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Automotive Service Management Newsletter
Vol 1, No 1, January 2007

Time is Money, Part 1 - Where did the Time Go?

I know this is no big news but let's face it, the only commodity that is sold in service is Labor Hours, parts just happen to go along with them. The only source of those Labor Hours is based on how technicians use their time while at work to generate those Labor Hours.

I have been working with automotive service departments for over 20 years now. I have discovered something that fascinates me in that many service managers do a marginal to poor job of tracking technician time or just don't know how.

Many managers have gotten too dependent on computer generated reports and forget one simple rule of using a computer, garbage in/garbage out. All may not be as well as it seems when relying on these reports because a service department can be making money while losing money because the service manager is not accurately tracking the use of technician time while at work.

So as redundant as this may seem, I decided in this first newsletter to address the most important aspect of a profitable service department, maximizing the Labor Hours available to sell everyday.

Let's start with knowing the amount of inventory, Labor Hours, available to sell on a daily basis. The reason to focus on a daily basis is that staffing can be different everyday due to technicians out on training, sick leave, vacation and so on.

To accurately figure your Labor Hour inventory every day, you must make sure that you are properly tracking four types of time that are controlled by the technicians - Available Time, Actual Time, "W" Time (nonproductive, non-repair times) and Labor Hours. I find that many managers are not aware of "W" time, what it is and how to track it, yet the accurate tracking of this time is critical to understanding what your techs are doing when not working on a repair.

Available time is the amount of time a technician is "available" to do work and is tracked on the standard employee's time card. For example, the technician punches "in" when starting work in the morning, punches "out" for the morning break, "in" after break, "out" for lunch, "in" when returning from lunch, "out" for the afternoon break, "in" after that break, then "out" went the technicians leaves work for the day. And it would look like this on the time card:

IN - 8:00 am
OUT (for break) - 10:00 am (2 hours)
IN - 10:15 am
OUT (for lunch) - 12:00 pm (1:45 hrs)
IN - 1:00 pm
OUT (for break) - 2:45 pm (1:45 hrs)
IN - 3:00 pm
OUT (end of day) - 5:30 pm (2:30 hours)
Total - 8 hours Available Time

Actual time is literally the actual time spent working on a repair. When a technician is dispatched a job, the Actual time for that job is started. Here is where many managers lose track of Actual time. When the technician has to do anything else than work directly on that job, then the tech should be punched "out" on that job and that time becomes "W" time.

"W" time is what the tech is doing when not directly working on a repair. It should be documented as to what the technician was doing when off the repair like getting parts, looking for and studying TSB's, contacting a repair hot line, getting a new job from the dispatcher, to give a few examples.

Labor Hours are a fixed time. Labor Hours are set by a labor guide, either for warranty or customer pay. Each has its own guidelines. Many managers currently set customer pay guidelines on 1.5 times the warranty pay guidelines from the manufacturer.

Let's say I dispatch a job to a technician that pays 1 Labor Hour and clock that tech onto that repair. During the repair the tech has to get parts, but there are several techs also at the parts counter causing an extra 15 minutes to complete the repair due to waiting for ordering the parts. When finishing with the repair, the tech turns in the repair to dispatch or clocks off of it if the service department uses electronic dispatching, and the total time to complete the repair is 1 hour and 5 minutes. The shop just lost money on that repair, yet the tech did the repair in an efficient manner.

How do I know this? We need to look at how the time needs to be recorded during the job, then how to measure the results of the technician's performance.

When the tech needed to get parts, the tech should have been clocked off the job. This would create "W" time. The "W" time should have been documented for "parts retrieval" indicating that the tech went to the parts counter to order and retrieve a part. After receiving the parts, the tech should have been clocked back on the job, then off when it was finished. The techs time tracking would look like this:

Start - RO #1583 - 00:00
Off - 30:00 - parts retrieval
On - 45:00 - return to RO #1583
Off - 1:05:00 - End of Repair
Actual Time on repair - 50 minutes
"W" Time - Parts retrieval - 15 minutes

If "W" time had not been tracked it would appear that the tech spent 1:05 hours on the repair resulting in a 92% efficiency on the repair, showing the shop losing money. However, using the 50 minutes of Actual time was spent on the repair, then we would be seeing a 120% efficiency rating showing the tech did an excellent job on the repair and the shop made money.

Still, the shop lost money on the repair due to the backup at the parts counter. The good news is that we have a tracking tool to see the area during the repair where the tech was not spending "Actual" time on the repair.

If this trend continues during the day for one technician, after doing 7 repairs, the tech would lose 1 hour 45 minutes at the parts counter, contacting manufacturer tech support or studying TSB's, on different repairs. Multiply that times 6-9 techs in a shop and the shop would be losing a lot of money each day, though probably showing a profit at the same time.

So where did I get the Efficiency Rating? Is it based on this formula (remember, you need to be as smart, if not smarter, than the computer):

Labor Hours / (divided by) Actual time = Efficiency Percentage

The National Auto Dealers Association recommends that Technician Efficiency should be in a range of 115-125%.

So the first step is to start making sure that the technicians are properly logging on and off jobs accurately, then properly documenting "W" time. This will help the manager and the technicians analyze how to minimize "W" time to maximize overall Technician Efficiency to insure profitable repairs.

In Part 2, I will go into more detail about the other formulas you need to use to look at Technician Productivity and Shop Capacity to increase profits in the service department.

Copyright, 2006, J. Daniel Emmanuel

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