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It is an indisputable fact that everything that happens within the walls of the Service department is tracked and controlled by the repair order. Most personnel in the department are paid directly or indirectly by what happens on the repair order. The repair order is so crucial, that what happens in the shop can be completely different than what is represented on the repair order. However, when that repair order is closed, and the charges are posted to accounting, there is a very good chance that, right or wrong, the result will show on the financial statement. With this in mind, it is important to know as accurately as possible, when and how the facts and figures become what they are.
When completing a manual repair order survey, time is not your friend. Given the task to accumulate repair orders, review them, document each item and tabulate the findings, it may require you to implement a new structured process just to get started.
Now there is a better way. It is M5’s Repair Order Survey Evaluation - ROSE.
This is Part 1 in a two-part article. Be sure to check back next week for Part 2.
The most common question a new client asks when I first start working with them, is “How good is my parts inventory?” I can appreciate where the question comes from because most Dealer Executives don’t know how to evaluate their investment. They are often confused by the overly simplified and sometimes contradictory information they receive from their District Managers, 20 Groups, NADA articles, newsletters, and financial advisors. Each of these “standards” will attempt to measure the quality of the inventory based on one or two narrow criteria. The most common ones are as follows:
Most dealerships use some type of matrix grid in the parts department because it’s needed to maintain gross profit percentages that are being lowered by selling maintenance parts at the discounts needed to stay competitive.
We have the same situation in the service department, although some service managers are fearful of using a matrix grid to offset the discounted labor for their maintenance operations.
This fear is mostly due to the manager and staff not understanding how a proper grid is constructed and implemented.
Wouldn’t it be nice if all the parts that are needed to repair and maintain vehicles were at our fingertips on a daily basis? The technicians wouldn’t complain about the parts department not having parts, customers would not have to return to have a part installed, and there would never be a need for a special order parts location in the parts department. But we don’t live in a perfect world. Even the parts distribution centers don’t have all the parts on any given day.
Special order parts represent a few different things, depending on how you look at it. To the parts department, they represent additional income. Non-stocked parts are ordered and then sold to the customer, generating income and gross profit. But they also can represent an expense when they are not installed and just sit on the shelf. Parts that are special ordered and never installed represent one of the largest contributors to parts obsolescence.
Step 4 - Determine the Trainee's Daily Production Objective
It is important to monitor the trainee’s daily production—therefore, a daily production objective must be calculated, rounded to the nearest half-hour, by simply dividing the weekly production objective by the number of work days per week.
In the example presented on the Pay Plan Worksheet (Annex A):
19.9 (FRH weekly production objective) ÷ 5 (work days per week) = 4.0 (FRH daily production objective)
Daily production objectives should always be rounded up. Management is responsible for ensuring that the trainee has the opportunity to reach that objective every day.
Management must insist that trainees turn in their completed flag sheets for daily review. Failure to manage trainee production objectives every day often results in trainees not producing enough flat rate hours early in the week. They miss their weekly production goals because management was unable to take corrective action early in the pay period.
This is Part 2 in a three-part article. If you missed Part 1, you can read it here: Part 1.
III. Implementation of the Trainee Pay Plan
The following seven basic steps, described below, are used to implement the technique:
Step 1 - Obtain the Necessary Data
Step 2 - Calculate the Weekly Sales Requirement
Step 3 - Determine the Trainee’s Weekly Production Objective
Step 4 - Determine the Trainee’s Daily Production Objective
Step 5 - Calculate the Training Bonus Accrual Rate
Step 6 - Test the Calculation
Step 7 - Implement the Bookkeeping Procedures
Step 1 - Obtain the Necessary Data
Two of the components needed to make the calculations for a Trainee Pay Plan may be unfamiliar to many service managers and may require some study. These elements are effective labor sales rate (the actual dollar amount collected for every flat rate hour sold) and effective cost-of-sales (actual dollar amount paid to technicians for producing a sold flat rate hour).
This is Part 1 in a three-part article. Be sure to check back next week for Part 2.
Of the hundreds of trainee pay plans currently in use, rarely do trainees, technicians and the dealership equitably share the burdens and benefits of “growing your own technicians.” The problems normally encountered when trainee technicians find themselves in a production environment include:
They say “We don’t have time to confirm customers' complaints!”
During my travels around the country advisors tell me they do not have time to confirm customers' complaints. “I just don’t have time,” they say. Let’s take a look at one case I observed.
A customer in a new car pulls up to the service department. He gets out of his car and walks up to the service advisor and states his dash lights do not work. The advisor asks the customer if he has an appointment and the customer responds, "No, do I need one? I just purchased this car from you a week ago." The advisor acts quickly and says, "No, you don’t need an appointment. Will you be able to leave it with me?" The customer says, "Yes, as long as I get a loaner." The advisor pulls up the customer's information in the DMS and starts to open a repair order. "Mr. Customer, the dash lights don’t work--is that correct?" The customer confirms the complaint. The advisor asks for the keys, runs out to throw a job tag in it, and collects the miles.