Often times when we are called to dealerships, the dealer and/or service manager inform us that the lack of productivity of the service department is due to their technician skill levels and they feel more technicians. Shortly thereafter, we generate a department forecast to determine the current technician’s proficiency, along with the manpower and proficiency needed to generate realistic customer pay labor hours - in addition to their existing internal and warranty labor hours. We commonly find that shops are operating at less than 85% productivity in addition to overall technician proficiency of less than 100%. So much for needing more technicians! Upon further discovery, we find that customers are being scheduled out several days in advance because the appointment schedule is fully booked… fully booked with what??
Customers typically begin to defect after being scheduled out in excess of three days. Still Need More Techs?
What technician proficiency is your shop operating at?
What technician proficiency should your shop be operating at?
Have you projected how many more labor hours you need to produce at a benchmark level of customer pay labor hours per transaction at the current repair order count?
What will your technician proficiency be with the current tech staffing level when you sell those additional labor hours?
Would you be understaffed or overstaffed if you sold those additional labor hours?
Do you have a Selling System in place to attain additional or benchmark levels of customer pay labor hours per repair order performance from you service advisors?
Do you track carry-over labor inventory hours and the reasons why it is carried over?
Key Performance Indicators:
Technician productivity the amount of time a technician has repair orders in his possession for the day - divided his available hours at work for the day. If a technician only had a repair order in his possession for 4 of the 8 hours he was available to work, he would be at a 50% productivity rate.
Technician productivity has more to do with the shop loading and scheduling than it does with the technician’s ability or performance.
Technician proficiency is the amount of labor hours the technician produced for the day -divided by the hours he was available for the day. If a technician produced 11 flat rate hours for the 8-hour day that he is available, he would have a 137.50% proficiency rate.
Benchmark performance for most domestic franchises is 90% - 95% productivity and 120%-125% proficiency.
Benchmark performance for most import franchises would be 90%-95% productivity and 130%-135% proficiency.
The higher proficiency in imports is due to the higher work mix of maintenance and menu services.
A service department is complex organization. It requires labor hours coming into the inventory each day and it also needs the correct balance of carry–over labor inventory each morning at start up to generate a realistic shop productivity, technician proficiency and return on investment. The labor inventory is one of four dealership inventories and it is the fastest turning inventory. It turns over daily and it can be turned at a value greater than face value because it can be produced in excess of 100% proficiency. In addition, the value can be escalated by increasing the effective labor rate at which the value of the labor is sold.
In your service department, how many techs do you have underutilized each morning - waiting for their first job because you have little or no carry labor inventory and they are waiting for the first scheduled appointments to arrive?
Shop Productivity Formula
Let’s assume you have a 12-technician shop. We will also assume as an average that all 12 techs had to wait 15 minutes each day for their first job. 12 techs x 15 minutes = 180 minutes divided by 60 = 3 hours of un-billable labor hours. 3 hours of un-billable labor @ $95.00 effective labor rate = $285.00 @ 76% labor gross profit retention = $216.60 per day of lost labor profits. 23 days @ $216.60 per day = $4,981.80 of lost labor profit opportunities for the month. In addition, this scenario just reduced the overall technician productivity by 3% before you even get started for the day.
Some fixed operations managers may be saying that they fixed that problem because the service advisors start work one hour before the technicians do. Maybe? Maybe not!
Are you tracking technician productivity, proficiency and the carry-over labor inventory each day?
Did you know that there is a direct correlation to all three of these key performance indicators?
Do you know the proper balance of carry over labor inventory hours daily for your service department and franchise?
Do you know the 4 categories of labor carry-over and the reasons why it is carried over?
I worked with a Ford dealer recently and we implemented a carry-over labor inventory report, technician proficiency summary and productivity report in addition to other operating systems.
The dealer called me the day after a blizzard this winter and informed me that his service department had 114% technician proficiency that day. This was accomplished even though only a handful of customers arrived that day. He credited the technician proficiency and hours produced to having a proper balance of carry-over labor inventory from the previous day. Prior to the implementation of this system, they would have sent technicians home early because they thought they had to schedule all vehicles to be out the same day. This excluded diesel repairs that only provided enough carry over labor hours for one technician. In addition, the hourly techs would have racked up unapplied labor reducing profits even further prior to implementing this system.
Most appointments systems do not compute or provide what the correct measure of carry-over labor hours should be for a shop to operate efficiently. In addition, the appointment system has to be manipulated to address this issue by increasing the number of appointments and or hours of capacity.
Do you know the percentage of walk in customers in your service department daily?
Do you encourage night drop offs?
This all needs to be part of the scheduling equation as well.
To a service advisor, appointments may be interpreted as: when customer drops of their car at 8:15 am, it will get repaired the same day. To the customer it may be understood that: if they arrive at 8:15 am for service it will be written up and technicians will start working on it by 8:20 am and they will have it back repaired, washed, vacuumed and ready for pick-up by 9:30 am.
Unfortunately, neither scenarios are realistic. But most importantly, the end result may be customer dissatisfaction.
If the service personnel assigned to making appointments does not know or have access the daily and month-to-date shop productivity, technician proficiency and carry over labor inventory, it is almost impossible to properly load a shop. Since service advisors do not want irate customers at the end of a day, the most logical choice is to under book. This practice becomes a self-fulfilling prophecy for diminishing sales, production and return on investment!
Have you ever been in an airport and the gate agent asks for volunteers to take a later flight since they overbooked the flight? Airlines project a percentage of no-shows on every flight, so they overbook flights by as much as 50% to ensure all seats are filled. Airlines cannot operate efficiently and be profitable if there are empty seats. Automobile service departments are no different. It is critical for dealership service departments to determine the proper amount of appointment scheduled labor hours to book while incorporating the carry-over labor inventory hours to maximize overall shop productivity, technician proficiency and customer satisfaction.
The Selling System is typically an area of significant financial opportunity in most dealerships. The service advisors customer handling skills and sales performance is paramount to maximizing fixed operation profits. The service advisor must establish a rapport and relationship with customers, recommend point of sale maintenance and menu services before the technician ever gets the repair order. Service departments must have a management designed front-end and back-end selling process to generate benchmark sales performance. If your service advisors and selling system is operating at 75% sales efficiency in terms of labor hours per repair order on the customer pay transactions, it is unrealistic to expect 120%-135% overall proficiency from the technicians in a properly staffed production system.
A service department is comprised of three dependent operating systems. When one system breaks down it has an adverse effect on the other systems. Don’t blame the technicians! There are numerous reasons why service departments are not be attaining benchmark levels of production, sales performance, and profitability.
Does any of this sound familiar to you about your service department?
Retail automotive dealers deserve a realistic return on their investment. No More, No Less! Many dealerships have additional significant financial opportunities just by attaining a realistic industry benchmark level of sales and gross profit retention performance. Sheriff 5-Star clients are experiencing additional fixed operations profits of tens of thousands of dollars per month-after the implementation of operating systems and training specific to the every dealership. Contact us for a free assessment on how much you may be leaving on the table every month by not attaining industry standard levels of performance.
Visit us on the web for more details and Typical Dealer Results at www.Fixedoperationsconsulting.com
John Sheriff is owner and founder of Sheriff 5-Star Fixed Operations and Consulting. He has consistently generated proven results by increasing fixed operations profits and customer satisfaction for all domestic and most import retail automotive dealerships for over 22 years. John has presented as keynote speaker for Dealer 20 groups and accountancy firms.