Productivity is King!
Being in business is easy. You buy something, sell it to someone else at a higher price than you bought it for, reinvest some of the difference in the business and pocket the rest. Sounds simple enough, doesn’t it?
As we all know, the automotive business adds nuances that make that simple business model far more complex. However, in principle, that’s how it works.
In the Fixed Operations departments you buy two things – labor hours and parts – and they become the assets that you sell to others. But you also invest in facilities, utilities and administration and protecting and maximizing the utilization of those vital investments.
The industry pays a great deal of attention to protecting Parts inventory. We count every single part once a year and sometimes we count them throughout the year. We carry out detailed investigations when we come up short to determine where the missing parts have gone, and we will not close the inventory process until every lead has been investigated.
A well-run dealership will take weeks to prepare for a full inventory before an army of volunteers comes in to count and recount the parts. Then days are spent poring over reports to look for discrepancies before the count is finalized.
How is the Service department different? To conduct business, you need to make a considerable investment in facilities, administrative support, utilities and marketing. While it’s true that flat rate Technicians are only paid when they’re working, the investment is already there to provide them with an environment where they CAN work. That investment must be maximized and the best way to do that is through high productivity. For hourly paid Technicians, the case is doubly compelling since the business |is investing in hours regardless of whether they’re sold or not. And, unlike parts, these hours are volatile. If a part doesn’t sell today, you can sell it tomorrow. If an hour of labor isn’t used, then it’s gone forever.
So why is productivity that is less than 100% accepted? In many cases productivity of 80% and less is tolerated. Would you feel the same way if 20% of your Parts inventory disappeared overnight?
How do you ensure high productivity? First, you must measure it accurately. Technicians should report their use of the facilities that are provided so you can determine their productivity regardless of whether they’re flat rate or hourly paid.
It’s the management team’s responsibility to enable high productivity. To do this, management should:
- Ensure that enough work is available
- Remove time-wasting obstacles such as trips to the Parts counter or the front desk
- Ensure that there’s a high sales rate for additional repairs
- Monitor technician time daily and make corrections in a timely manner
- Use productivity information as a tool to drive it higher
Productivity is indeed king. And remember — selling additional hours also results in additional parts sales. That’s a win-win for your dealership.
If you are looking for additional support, a 20 group format can help establish long term productivity habits. We're here to help.