Download - Making Money in Repair from Intent to Implementation Dick Fuller The MED Group August 6, 2008
Making Money in Repair
from Intent to Implementation
Dick FullerThe MED Group
August 6, 2008
Objective
Learn how to more effectively manage your service operation
Agenda for today
Overview of service industry
How much does it really cost to provide service
Measuring productivity
Implementation
Assumptions: Have ongoing service operation
Trained and competent techs
Policies and procedures in effect
Quality assurance controls
Adequate facility with proper tools and equipment
Service industry history:
1887 Richard Sears and Alvah Roebuck
Early 1900’s automotive growth
1887 Richard Sears and Alvah Roebuck
Early 1900’s automotive growth
1887 Richard Sears and Alvah Roebuck
Early 1900’s automotive growth
The HME service department
Range of products
Changing technology
Many low volume products
Custom products
Reimbursement issues
Liability exposure
Cost of providing service
CRC Survey on PWC Warranty Costs
Purpose
Methodology
Limitations
n=60
CRC Survey, PWC Warranty
4 Sections:
Location of service
Field service
CODB
Product reliability Implications
CRC Survey, PWC Warranty
Section 1: Where service is done
Question 1Percent warranty done in-home
0-25% 32% of respondents
25-50% 25%
50-75% 25%
75-100% 18%
n=56
Question 2Percent warranty done in shop
0-25% 32% of respondents
25-50% 25%
50-75% 27%
75-100% 16%
n=56
Question 3Percent warranty done in facility
0-25% 91% of respondents25-50% 7%50-75% 2%75-100% 0%
n=56
CRC Survey, PWC Warranty
Section 2: Field service calls
Question 5Single service call to complete job
0-25% 59% of respondents
25-50% 23%
50-75% 7%
75-100% 11%
n=56
Question 6Two service calls to complete job
0-25% 7% of respondents
25-50% 23%
50-75% 27%
75-100% 43%
n=56
Question 7Three or more service calls to complete job
0-25% 86% of respondents
25-50% 9%
50-75% 0%
75-100% 5%
n=56
CRC Survey, PWC Warranty
Section 3: Cost of Doing Business
(CODB)
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.
Question 9Average time to complete warranty repair
Weighted average = 86 minsn=56
Question 10Average time to complete paperwork
Weighted average = 65 mins
n=55
Question 11Average distance traveled for service call
Weighted average = 26 miles
n=56
Question 12Average cost per mile for van
Weighted average = $0.70 per mile
n=53
Question 13Average cost of tech labor: hourly wage plus allocation of management & clerical support, plus 30% burden (FICA, insurance, etc.)
Weighted average = $36 per hrn=55
Note: This is not average tech wage
Calculation, hourly cost of tech labor
Number of techs 6Average wage for techs 15.00Add 30% to above 4.50Allocation of Service Manager salary (per hr per tech) 3.33Allocation of clerical wage 2.50Allocation of Senior Management salaries 5.00
Hourly tech labor cost 36.33
Question 14Average non-labor overhead per repair tech hour
Weighted average = $34 per hour
n=55
Question 15Average CODB per hour (Question 13 plus 14)
Weighted average = $71 per hour
n=53
Question 16Percent of service orders that are warranty
Weighted average = 14.0%
n=53
CRC Survey, PWC Warranty
Section 4: Product Reliability
Question 17Percent requiring warranty service
Average incidence of repair = 6.3%
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
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
Implications:#3
Single service call:
Average cost PWC warranty repair done IN FIELD (assume 25 miles each way) = $231
Implications:#4
Two service calls:
Average cost PWC warranty repair done IN FIELD (assume 25 miles each way) = $338
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
Implications:#6
Minimize field service calls: Fix with single service call Sector routing Incentives:
Customer Staff
Now what?
Audit your cost of providing service
Compare to survey results
Identify problem areas
Review your labor rates
Budget for warranty
Measuring Productivity
The P&L
The 10 “Key Performance Indicators” (KPIs)
Measuring Productivity
Average Invoice (KPI #4)
Technician Productivity (KPI #8)
Measuring ProductivityKPI #4:
Average Invoice =Gross Sales
Service Order Count
Measuring ProductivityKPI #9:
Productivity =Hours Billed
Hours Available
Improving Productivity
Standardized labor charges
Use Flat Rate Manual
Measure productivity by technician
Set goals
Incentives
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