Have you ever wondered or even considered how similar our Parts and Service Business is to the restaurant business? In both service industries, sales and profitability is often determined by shear numbers and volume. Both industries also focus heavily on time, meaning how efficient we utilize our "inventory of time".
Also, in both industries, time is a "perishable inventory" that we can never retrieve or get back. With that said, we could compare "turning the tables" in the restaurant business to our "Service Cycle Times".
As a matter of fact, they are so similar that my partner, Guy Salkeld, who heads up our Service Division, has actually conducted restaurant training with many of our service processes that actually "dovetail" quite nicely into the restaurant business.
In comparison, having a dinner party of ten people occupying a big table for two hours instead of maybe one hour could be as costly as let's say an engine job in the shop that pays 15.0 hours flat rate for close to thirty hours in clock time.
In each scenario, starting with the restaurant business, we probably could have waited on two parties of ten people in the same time period, thus increasing "efficiency" two fold. In our business, on the engine job scenario, we could have done two engine jobs in the same time frame if we were 100% efficient and productive.
Before we break down and focus on our part in "Service Cycle Times", let's see how extremely similar the restaurant business is to our parts and service business by matching up these similarities.
Restaurant Industry: Tables
Automotive Service Industry: Service Bays
Restaurant Industry: Waiters/Cooks
Automotive Service Industry: Technicians
Restaurant Industry: Inventory - Food Products
Automotive Service Industry: Inventory - Automotive Parts
Restaurant Industry: Food/Drink Menus
Automotive Service Industry: Vehicle Maintenance Menus
Restaurant Business: Waiters/Bartenders
Automotive Service Industry: Service Advisors/Parts Counter Staff
Restaurant Industry: Food Inventory/Food Shelf Life
Automotive Service Industry: Parts Inventory/Obsolescence
Restaurant Industry: Food/Menu Selection
Automotive Service Industry: Parts Inventory Breadth
Restaurant Industry: Tips
Automotive Service Industry: Incentives/Commissions
Restaurant Industry: Food Deliveries
Automotive Service Industry: Parts Deliveries
Both Industries also share other similarities such as; management levels, sales greeters, "sales per ticket" goals and guidelines, sales training, word track training, as well as many other similarities that I may have not mentioned.
So, how does our part in contributing to "Service Cycle Times" affect our overall Parts and Service Sales and Profitability?
Could you just imagine going into a restaurant and selecting something on the menu that you really want that would satisfy your taste buds and looking forward to, or maybe even that certain dinner cocktail or wine selection only to find out that they ran out?
This is exactly what I'm referring to when it comes down to doing our part in the "Service Cycle Time" Process. The costs in both industries are again similar and could impact overall sales and profitability and more important...Customer Retention.
Now down to the "nitty gritty"....
One of the most unique excel calculators I have can actually detail the overall cost of not having the "right part at the right time", or what I refer to as having the right "First Time Off Shelf Fill Rates". According to NADA, (which I truly agree with), we should have a "First Time Off Shelf Fill Rate" of 80% - 90%.
In many stores that I have visited, these "First Time Off Shelf Fill Rates" are below 50% and some way below 50%. If we use the restaurant scenario, I don't think we would be going back to that restaurant if they didn't have our food or drink selection less than 50% of the time.
Now, let's look at the overall cost of having a "First Time Off Shelf Fill Rate" less than 50%...
According to Automotive Service Industry studies by NADA and others, the average technician, (excluding Express Services), works on 5 - 6 repairs orders per day, pending the manufacturer of course and that same technician spends an average of 5 - 7 minutes at the parts counter, looking up and retrieving parts, (excluding dealers with a parts delivery system to technicians).
This totals up to an "accepted technician down time" of approximately 25 - 40 minutes per day of lost service productivity. Unless the parts department has a parts delivery process to their technicians, this lost time has and is usually acceptable as long as the Service Department maintains an accepted overall productivity to NADA Guidelines, (100% - 125%).
Although, in many Service Departments across the country, productivity percentages are well below industry standards. In my own personal research and experience, when the parts "First Time Off Shelf Fill Rates" are below 50%, the added time spent by the technician at the parts counter, or even waiting for parts to be chased down has doubled the technician lost productivity number.
That being said, if I doubled the lost productivity percentage due to lower than desired "First Time Off Shelf Fill Rates", I would lose at least 30 minutes per day, per technician that I can never get back as time is a perishable inventory.
Now, let's do the math....
Let's use that 30 minutes as a potential lost productivity number per technician along with the following examples as a guideline;
Number of Technicians on Staff: 10
Current Overall Effective Labor Rate: $100.00
Current Overall Labor Gross Profit %: 72%
Current Shop Productivity: 90%
Current Number of "Billable Hours" Produced Monthly: 1500
Current Overall Parts Retained Gross Profit %: 40%
Current Parts to Labor Ratio: 100%
Current Hours of Operation Per Day: 8
Current Number of Days Per Week: 5
Now that we have the basic information tabulated, it's time to break down the lost productivity into potential lost sales and gross profit in both parts and service with just utilizing these 30 minutes as our guideline;
Lost Labor Sales Daily: $500.00
Lost Parts Sales Daily: $500.00
Lost Labor Gross Profit Daily: $360.00
Lost Parts Gross Profit Daily: $210.00
Lost Labor Sales Monthly: $10,500.00
Lost Parts Sales Monthly: $10,500.00
Lost Labor Gross Monthly: $7,560.00
Lost Parts Gross Monthly: $4,410.00
Lost Labor Sales Annually: $126,000.00
Lost Parts Sales Annually: $126,000.00
Lost Labor Gross Annually: $90,720.00
Lost Parts Gross Annually: $52,920.00
Total Lost Sales Annually: $252,000.00
Total Lost Gross Annually: 143,640.00
Even if we were able to capture 70% of that lost gross profit annually, it would still be an additional $100,000.00 in total gross profit annually. I don't know about you, but I would take that additional gross any day. In vehicle sales numbers, that would equate to an additional average unit sales in excess of 40 to 50 units annually.
The bottom line is that this lost gross profit in both parts and labor is real money and it can be obtained by focusing on our "First Time Off Shelf Fill Rates". In my opinion, that's our number one priority as "Smart Parts" Managers.
Utilizing the proper Set Ups & Controls in our own Dealer Management Systems, (D.M.S.) and not just focusing on our Vendor Management Inventory, (V.M.I.) offered by the manufacturers can highly impact these "First Time Off Shelf Fill Rate" numbers.
Final questions are...are you doing your part in "turning the tables" in your restaurant?....are your customers not coming back because you ran out of food at your restaurant? Very simple questions but very "eye opening" when we look at the our role in "Service Cycle Times" in a different light.
Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTM. The only "Results Based" High Return Training, Coaching, and Consulting company in the world! Dave can be reached at Cell 786-521-1720 or E-mail at dave@smartservicetraining.com Vist our Website at www.smartpartstraining.com
No comments:
Post a Comment