Fixed Operations A Basic Understanding

Areas Of Emphasis  Controlling Expenses  Personnel  Policy  Advertising  Other Supplies  Sales  Labor Sales (Hours)  Parts Sales  Customer Pay, Warranty & Internal

Shop Production Calculations  Productivity  Efficiency  Proficiency

Productivity  Booked Hours/Actual Hours Worked (Clock Time)  Enemies of Productivity:  Time Spent Waiting In Parts  Time Spent Waiting For Authorizations from Service Advisors  Idle Time – No Work

Efficiency  Booked Hours/Time Actually Working On Job (Punch Time)  Efficiency calculates how quickly and efficiently a technician completes jobs based on the time the job pays.  Efficiency is only effected by the difficulty level of the job and the technician’s skill level.

Proficiency  Booked Hours/Shift Hours  Shift Hours are the hours the technician is scheduled to work. Usually 8 or 10  Shift Hours are easier to track and calculate

PROFICIENCY Proficiency is the easiest to calculate because Actual Hours Worked & Punch Time are not always accurately tracked and not as easy to calculate. Bottom Line: No matter which way they calculate it, it is important to know how it is done so that it is a consistent, apples to apples comparison from month to month or year to year.

Booked Time  Also referred to as Flat Rate Time  Chilton, Motor  Factory Warranty Time

Effective Labor Rate  Total Labor Sales/Total Hours Booked  Customer  Warranty  Internal  Overall  Increasing Effective Labor Rate Is Key In Today’s Service Market

Loss Of Production  1 Technician absent for one – eight hour day.  At 100% Proficiency  8 Hours X $85 (Effective Labor Rate) = $680 Labor  If Parts Sales is 1:1 = $680 Parts  Total Lost Sales For 1 Day = $1,360  If Fixed Gross Profit is 50% of Sales = $680 Lost Gross  $680 X 5 = $3,400 Lost Gross Profit Per Week

Loss Of Production  If Each Technician Spends 1 Hour per Day waiting in parts or for authorizations:  5 Hours per Week X $85 = $425 Lost Labor Sales  $850 Lost parts & labor sales  $425 Lost Gross Profit  Multiply by 10 technicians = $4,250 Lost Gross Profit per Week

Increasing Sales & Gross Profit  Rate & Volume  Volume = Hours  Rate = Effective Labor Rate  Variable Labor Rates  Lower Hourly Rate Charged for Competitive Services  Higher Hourly Rate Charged for Captive Services (Services that are more High-Tech)

How To Help  Develop Specials That Help Increase Effective Labor Rate  Make sure they are telling and selling VALUE by including every extra a customer receives with a particular service.  Group several services together as a Package in order to increase effective labor rate by adding more value.  Focus on services that add value, but not cost to the service special

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