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Calendar Utilization, Efficiency Are Among Most Important Arrows In CPI Quiver

Improvements in these technician time-usage indicators lead directly to dealership net income. BY MICHAEL ROPPO

Screen Shot 2015-08-14 at 10.58.59 AMAs dealerships keep pressing to recover profitability as the economy gradually recovers, it’s always a great time to look for hidden opportunities and tweak critical performance indicators (CPIs), while also dedicatedly removing roadblocks to success. The service department is one of the areas in the dealership that always certainly merits a closer look.

Striving for the best possible ratios with the CPIs I have written about in this series of stories should bring your service department higher levels of shop selling time, increased shop performance, and overall increased profitability and performance for the dealership. Further, having the service staff compete for incentives tied to improving efficiency and proficiency CPIs in a properly utilized calendar month can ensure long-term business success.

With the calendar utilization CPI measuring the number of days you have in open shop and billable time, efficiency measurements tell you how well the specific technician or department performed vs. the time billed to customers. Proficiency measurements tell you how well the individual and/or shop used the available technicians’ time-hours.

Why is this important? It leads to an increased amount of net, and a considerable amount of it!

Calendar Utilization Formula

Calendar utilization is calculated by comparing the number of days worked in a given time period with the number of days that techs or production people were scheduled to be at work. Note: For some shops, this calculation can assume that the service department is open for 24 hours, with a working technician at every bay. Pretty interesting, isn’t it?

Measuring Efficiency

Efficiency measures how well the technician performed as compared to the time the customer was charged for a specific job. So, the source of the initial estimate is critical in this situation.

Using an accurate labor guide to determine the amount of time required to perform a specific vehicle repair generally ensures a good starting point. The amount of time required for repairs that have been performed a number of times in the past can be based on that history. The key is to have a starting point that is consistent.

Technician Efficiency Formula

In this calculation, you divided sold (billed) hours by actual hours per service technician for a time period. Example: If a tech clocked 30 actual hours for the week, and that work represented 25 billed hours charged to customers, the efficiency rating for that tech would work out as 35 billed hours ÷ 40 actual hours = 87.5 percent efficiency.

The tech’s goal should be to achieve a routine average of 100 percent efficiency. Note: An entry level tech, such as one who has graduated from an automotive technician training program, should be able to correctly perform routine services at 50 percent efficiency (assuming proper training) within 90 days, and continue to improve until he meets the minimal accepted performance for management (usually 40 hours of produced billable time).

Measuring Proficiency

Proficiency is a measurement of how well the business utilized the labor hours that were available during a given time period. It indicates how well the shop is running. One hundred percent proficiency indicates that technicians spent all available hours doing repair work.

Evaluating proficiency enables the shop to identify areas that can be improved and pinpoint processes and procedures that can be modified, leading to greater profitability for the overall business and its employees.

Technician Proficiency Formula

With this calculation, you divide billed hours by available hours. Example: If a shop charged 100 billed hours during a week and had 150 available hours to schedule, its proficiency would work out as 100 billed hours ÷ 150 available hours = 66 percent.

Unfortunately, many dealers still tend to examine dealership performance benchmarks only from a high altitude. At these dealerships, questions often heard at month-end are: “Where will hours per RO per advisor end up this month? What about labor gross profit percentage? And how about fixed gross?”

Rather than look down on performance from 40,000 feet, perhaps dealers should pose more specific and more focused questions, such as:

  • “How did our fixed operations performance compare with our calendar utilization/facility potential?”
  • “Why did we fall short of expectations when it comes to tech efficiency?”
  • “How productive, proficient and efficient are our technicians, and what opportunities do we need to offer in order to make improvements?”

Right Questions = Right Answers

Better questions for a dealer/GM (and, for that matter, the service manager) to explore are:

  • How many days will the service department be open for business this month?
  • Do the techs know how efficient they need to be and how many hours they need to turn and bill?
  • Is the dealership keeping track of techs’ hours on time tickets?
  • Do the techs clock in on every work order and every individual job on the work order?
  • At the end of each work day, are all time tickets turned in and their hours and efficiency totaled and communicated to the techs?
  • Are those generated hours and efficiency levels posted for each technician on the service department’s performance board by 10 a.m. the next day?
  • What is causing technicians to spend time away from their bays?
  • Are parts fill rates at optimal levels?
  • Is the distribution of work to technicians appropriate for their skill levels?
  • Is the facility designed to promote efficiency with workflow and information?
  • Are technicians properly trained?
  • Do techs have the correct tools, and are all of those tools in good working order?
  • Are staffing levels in service appropriate to meet customer demand?
  • Are the technicians paid fairly and rewarded for a job well done?

Act Based On Utilization Questions

As I mentioned in the May story (see Service Drive Magazine, May 2015, p. 14), many CPIs can influence performance and profitability in our industry. In order to make the most of these CPI measurements, dealers and service advisors must pose smart questions and take well-planned actions in the reporting of maximized time and calendar utilization.

Time is the main ingredient that a service group sells! Processes must be put into place and actions must be taken to use and influence the information I’ve reviewed here, to make evaluations and identify areas that need improvement.

Source: Service Drive Magazine, July 2015 Issue

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