1. Making Money in Repair from Intent to Implementation Dick Fuller The MED Group August 6, 2008

2. Objective Learn how to more effectively manage your service operation

3. Agenda for today  Overview of service industry  How much does it really cost to provide service  Measuring productivity  Implementation

4. Assumptions:  Have ongoing service operation  Trained and competent techs  Policies and procedures in effect  Quality assurance controls  Adequate facility with proper tools and equipment

5. Service industry history:  1887 Richard Sears and Alvah Roebuck  Early 1900’s automotive growth

6.  1887 Richard Sears and Alvah Roebuck  Early 1900’s automotive growth

7.  1887 Richard Sears and Alvah Roebuck  Early 1900’s automotive growth

8. The HME service department  Range of products  Changing technology  Many low volume products  Custom products  Reimbursement issues  Liability exposure

9. Cost of providing service CRC Survey on PWC Warranty Costs  Purpose  Methodology  Limitations  n=60

10. CRC Survey, PWC Warranty 4 Sections: Location of service Field service CODB Product reliability Implications

11. CRC Survey, PWC Warranty Section 1: Where service is done

12. Question 1 Percent warranty done in-home 0-25%32% of respondents 25-50%25% 50-75%25% 75-100%18% n=56

13. Question 2 Percent warranty done in shop 0-25%32% of respondents 25-50%25% 50-75%27% 75-100%16% n=56

14. Question 3 Percent warranty done in facility 0-25%91% of respondents 25-50% 7% 50-75% 2% 75-100% 0% n=56

15. CRC Survey, PWC Warranty Section 2: Field service calls

16. Question 5 Single service call to complete job 0-25%59% of respondents 25-50%23% 50-75% 7% 75-100%11% n=56

17. Question 6 Two service calls to complete job 0-25% 7% of respondents 25-50%23% 50-75%27% 75-100%43% n=56

18. Question 7 Three or more service calls to complete job 0-25%86% of respondents 25-50% 9% 50-75% 0% 75-100% 5% n=56

19. CRC Survey, PWC Warranty Section 3: Cost of Doing Business (CODB)

20. Weighted Average Calculation: For each selection category, multiply by number of responses by the units (minutes, hours, dollars) for that selection category. Add these sums together and divide by total number of responses.

21. Question 9 Average time to complete warranty repair Weighted average = 86 mins n=56

22. Question 10 Average time to complete paperwork Weighted average = 65 mins n=55

23. Question 11 Average distance traveled for service call Weighted average = 26 miles n=56

24. Question 12 Average cost per mile for van Weighted average = $0.70 per mile n=53

25. Question 13 Average cost of tech labor: hourly wage plus allocation of management & clerical support, plus 30% burden (FICA, insurance, etc.) Weighted average = $36 per hr n=55 Note: This is not average tech wage

26. Calculation, hourly cost of tech labor

27. Question 14 Average non-labor overhead per repair tech hour Weighted average = $34 per hour n=55

28. Question 15 Average CODB per hour (Question 13 plus 14) Weighted average = $71 per hour n=53

29. Question 16 Percent of service orders that are warranty Weighted average = 14.0% n=53

30. CRC Survey, PWC Warranty Section 4: Product Reliability

31. Question 17 Percent requiring warranty service Average incidence of repair = 6.3%

32. Implications: #1 Average cost for vehicle use for each service call: $18.20 Q-11 times Q-12 = $18.20 times 2 (round trip) = $36.40

33. Implications: #2 Average cost PWC warranty repair done IN SHOP = $124 86 mins at $71/hr CODB + 65 mins at $20/hr for billing $102 + $22 = $124

34. Implications: #3 Single service call: Average cost PWC warranty repair done IN FIELD (assume 25 miles each way) = $231

35. Implications: #4 Two service calls: Average cost PWC warranty repair done IN FIELD (assume 25 miles each way) = $338

36. Implications: #5 25 Mi.50 Mi.75 Mi.100 Mi. Single service call $178$231$285$338 Two service calls $232$338$446$552 Three service calls $286$445$607$766 Additional service calls $54$107$161$214

37. Implications: #6 Minimize field service calls:  Fix with single service call  Sector routing  Incentives:  Customer  Staff

38. Now what?  Audit your cost of providing service  Compare to survey results  Identify problem areas  Review your labor rates  Budget for warranty

39. Measuring Productivity  The P&L  The 10 “Key Performance Indicators” (KPIs)

40. Measuring Productivity  Average Invoice (KPI #4)  Technician Productivity (KPI #8)

41. Measuring Productivity KPI #4: Average Invoice = Gross Sales Service Order Count

42. Measuring Productivity KPI #9: Productivity = Hours Billed Hours Available

43. Improving Productivity  Standardized labor charges  Use Flat Rate Manual  Measure productivity by technician  Set goals  Incentives

44. Closing thoughts  Expert repair techs are valuable assets to your business  Other industries have dealt with same issues  Participate in CRC  Excellent service is an opportunity