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Making Money in Repair from Intent to Implementation Dick Fuller The MED Group August 6, 2008

Making Money in Repair from Intent to Implementation Dick Fuller The MED Group August 6, 2008. Objective. Learn how to more effectively manage your service operation. Agenda for today. Overview of service industry How much does it really cost to provide service Measuring productivity

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Making Money in Repair from Intent to Implementation Dick Fuller The MED Group August 6, 2008

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  1. Making Money in Repairfrom Intent to ImplementationDick FullerThe MED GroupAugust 6, 2008

  2. Objective Learn how to more effectively manage your service operation

  3. Agenda for today • Overview of service industry • How much does it really cost to provide service • Measuring productivity • Implementation

  4. Assumptions: • Have ongoing service operation • Trained and competent techs • Policies and procedures in effect • Quality assurance controls • Adequate facility with proper tools and equipment

  5. Service industry history: • 1887 Richard Sears and Alvah Roebuck • Early 1900’s automotive growth

  6. 1887 Richard Sears and Alvah Roebuck • Early 1900’s automotive growth

  7. 1887 Richard Sears and Alvah Roebuck • Early 1900’s automotive growth

  8. The HME service department • Range of products • Changing technology • Many low volume products • Custom products • Reimbursement issues • Liability exposure

  9. Cost of providing service • CRC Survey on PWC Warranty Costs • Purpose • Methodology • Limitations • n=60

  10. CRC Survey, PWC Warranty • 4 Sections: Location of service Field service CODB Product reliability • Implications

  11. CRC Survey, PWC Warranty Section 1: Where service is done

  12. Question 1Percent warranty done in-home 0-25% 32% of respondents 25-50% 25% 50-75% 25% 75-100% 18% n=56

  13. Question 2Percent warranty done in shop 0-25% 32% of respondents 25-50% 25% 50-75% 27% 75-100% 16% n=56

  14. Question 3Percent warranty done in facility 0-25% 91% of respondents 25-50% 7% 50-75% 2% 75-100% 0% n=56

  15. CRC Survey, PWC Warranty Section 2: Field service calls

  16. Question 5Single service call to complete job 0-25% 59% of respondents 25-50% 23% 50-75% 7% 75-100% 11% n=56

  17. Question 6Two service calls to complete job 0-25% 7% of respondents 25-50% 23% 50-75% 27% 75-100% 43% n=56

  18. Question 7Three or more service calls to complete job 0-25% 86% of respondents 25-50% 9% 50-75% 0% 75-100% 5% n=56

  19. CRC Survey, PWC Warranty Section 3: Cost of Doing Business (CODB)

  20. Weighted Average Calculation: For each selection category, multiply by number of responses by the units (minutes, hours, dollars) for that selection category. Add these sums together and divide by total number of responses.

  21. Question 9Average time to complete warranty repair Weighted average = 86 mins n=56

  22. Question 10Average time to complete paperwork Weighted average = 65 mins n=55

  23. Question 11Average distance traveled for service call Weighted average = 26 miles n=56

  24. Question 12Average cost per mile for van Weighted average = $0.70 per mile n=53

  25. Question 13Average cost of tech labor: hourly wage plus allocation of management & clerical support, plus 30% burden (FICA, insurance, etc.) Weighted average = $36 per hr n=55 Note: This is not average tech wage

  26. Calculation, hourly cost of tech labor

  27. Question 14Average non-labor overhead per repair tech hour Weighted average = $34 per hour n=55

  28. Question 15Average CODB per hour (Question 13 plus 14) Weighted average = $71 per hour n=53

  29. Question 16Percent of service orders that are warranty Weighted average = 14.0% n=53

  30. CRC Survey, PWC Warranty Section 4: Product Reliability

  31. Question 17Percent requiring warranty service Average incidence of repair = 6.3%

  32. Implications:#1 Average cost for vehicle use for each service call: $18.20 Q-11 times Q-12 = $18.20 times 2 (round trip) = $36.40

  33. Implications:#2 Average cost PWC warranty repair done IN SHOP = $124 86 mins at $71/hr CODB + 65 mins at $20/hr for billing $102 + $22 = $124

  34. Implications:#3 Single service call: Average cost PWC warranty repair done IN FIELD (assume 25 miles each way) = $231

  35. Implications:#4 Two service calls: Average cost PWC warranty repair done IN FIELD (assume 25 miles each way) = $338

  36. Implications:#5

  37. Implications:#6 Minimize field service calls: Fix with single service call Sector routing Incentives: Customer Staff

  38. Now what? • Audit your cost of providing service • Compare to survey results • Identify problem areas • Review your labor rates • Budget for warranty

  39. Measuring Productivity • The P&L • The 10 “Key Performance Indicators” (KPIs)

  40. Measuring Productivity • Average Invoice (KPI #4) • Technician Productivity (KPI #8)

  41. Measuring Productivity KPI #4: Gross Sales Average Invoice = Service Order Count

  42. Measuring Productivity KPI #9: Hours Billed Productivity = Hours Available

  43. Improving Productivity • Standardized labor charges • Use Flat Rate Manual • Measure productivity by technician • Set goals • Incentives

  44. Closing thoughts • Expert repair techs are valuable assets to your business • Other industries have dealt with same issues • Participate in CRC • Excellent service is an opportunity

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