By Dustin Jones
My specialty is helping dealers squeeze every ounce of performance from their reconditioning so they get more cars sale-ready faster to save money and meet demand.
One costly error occurs when a service or recon manager reactively adds a technician to meet volume requirements and to improve shop labor efficiency. Sometimes this is the right decision, but often not.
If you face this decision, before you go any further, consider time leaks that might be in your process that when discovered and remedied would increase productivity and profitability — without adding headcount and payroll.
For one dealer in this situation, my analysis revealed an unapplied labor issue was costing the service department $6,700 a month in unrealized billable hours.
The service manager saw the loss in profitability and the technician in compensation.
How Did This Happen?
In a modern reconditioning shop, using reconditioning software, production can run 80% faster than can manual recon-tracking. A shop running so smoothly and efficiently (at first glance) may be masking problems in the details.
Thus, the importance of checking the gauges — the performance details tracked and reported by the software.
These reports help identify workflow bottlenecks, and, for example, internal technician efficiency opportunities, had the reports been evaluated more often.
In this case, a remedy for this leak was to refocus the technician on productivity goals and address management oversight and performance report analysis with the service manager.
The data I study tells me that, on average, internal tech efficiency is 68%. At this efficiency, technicians cost the business 40% of their payroll in unapplied time.
Improved Performance Overall
While the unapplied time this shop experienced was the most quantifiable loss here, poor labor efficiency also means fewer cars get through the reconditioning process promptly.
A longer-than-necessary recon workflow directly affects a recurring cost per car per day called holding cost. Holding cost control can save hundreds of thousands of dollars a year. For instance, a monthly recon volume of 100 cars at a 13-day per car recon cycle at an industry average of $40 per car per day holding cost is $52,000/month or $640,000 a year. A six-day cycle cuts that to $352,000 – a $288,88 benefit.
With renewed performance accountability again established in this shop, the unapplied time losses ceased while labor efficiency improved steadily from less than 80% toward a nine-month goal of 120%.
Dustin Jones is a performance manager for Rapid Recon. He has 14 years in the automotive aftermarket and fixed ops positions with several multi-store groups, including Lithia. He holds a Nissan Award of Excellence in Service Advising.
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