Utilizing Efficiency and Productivity Numbers
According to the 2015 Ratchet+Wrench Shop Performance Survey, 82 percent of shop owners say they routinely track key performance indicators (KPIs). While that number is encouraging, nearly a quarter of shop owners admit that they do not routinely track technician efficiency or productivity, two figures that consultants BJ Lee and Dave Schedin consider among the most important for measuring success.
And that lack of tracking shows: Only 5 percent of shops reported technician efficiency of more than 120 percent, and less than a third of respondents said their technician productivity levels were above 90 percent.
Those figures illuminate a trend that Lee, a consultant and vice president of client services at the Institute for Automotive Business Excellence and a former shop owner, says is all too common in the industry: Shops track these numbers, or KPIs in general, but have little idea how to interpret or make business decisions based off those numbers—especially when they fall short of set goals.
The importance of utilizing those numbers is a no brainer, says Schedin, a former shop owner and founder of management company The CompuTrek Group.
“If you have a shop rate of $90 an hour and you have three techs and each tech is inefficient by .3 a piece, the missed labor sales opportunity at the end of the year is a little over $30,000,” Schedin says. “If you have three techs and raise their efficiencies by [.3], your shop could be raised by $30,000. How much more efficient equipment could you buy if you actually capitalized on that $30,000?”
Schedin and Lee break down easy steps every shop owner can take when they see efficiency and productivity numbers drop and how to make business decisions based off those numbers.
Productivity and Efficiency: A Reminder
Before you can start using the numbers to effect change in your shop, you need to know exactly what productivity and efficiency mean. Productivity refers to the time a technician is available at a workplace and how much he’s working on positive cash flow repair orders, Schedin says. Productivity is calculated by hours worked divided by hours available. Tracking productivity shows you the actual time a technician works in a day and allows you to see whether the shop has enough work for technicians and whether that work is ready for them when they are available.
Efficiency, on the other hand, shows the speed at which technicians get the job done once they begin working on the repair order, Schedin says. Measuring the efficiency of each employee—the total number of hours it takes them to complete a job versus the number of labor hours sold—allows a shop operator to set a benchmark for capacity. Efficiency is determined by dividing the flat-rate hours produced by the actual hours worked.
Setting Proper Goals
Both Lee and Schedin agree: If you want to make maintaining efficiency and productivity numbers a priority in the shop, it needs to start with management instilling it as part of the business culture.
“It all starts with management,” Lee says. “Setting the goals, measuring those goals, having the accountability and getting the buy-in from the people in the organization. Once you can set that foundation, now we understand where we need to be and where we’re headed and what’s expected.”
Lee and Schedin say that industry benchmarks of 130–150 percent efficiency and 90 percent productivity are good starting points but that it’s important to know your shop, your technicians and their capabilities. Schedin also notes the importance of taking the time to explain what these numbers mean to technicians and using daily time-tracking systems for techs to gather this data.
“The tech sees five hours and says, ‘I have five hours to do it.’ He thinks because he got it done in 4.5, he did pretty good on that one. That’s not good at all. That’s only 110 or 120 percent efficiency,” Schedin says.
How to Solve Low Productivity
If productivity levels are low in your shop, you need to address them right away, rather than waiting until the end of the month—something that Schedin says happens all too often. Lee and Schedin recommend the following steps to figuring out the root cause of a drop in productivity levels:
Is there enough work to do? Low car count is one of the biggest factors associated with low productivity. Schedin says that you need to track your car count from week to week so you have an idea of what a normal or good week looks like for your shop and what tech productivity is during those weeks. A shop with low car count might need to make adjustments in a variety of areas, including upping marketing initiatives or changing staffing levels. More than anything, this issue is the owner’s problem, Lee says, and the owner needs to ensure that techs always have enough work.
Is your dispatch process working efficiently? Lee says one of the most common problems he sees in shops with poor productivity numbers is a poor dispatch process where tickets just sit on the counter. If there are cars in the parking lot but technicians are standing around not working, that’s an indicator of an inefficient dispatch.
An effective dispatch comes down to nonverbal communication, Lee says. He recommends having call times on each ticket for when the advisor will call the customer with an update. He also suggests the use of individualized job boards for each technician that allows everyone to see which vehicles need to be inspected, those waiting on approvals and those in process. You can’t be there micromanaging every ticket, Lee says, so the point is to create a system that relies on nonverbal cues that everyone in the shop understands.
Do you have a poor parts process? Another common issue that prevents technicians from being productive is a poor parts process. That could mean getting the wrong parts, waiting a long time on parts or a late delivery.
“When they first start a job—and it happens in almost every shop—they always order an, ‘Oh I forgot that part,’” Schedin says. “We have parts requisition forms for the larger jobs they do, like steering, suspension, drivability, intakes, reseals. It’s a checkmark to help them remember what they need.”
Schedin says that the maximum time you want to wait for parts locally is 1–2 hours. If deliveries are taking longer than that, work with your vendors to find delivery times or a schedule that works better for both parties. In addition, he says an easy way to cut down on damaged or incorrect parts is to have someone in the shop assigned to validate parts upon delivery.
Is unapplied time too high? If you use a tech time-tracking system (like QuickTrac), Schedin recommends tracking unapplied time, which refers to time in which the technician is available to work but can’t. Those systems also allow users to set up codes that specify the reason for that unapplied time.
“If the benchmark is 90 percent productivity and a tech is there working eight hours a day, we want him working on cars 7.2 hours a day,” Schedin says. “Eight-tenths (of an hour) is an acceptable time that he is not working on cars.”
If that number is higher than that, you need to start looking at the reasons for the unapplied time and if there’s a change that can be made.
Maintaining Efficiency Benchmarks
If you know your shop brings in enough vehicles but it seems to take a long time to do the work on those cars, Lee says that points to an efficiency problem. Lee and Schedin recommend some easy, tangible steps to maintaining efficiency benchmarks:
Do you have the right equipment? Most equipment—save for the heavy-duty equipment, like lifts—only has a lifecycle of 3–5 years, not to mention diagnostic software, which typically needs to be updated on at least a quarterly basis. If equipment isn’t working properly or is taking too long, technicians won’t be able to complete jobs quickly enough to hit efficiency benchmarks, Lee says.
First, he recommends having processes in place that keep equipment clean, organized and oiled according to the maintenance contracts. Then, both Schedin and Lee recommend attending trade shows and paying attention to new equipment releases that may help the shop increase efficiency.
“Let’s say you have a tire balancer that takes four minutes to change a tire and now they have a new piece of equipment that allows you to do it in half the time,” Lee says. “Then you do the math and say, ‘I do X amount of tires and it takes me X amount of time. If I can cut that time in half, how much time will it take me to pay for this equipment and make it profitable for me?’”
Are technicians properly trained? One way to maintain efficiency is by assigning the right job to the right tech. That means making sure that the technician is trained and has the correct technical information readily available to him or her.
If a technician takes longer than book time to complete a job, Schedin says that it’s more than likely a training issue. That means that either complicated jobs need to be assigned to a more highly qualified technician or technicians need to be sent to training so they have the skills and information needed.
Do you use an incentivized pay plan? To increase efficiency, Schedin says that you need to get into the technician mindset.
“If they’re just coming in and they’re paid hourly, there is no motivation for a tech in an hourly shop to want to do better unless it’s an ego thing,” he says. “Ego only takes technician productivity and efficiency to a certain level and then it has a ceiling on it. It’s not until you motivate that with some dollars or an extra paid day off.”
Lee recommends setting benchmarks for your technician pay plan. For example, if a technician has a base pay of X dollars, once he or she reaches 35 hours of productivity, that base pay goes up another $5 an hour. Lee says tiered pay plans make a big difference in getting technicians motivated, but just be sure you clearly explain the goals and expectations.
What is your average hours per repair order? Efficiency numbers aren’t based on technicians alone. Instead, setting technicians up for success begins with the service advisor, Schedin says.
“The most efficient person in the store needs to be the advisor,” he says. “If you have an inefficient advisor, you will have an inefficient appointment and an inefficient repair order. If we hand that to a technician and say go be efficient with this, it just doesn’t work.”
When it comes to efficiency, specifically, Schedin says that you need to pay attention to average hours per repair order. While the national average is 1.8–2.4 hours, he says that to achieve true efficiency, that number needs to be over 3 hours.
“You’re giving them something with such low hours on it, they don’t have time to be efficient at it,” Schedin says. “Typically the low ROs have lower-priced jobs on them, like an oil change, that is basically a 1-for-1.”