MAXIMIZING SHOP PRODUCTION    May 2013                       

Greetings, Dealerelite:

Before we get in to the meat and potatoes of maximizing shop production, let’s take a look at things in a simple applicable way.  For this example let’s consider a shop that employs 10 technicians. If the technicians don’t have work to start on immediately when they arrive there is an area of opportunity. 

Let’s say the 10 technicians don’t really start working on cars until 8:30 am when their shift started at 8:00.  This could be caused by an inefficient dispatch process, excessive standing around and talking before starting; the reasons can be increased ad infinitum. 

As a good practice, make sure every tech has something to start on as soon as their shift starts.  If there isn’t enough customer work to have everyone busy right away, then have a used car or PDI on their racks with the RO on the windshield ready to go. 

Be present in the shop during the 1^st half hour of the morning.  Now let’s do some math… 10 technicians, not being productive until 8:30, equals 5 labor hours lost per day.  Let’s say your ELR is $80.00/hr.  This equals $400.00 in gross profit LOST.  Multiply that by 5 days a week and that’s $2000.00 per week, and $8400.00 in a 21 day work month.  Multiply that by 12 months….that’s $100,800.00 annually!  

Do I have your attention now?

Managing availability and usage of shop labor can have a profound effect on profitability. In fact it’s one of the most often overlooked yet potentially impactful areas of business activity in an auto repair shop. These types of measurements require time reporting and time reporting has a cost.

But if the information is put to use it can prove to be a worthwhile investment. Time reporting can provide an accurate measurement of how well time is being used and provide information that will support improvements. Efficiency measurements tell us how well the technician did versus the time billed to the customer. Proficiency measurements tell us how well the shop used the available technician hours.

Striving for the best possible ratios in these areas will result in higher profitability for the business and its employees. Furthermore, providing incentives for achieving certain levels of efficiency and proficiency can ensure business success.

The Cost of Reporting

The time spent reporting when jobs were stopped and started as well as time spent not working on jobs is an expense that is absorbed on some level. But if technicians have easy access to computers and clocking on and off of jobs on repair orders doesn’t take a lot of time then the cost is minimal.

If the technician works from a computer screen rather than working from paper to determine what jobs to do then time reporting can take place in the normal course of work and the impact is negligible. This responsibility falls on shop management. If work flow is optimized then time reporting will naturally become part of the process.

Measuring Efficiency

Efficiency is a measurement of how well the technician performed as compared to the time the customer was charged for a 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 repair on a vehicle will generally ensure 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 history. The key is to have a starting point that is consistent.

Measuring Proficiency

Proficiency is a measurement of how well the business utilized the labor hours that were available during a given time period. It is an indicator of 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 business and its employees.

Structuring Incentives

Compensating employees for higher efficiency and proficiency ratings is a model employed by many businesses. It’s important that incentive plans include responsibility for quality problems and customer relations.

Higher levels of efficiency that result in higher levels of comeback work will negatively impact the long term viability of the business. Likewise, overselling to increase proficiency will result in higher customer attrition rates. All factors and impacts must be included in the evaluation of results.

Taking Advantage of the Opportunity

In order to make the most of these measurements care must be given in the reporting of time utilization. Processes must be put into place to use the information to make evaluations and identify areas in need of improvement.

Including employees in the evaluation process will bring a perspective that may not be readily visible to management. Evaluating efficiency and proficiency should be continuous. Opportunities for improvement should be captured so benefits can be realized by the business and its employees.

Sincerely,

Tony DeLeonibus

Regional Manager

Fixed Performance

www.fixedperformance.com

Fixed Performance Inc. 827 Superior Dr. Huron, Ohio 44839 United States (419) 433-8219