be splitting that cost with other businesses in the area. Rural companies are very receptive to this concept. In fact, they have been helpful in recommending our services to other companies in the area. Depending on how much equipment is in the area, you may eventually develop enough service work for two to three consecutive days per month. In that case, you would need to put the tech up in a motel.

Bob Weeks: The first hour of service can be a set amount, i.e., $150, with each additional hour at the normal rate. I believe you can explain that the amount covers a multitude of costs.

Jim Ripkey: Travel charges have many faces in our industry. Some call it a travel charge, while others call it a zone charge, a service charge or fee, or even a destination charge. I agree that most customers in our industry are not comfortable with seeing “travel” as part of their invoice. Some dealers roll travel time right into their invoice to the customer as billable labor. Depending on how your service orders are designed, this portal-to-portal type of billing can have a great deal of acceptability. When coupled with a “not to exceed” policy, your travel recovery rate will often exceed any flat rate methods. Nonetheless, flat rating travel seems to be the most popular method of travel recovery. In this practice, your servicing area is separated into travel zones where each carries a pre-determined charge. While you can be as detailed as you want to be regarding the set up of these zones, I encourage service managers to keep it as simple as possible and often recommend no more than five service zones depending on the size of the area. The “charge” is an amount set by the dealership based on travel time from the dispatching center. Technicians are instructed to code their service order with a flat rate code based on the destination of their travel. Their origin is disregarded, thereby making efficient dispatching even more attractive as all customers in the zone are charged regardless of where the technician started. The ultimate key in this program is to make sure your flat rates are covering your travel costs. If you are unable to cover travel as a cost of doing service in the area, make sure that the overall profitability of the work you are doing is meeting your objective.

Material Handling Equipment Distributors Association

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