Production performance in the service department is measured in various ways, but measuring flat-rate hours per repair order alone is no longer the key ingredient to success.
In fact, it may provide misleading information. One recent marriage of performance indicators has been the coming together of flat-rate hours (FRH) with the blushing bride known as parts.
Analyzing these together produces a stronger measurement of performance.
The chart at right compares individual sales performance by service writers who produced 300 repair orders per month.
If “total hours sold” were the only measurement, Jones would be the top producer with 471 hours. However, adding total parts sales shows Smith had $9,222 more total sales with fewer hours.
In examining our operations for both parts and labor, look at the following:
- Work Mix
Understanding how much repair work vs. maintenance makes up your work mix helps determine how customers are using your service department. You will have higher parts sales per flat rate hour when repair business is a big part of the work mix. Repairs typically involve more parts.
- Parts Matrix Pricing
Most dealer computer systems include a parts matrix-pricing tool. It can boost parts sales per FRH. Are you using yours?
- Courtesy Inspections
These can increase repair volume and affect your work mix. Increase parts sales per FRH by offering courtesy multi-point inspections to every customer.
- Tire Sales
They will boost average parts prices because of the larger dollar volumes associated with tire sales.
- Sales Training
Many service advisors are uncomfortable “selling.” They may need training. An advisor who confidently presents products will enjoy a higher level of parts sales per FRH.
- Technician Skills
A technician's skill level can influence parts sales per FRH. Highly skilled technicians will find more service and repair opportunities and recommend needed services.
- Technician Opinions
One technician may like to rebuild assemblies and another may wish to use a new replacement assembly. A technician may not provide the opportunity for the customer to decide on a service.
- Parts Inventory Image
Technicians with low confidence in the ability to acquire parts in a timely fashion may have lower parts sales per FRH. It is not uncommon to hear “They won't have the part, so why recommend it?”
- Belief in the Advisors' Ability to Sell
If technicians lack the confidence that service advisors can present and close services they have recommended, technicians reduce what they find, hurting labor and parts sales.
- Philosophy of the Service Manager
A service manager who strongly believes in dealer-recommended services, such as fluid replacements, will positively impact the parts sales per FRH.
- Factory Recommended Maintenance
If the service advisors do not believe in the factory recommended maintenance program, they may not present services to customers. Maintenance menus may be abandoned in drawers and cabinets.
- Pay Plans for Technicians
Can a difference be expected in parts sales per FRH in a shop that uses hourly vs. flat rate technicians? Flat-rate technicians are typically more aggressive at generating production hours.
Understand and examine your fixed operations in both parts sales and labor sales. Doing so means higher profits.
Lee Harkins and co-author Jon Freier are with ATcon, located in Birmingham AL. Contact them at 800-692-2719 or [email protected] and [email protected].
Questions or comments about this column? Send us an e-mail at [email protected].
| Advisor | Repairs Orders | × | Hours per Repair Order | = | Hours Sold | × | Effective. Labor Rate | = | Total Labor Sales | Parts Sales Per FRH | Total Parts Sales | Total Parts & Labor Sales |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Smith | 300 | × | 1.28 | = | 384 | × | $69.00 | = | $26,496 | $86.48 | $33,208 | $59,704 |
| Jones | 300 | × | 1.57 | = | 471 | × | $69.00 | = | $32,499 | $38.18 | $17,983 | $50,482 |
