Please don’t take offense to the oblivious title — it’s just “catchy,” but after evaluating this tidbit you’ll recognize how much of the precious revenue-producing calendar clock time goes fallow. Of course, if you were a thin-skinned rascal you wouldn’t be in this high-pressure business anyway!
In the case of service and parts departments, there is nothing more contributing to their financial health than how effectively all the participants utilize and manage time. In itself, elusive clock time is an extreme challenge as a constantly vanishing inventory to govern. No matter how hard a service manager tries to secure it, the dang second/minute/hour inventory keeps disappearing like a good-writing pen.
Boo hiss
Look at it this way, a simple six-technician shop functioning at 100% output, eight-hour day, $80 overall effective labor rate, creates daily labor sales of $3,840 — a significant amount of loot. Say, Bubba the tech isn’t up to producing today (gator wrestlin– night before wore him out), so he only produces labor at 50% output — needing four hours of recuperation. Here’s the loss, four hours x $80 = $320. Liken that to chucking $600 worth of new parts (at 40% GP) out the back door the same day — no difference.
Take training days for instance, the larger cost of training isn’t what is paid to the tech or his/her expenses, it’s the loss of revenue. In this example: eight hours x $80 = $640 (plus parts) per day.
Just for grins I developed an Excel spreadsheet calculating calendar time, shop clock time and technician clock time relationships, which revealed some interesting stats. There are 8,760 clock hours in one year, all available to produce income theoretically. A shop that is open the typical 10 hours-a-day Monday–Wednesday, open late Thursday 12 hours, Friday 9 hours, and Saturday 6 hours creates a total of 57 weekly hours, creating income-producing time of 2,964 hours annually.
Holiday blah
Take out Christmas, New Year, Memorial & Labor Days, July 4th and Thanksgiving, and the available potential income-producing hours drops to 2,904, a loss of 60 hours. In the six-tech shop at 100% output, the holiday loss is 360 flat rate hours, $28,800 at an $80 ELR –holidays are expensive indeed. Taking another half day here or there is a revenue loss of $1,920 each. In this aforementioned scenario, the shop hours are only 33% of the total available, so 67% of the available clock time the shop doors are locked. Keep in mind that expenses are generated the entire 8,760 hours, and when technicians aren’t present, the shop hours aren’t income producing.
Speaking of techs, I did some central calculations regarding these important money-generators. A tech working 40 hours a week would have a potential for generating revenue 2,080 clock hours annually. Unfortunately, when I deducted the typical vacation/training/holiday/other (i.e. too much tequila) days out, the total dropped 136 hours ($10,880 in revenue), which is 7% of the 2,080 annual hours. So, the typical tech contributes only 93% of their total available clock time. Apply tech clock time to the entire year’s opportunity, and a tech is available to generate gross profit (pay bills) a meager 22% of the total time expenses are being generated — take out the tool truck/cell phone/smoking/parts counter BS/etc., breaks and the miniscule 22% deteriorates quickly.
Ouchie
To cap off my modest study, I calculated that an average technician annually worked 960 hours less than the available time the shop is actually open. That revenue loss is a heady $76,800 using the same figure for ELR. The obvious conclusion is that dealer service departments do not utilize much of the available clock time in which expenses are being generated. Of course, some dealer groups and individual dealers (I swear I saw one last week), are beginning to study how effectively they could utilize evenings, nights and even Sunday clock hours.
I envision that in many urban markets, aggressive dealer operators will begin opening the same hours as quick service and big box stores currently do, and dealer techs and support staff will have to deal with what many aftermarket techs are already dealing with — odd hours and days.
If you want to run your own facility/technician study on my Excel worksheet, just e-mail me at [email protected] and put on the subject line “More Hours –U Gotta Be Kidding.” As they say: “Competition makes us better? –they just left out — and more tired.” The good news is that a little sweat might be the difference in survival or not.
