Learning to Crawl Before You Can Walk

In the middle of 2014, incadea Business Consultants ran a survey seeking answers on how effective dealerships were at upselling services. At what stage of the service lifecycle did they sell, how valuable is upselling, and what happens after the car leaves the workshop? The results of this survey will be revealed in detail within the next in.DEALER article “Upselling – Supersize Your Dealership.”

While planning the survey, we thought it would be beneficial to ask some basic questions regarding the workshop. In particular, we asked our survey participants: How do you manage your workshops? Which KPIs do you use? Which reports are then sent to the OEMs for analysis? The results of this portion of the survey were quite surprising.

Before we discuss the findings, let’s first cover the two basic yet valuable workshop KPIs.

  1. Utilization (%) refers to the relation between the time a mechanic spends working on cars and the total time spent in the workshop. For example, a mechanic might come to work at 7 a.m. and return home at 3 p.m, thereby spending 8 hours in the workshop. On the other hand, the mechanic spent 6.5 hours working on specific vehicle jobs, or doing actual repairs. The rest of the time was spent between service orders, breaks, waiting for parts or other internal activities. Therefore, the utilization of this mechanic was equal to 81% (6.5 divided by 8). Usually, efficient dealerships aim for a range of 85% to 95%.

  1. Productivity (% ) is the relation between the time that mechanic spends to perform the job, and the standard time provided by the manufacturer or the time the customer was invoiced. For example, if the standard time for replacing a windshield is invoiced as 2 hours but the mechanic has completed the job in 1.5 hours, his efficiency is equal to 133% (2 divided by 1.5). Dealerships often aim for a range of 110% to 150% to consider the performance of the mechanic as productive.

What do these values help us understand?

Utilization shows us how well we have organized the workshop processes, and how well our mechanics follow company standards. High utilization percentages indicates a well-organized team, good cooperation between the workshop and parts department, and highly efficient assignment of tasks. Productivity indicates the quality and skill level of the team. High productivity implies that our mechanics are well trained, properly equipped and experienced.

Essentially, these two basic values allow the service manager to understand how much time the mechanics and workshop have available, to be able to better plan how much time can be sold to the customers coming for service jobs.

It is very difficult to imagine running a professional service, particularly one as complex as a workshop, without knowing the utilization and productivity percentages. Those are the most basic parameters between differentiating successful and poor performers.

So what were the results of the study?

It turns out that a whopping 40% of the service managers admitted that they did not know what their utilization and productivity were, or did not calculate KPIs at all. Another 30% insisted they knew what those values were without using data, but rather based on their knowledge and experience. Let’s face it though, they were guessing. A handful of others mentioned they had rough estimates of those KPIs, which can also be seen as guessing.

The question is, how could anyone manage a service workshop without the use of such basic KPIs? Without these, it is unreliable to measure performance and impossible to strive for improvements.

But let’s set this question aside for a second. Another aspect of this tricky and challenging situation, is that nearly every dealership sends reports to the OEM regarding utilization and productivity on a monthly basis. Therefore, a significant portion of service managers are not only misleading themselves but also OEMs, causing a chain reaction of issues.

So why are so many dealerships suffering from this lack of data and analysis? Many simply lack the systems or integration, are unable to implement an appropriate process, or are experiencing resistance from their employees. The fact is, everyone needs to learn to crawl before they can walk, and often times the basics are overlooked or forgotten.

We love this industry - there is still a lot to be changed.

Rafal Jacaszek | Director Business Consulting
| Rafal.Jacaszek@incadea.com

Director Business Consulting, main tasks cover focusing on the strategic positioning of the professional services team to optimally drive the short and long term objectives of incadea customers. Rafal has over 15 years of automotive experience and has gained a significant reputation on market trends. Prior to incadea, Rafal held leading positions at General Motors Europe, being responsible for the GME Dealer Management System Project, assuring processes between GME, DMS vendors and GM Retail network in Europe. Rafal started his career with the automotive business units of EDS.