Professional Documents
Culture Documents
Utilization Efficiency
Hours Worked ➗ Hours Attended (✖100) Hours Sold ➗ Hours Worked (✖100)
Ø The route to success with the service department is to keep the technicians working faster than the allocated
job :mes & filling the :me you have gained with addi:onal work.
Ø The best service manager in the industry are not good at doing one thing, they are good at keeping everything
in balance.
Technical Efficiency
Ø A business can survive a long 0me without profit, but it can’t survive a single day without cash.
Department Profit %
Ø Keeping track of the profit % on monthly basis so that you can see the trends that are emerging.
Department Expenses %
Ø it can be very misleading because the overall gross profit result is influenced by the shiEing volumes of labour
sales, sub contract & oil sales, so avoid this one & stay with the gross profit for each individual income stream
so you can see the shiEing trends of each sector rather than mere average.
Ø It is indicaHve of a dealership’s pricing policies& measure of return on assets.
Diverted Time
Ø It is important to keep track of the numbers of hours sold as it is to keep track of their monetary value.
Ø The monetary value of the hours sold can be influenced by the charge out rates & recovery rate & this doesn’t
therefore provide you with an accurate reflecFon of the direcFon of the business, but the rather that of
discounFng where it is applicable.
Ø Keep in mind that it may be possible for the service advisor to influence this figure by discounFng the hours
sold, rather than the labour rate & it is also influenced by the skill of the service advisor to idenFfy all of the
work that’s been conducted to dell it effecFvely to the customer.
Hours Sold per Parc
1. Hours worked produc(vity (Clocked onto jobs - This is found within the Labour cost of sales)
2. Idle (me (In aIendance, but not clocked onto jobs - This is found within the Direct Expenses)
3. Rec(fica(on (rec(fica(on & goodwill - This is found within the Direct Expenses)
4. Holidays, sickness & training (Not in aIendance - This is found within the In-Direct Expenses)
Ø It is only hours worked produc(vely that is represented in the labour cost of sales.
Ø The other three categories are classified expenses.
Ø If the management accounts are not structed in this way, then you may be blind to any problem or
opportuni(es that may exist.
Labour Gross Profit
Ø If you have other streams of income such as budget service or fleet contract, these too should be analyzed to
assess the sales mix of the workshop.
Ø Understanding the work mix can help for markeJng Programmes, customer retenJon & the reliance upon
internal & warranty work.
Lead Time
1. In which income stream is the discount being given? You need calculate the recovery rates for retail, internal
& warranty.
2. How can you baseline this performance to compare against other dealerships? You can ascertain this by
calculaJng the recovery rate % for each income stream.
Recovery Rate (Sector Breakdown)
1. Rent
2. DepreciaBon
3. Taxes
4. Insurance
5. UBliBes
6. Repairs & maintenance
Ø Fixed Expenses are shown as a monetary value & in order to capture meaningful trend analysis you will need to
express as a percentage of department turnover.
Semi-Fixed Expenses %
Ø Semi-Fixed Expenses are shown as a monetary value & in order to capture meaningful trend analysis you will
need to express as a percentage of department turnover.
Ø The reason that called Semi-Fixed is that they are fixed each month irrespecFve of sales volume but the
directors of the business decide those expenses are fixed.
Personnel Expenses %
1. Compensa9on – supervision
2. Compensa9on – clerical
3. Other salaries & wages
4. Payroll taxes
5. Pensions
6. Advisors pay
7. Uniform
8. Absentee compensa9on
Ø Personnel Expenses are shown as a monetary value & in order to capture meaningful trend analysis you will
need to express as a percentage of department turnover.
Service Sales per Parc Unit
Total Number of Days Worked Annually➗ Total Annual Days Planned to be Worked
Purpose: Budget & Composite Analysis
Ø Calendar U*liza*on is a comparison of the number of days worked versus the days planned for work, expressed
as a percentage.
Effec%ve Labor Cost
Hours Worked Per Day X Produc<vity X Work Days Available X Calendar U<liza<on
X Overall Effec<ve Labor Rate
Purpose: Budget & Composite Analysis
Ø Monthly Technician Labor Sales Value is the average monthly labor sales value per technician.
Number of Technicians Needed
1. Benchmark: is used when the performance is to be restricted between an upper limit & lower limit & always
consist of two numbers.
2. A Benchmark suggests that you should reach a given level of performance & maintain it.
3. Baselines: is used when you want to express a star?ng point for a given area of performance, this is a minimum
expecta?on.
4. Baseline suggests that you should reach a given level of performance as an absolute minimum & you should
con?nue to develop the area even further.
5. Benchmarks & Baselines are NOT targets to be achieved there are reference points.
6. Technicians do not sell hours, that's the job of the Service Advisor or the EsJmator.
7. AcJons are causes & Results are effects.
8. If you want to change the effects in your business, you MUST change the causes.
9. All KPIs are effects, it's your job to correctly idenJfy the causes.
10.Your task is to learn how to read the results & track the trends between the efficiencies to help you to
develop strategies & move your business in the right direcJon.
11.Allocated Job Times: This represents the ?me allowed or the ?me gives to a Technician to complete a job, it is
not the same as the Hours Sold.
12.The allocated job ?me is generated in one of two ways:
A. In franchised dealership: manufacturer's book ?mes should be used as the allocated job ?me for Technician
to complete the work & it Not always the same as the Hours Sold.
B.In independent workshop: you will need to allocate a job 9me yourself based upon how long you believe the
job should take which will be based on your own technical knowledge & experience with the task in hand & of
course the customer es9mate.
13. The top achievers have well trained service Advisors who clearly understand the manufacture's book 9mes &
their own DMS.
Auto Service Department KPIs Digest
S KPI Benchmarks/Baseline/Purpose Remarks
1. This is NOT measure of Technician's Efficiency, it's measures
against the Hours Sold. 2. The
1 Efficiency = Hours Sold / Hours Worked (X 100) Benchmarks: 110% to 125%
responsibility of the Hours Sold sits firmly with the Service
Advisor.
1. The danger here is that if technicians slow down, Utilization
2 Utilization = Hours Worked / Hours Attended (X 100) Benchmarks: 85% to 95% will increase, so it must be analyzed. 2. Idle Time =
Hours attended - Hours Worked
1. This KPI measures the abilities of the Manager, the Technicians
& the front counter staff to control the whole workshop.
3 Productivity = Hours Sold / Hours Attended (X 100) Benchmarks: 93.5% to 118.75% 2. here's the Key … In the time the Technicians have saved by
working quickly, you must load additional jobs into the time saved
or you will just be left with Idle time. 3. Workshop
with high levels of Productivity have high levels of profit.
1. This KPI measures the speed at which Technician complete
4 Technical Efficiency = Allocated Job Time / Hours Worked (X 100) Benchmarks: 95% to 105%
their jobs compared with Flat Rate Times.
A business can survive a long time without profit, but it can’t
5 Debtor Days = Service Debtors Service Daily Credit Turnover Baseline: 45 days
survive a single day without cash.
Keeping track of the profit % on monthly basis so that you can see
6 Department Profit % = Department Profit Turnover (X 100) Baseline: 35%
the trends that are emerging.
Keeping track of the Department Expenses % on monthly basis so
7 Department Expenses % = Department Expenses Turnover (X 100) Baseline: Own Strategy
that you can see the trends that are emerging.
1. Within the service department there are two levels of gross
profit that are measured 2. it can be very
misleading because the overall gross profit result is influenced by
8 Department Gross Profit % = Department Gross Profit Turnover (X 100) Baseline: 65% the shifting volumes of labour sales, sub contract & oil sales, so
avoid this one & stay with the gross profit for each individual
income stream so you can see the shifting trends of each sector
rather than mere average.
1. The diverted hours exchange to monetary value which usually
will be found with the variable expenses of the service
department. 2. There’s often a
9 Diverted Time = Hours Attended - Hours Worked Benchmarks: 5% to 15% of the Hours Attended big misunderstanding of diverted time which refer to has not
been sold this incorrect, the truth the technicians time has not
been worked. 3. The technician don’t sells hours,
they work hours, it’s service advisor play role selling the hours.
Factors that will influence the number of hours attended are the
10 Hours Attended = Total number of hours available to work Baseline: Own Strategy times spent on training courses, time off on holidays & absence,
all of these factors should be analyzed separately.
1. Hours bought is never used in the KPIs because the technicians
are not available to be utilized when they are on holiday, absent
11 Hours Bought = Total number of hours paid to technicians Baseline: Own Strategy or on training. 2.The hours bought are used
for the budgets & business plans because you need to know the
total financial exposure you have with technicians.
Keep in mind that it may be possible for the service advisor to
influence this figure by discounting the hours sold, rather than the
Baseline: 70% Retail, 20% Internal, 10%
12 Hours Sold = Total number of hours invoiced to the customer labour rate & it is also influenced by the skill of the service advisor
Warranty
to identify all of the work that’s been conducted to dell it
effectively to the customer.
1. This is not a day-to-day operational measure in the service
department, but it might be useful when putting a business plan
or a budget when comparing the performance with the previous
13 Hours Sold per Job Card = Hours Sold Number of the Job Cards Purpose: Budget & Composite Analysis
year. 2. You can see also the separation
between retail hours sold per job card, internal hours sold per job
card & warranty hours sold per warranty job card.
1. You have ask yourself a question about the age profile of the
vehicles that your dealership attracts. 2. It would be
far more variable to this statics calculated on a year-by-year basis
14 Hours Sold per Parc = Annualized Hours Sold Number of Vehicles in Parc Purpose: Budget & Composite Analysis
& model-by-model basis too, this will provide with a more realistic
& accurate figure with which to measure the territory penetration
& retention.
1. It is NOT a day-to-day operational measure within a service
department. 2. This KPI is often
15 Hours Sold per Technician = Hours Sold Number of Technicians Purpose: Budget & Composite Analysis misinterpreted because it suggests that technicians are
responsible for the hours sold, which of course is INCORECT,
technicians are responsible for the the hours worked.
There is only one way to accurately capture the number of hours
16 Hours Worked = Hours attended - Idle Time Benchmarks: 85% to 95% of the Hours Attended worked & that is for each technician to clock on & off each
individual customer concern.
It is only hours worked productively that is represented in the
17 Labour cost of sales = The money paid to technicians for the Hours Worked Baseline: 25% of Labour Sales
labour cost of sales.
The definition is the invoice value of the hours sold minus the
18 Labour Gross Profit = Labour Sales – Labour Cost of Sales Baseline: 75% of Labour Sales
money paid to the technicians for the hours worked.
This KPI asks what percentages of gross profit you have retained
19 Labour Gross Profit % = Labour Gross Profit Labour Sales (X 100) Baseline: 75% of Labour Sales from the hours sold after you have paid the technicians for the
time taken to complete the work.
This KPI asks what percentages of gross profit you have retained
Baseline: 70% Retail, 20% Internal, 10%
20 Labour Sales Mix = (Sector) Hours Sold Total Hours Sold (X 100) from the hours sold after you have paid the technicians for the
Warranty
time taken to complete the work.
A long lead time of seven to ten days is not generally understood
21 Lead Time = “I want my vehicle serviced, when you can fit it in” Baseline: 3 days or less nor accepted by customers & usually results in them taking their
vehicles elsewhere forever!
Most manufactures'’ financial reports show this statistic within
22 Oil & Lubricants Profitability = Oil Gross Profit Oil Sales (X 100) Baseline: 40%
the service department for trend analysis.
The only way to flatten out the size difference between large &
23 Parts Sales per Hours Sold = Invoiced Parts Sales to the Workshop Hours Sold Purpose: Budgeting & Composite Analysis small dealerships is to divide the parts sales by hours sold to give
more kind of average.
You should be aware of parts sold into each income stream of
Parts Sales Mix per Hour Sold = (Sector) Invoiced Parts Sales to the Workshop
24 Purpose: Budgeting & Composite Analysis service department because each income stream will be different
(Sector) Hours Sold
for every specific reasons.
Parts Sales per Technician Invoiced Parts Sales to the Workshop Number of The first thing to point out is that this is not an operational
25 Purpose: Budgeting & Composite Analysis
Technicians measure because technicians don’t sell parts.
A hours worked on the vehicle should be charged at cost price &
26 Policy Costs = Certainly, we’ll rectify that as a gesture of goodwill Baseline: Own Strategy shown in the management accounts in the semi-fixed expenses as
policy cost.
If the productive ratio is lower than 3:1 you could be over-staffed
27 Productive Ratio = Number of Technicians Number of Staff Baseline: Circa 3:1
or in a small or new start up business.
The recovery rate is asking how much revenue you have
28 Recovery Rate (Overall) = Total Labour Sales Total Hours Sold Baseline: Not Applicable
recovered per hour sold after any discount.
Here you can see the recovery rate for each sector, but it’s pretty
29 Recovery Rate (Sector Breakdown) = Sector Labour Sales Sector Hours Sold Baseline: Own Strategy
useless unless you match them to the charge out rates.
This KPI is simply asking what percentage of the charge out rates
30 Recovery Rate % (Overall) = Recovery Rate Charge Out Rate (X 100) Baseline: Dependent upon Labour Sales Mix are begin retained so it can be accurately compared (discounting
& retention).
You can use this KPI to isolate the discounting & then take the
31 Recovery Rate % (Retail) = Retail Recovery Rate Retail Charge Out Rate (X 100) Baseline: 90%
necessary action to prevent the discounting if deemed necessary.
The term internal represents work conducted by the service
32 Recovery Rate % (Internal) = Internal Recovery Rate Internal Charge Out Rate (X 100) Baseline: 98%
department that will be charged to the sales department.
Although the warranty labour sales will reduce on the dealer
Recovery Rate % (Warranty) = Warranty Recovery Rate Warranty Charge Out Rate (X management system, the hours sold may remain the same, you
33 Baseline: 98%
100) will see a reduction in the reduction in the warranty recovery rate
% hence the baseline of 98%
This KPI is used to level the playing field within a composite report
34 Repair Orders per Technician = Number of Repair Orders Number of Technician Purpose: Budgeting & Composite Analysis
so as to compare a large dealer with a small dealer.
When you wish to compare the performance with another dealer
it is often difficult to gain an accurate measurement by using
labour sales or the number of hours sold because no two
35 Retail Hours Sold per Retail Repair Order = Retail Hours Sold Retail Repair Order Purpose: Budgeting & Composite Analysis
dealerships are the same, this why manufactures'’ composites &
inter-firm comparisons create this statics in an attempt to make
fair comparison.
This strong indicator of the service manager’s ability to grow the
36 Retail : Internal Ratio = Retail Hours Sold Internal Hours Sold Baseline: 2.5:1
workshop without the reliance upon internal & warranty work.
The problem here is that technicians are not responsible for the
37 Revenue per Technician = Department Turnover Number of Technician Purpose: Budgeting & Composite Analysis
turnover.
They represents those expenses that have to pay to keep the
38 Fixed Expenses % = Fixed Expenses Total Turnover (X 100) Baseline: Own Strategy
department running whether sell anything or not
The reason that called Semi-Fixed is that they are fixed each
39 Semi-Fixed Expenses % = Semi-Fixed Expenses Total Turnover (X 100) Baseline: Own Strategy month irrespective of sales volume but the directors of the
business decide those expenses are fixed.
They represents any expense that is associated with payroll or
40 Personnel Expenses % = Personnel Expenses Total Turnover (X 100) Baseline: Own Strategy
employee benefits.
Be sure to obtain the correct interpretation from the respective
41 Service Sales per Parc Unit = Annualized Labour Sales Vehicle in Parc Purpose: Budgeting & Composite Analysis
manufacture.
Sub Contract refers to the jobs that you take in & undertake a 3rd
42 Sub Contract Profitability = Sub Contract GP Sub Contract Sales (X 100) Baseline: 20%
party to conduct on behalf, an example fitting of windscreen.
Variable expenses are those expenses that are directly linked to
43 Variable Expenses = Variable Expenses Total Turnover (X 100) Baseline: Own Strategy
the volume of business that conduct like consumables.
In many cases the time period for measuring vehicle parc spans
Vehicle Parc = Manufacturer provide all the vehicles registered within the
44 10 years, although this varies from manufacturer to
Dealerships area responsibility over a given period of time
manufacturer.
45 Work In Progress (Days) = WIP Hours Nº of Tech’s Hrs. attended in 1 day Baseline: 3 days or less Work In Progress (WIP) simply refers to number of hours have
been booked onto repair order that have not yet been invoiced.
This is gross profit that is derived from service department
46 Additional Gross Profit = Additional gross profit other than labor sales Purpose: Budget & Composite Analysis operation other than labor sales or parts gross profit transfers,
e.g., shop supplies and sublet.
Additional Service Request Closing Percentage (ASR closing %) is
Additional Service Request Closing Percentage (ASR closing %) = Total ASR Hours Sold
47 Purpose: Budget & Composite Analysis the amount of labor sales, or flat rate hours sold versus amount
Total Hours Requested
requested.
Annualized Net Turn is the annualized improvement from one
48 Annualized Net Turn = The annualized improvement from one time period to another Purpose: Budget & Composite Analysis
time period to another.
Calendar Utilization is a comparison of the number of days
Calendar Utilization Percentage = Total Number of Days Worked Annually Total
49 Purpose: Budget & Composite Analysis worked versus the days planned for work, expressed as a
Annual Days Planned to be Worked
percentage.
50 Effective Labor Cost = Technician Pay Hours Sold Purpose: Budget & Composite Analysis Effective Labor Cost is the technician pay divided by hours sold.
Monthly Technician Labor Sales Value = Hours Worked Per Day X Productivity X Work Monthly Technician Labor Sales Value is the average monthly
51 Days Available X Purpose: Budget & Composite Analysis labor sales value per technician.
Calendar Utilization X Overall Effective Labor Rate
Number of Technicians Needed is the labor sales required divided
52 Number of Technicians Needed = Labor Sales required Technician Labor Sales Value Purpose: Budget & Composite Analysis
by technician labor sales value.
Potential Billable Hours is the available daily clock hours multiply
Potential Billable Hours = Hours Attended daily X monthly days worked X calendar
53 Purpose: Budget & Composite Analysis by monthly days worked multiply by calendar utilization %
utilization X Productivity
multiply by production %
Sales Needed to Break Even is the average monthly expenses
54 Sales Needed to Break Even = Average monthly expenses Gross Profit % Purpose: Budget & Composite Analysis
divided by gross profit %
Sales Needed to Net Desired Percentage = Average monthly expenses (Gross Profit % Sales Needed to Net Desired Percentage = Average monthly
55 Purpose: Budget & Composite Analysis
- desired net %) expenses divided by (gross profit % minus desired net %).
Thank You
Mohamed Shehata
www.linkedin.com/in/mohamedshehata
Auto Business way
Autobway@gmail.com