Efficiency
Hours Sold ➗ Hours Worked (X 100)
Benchmarks: 110% to 125%
 This is NOT measure of Technician's Efficiency, it's measures against the Hours Sold.
 The responsibility of the Hours Sold sits firmly with the Service Advisor.
 Increasing Efficiency is a matter of good service management either at the front counter to increase the hours
sold, or in the workshop to decrease the hours worked.
 Although a manufacture’s book times dictate the number of hours sold, they don’t dictate the number of hours
worked.
 This means that you can only influence your Efficiency with the hours worked.
 It’s up to the service manager & the service consultant to decide how many hours are to be charged to the
customer (The most profitable way).
 The general idea of Efficiency is that your hours sold should be higher than your hours worked. The number of
hours sold is decided by the customer facing staff & the the number of hours worked is decided by the
technicians & both are controlled by the service manager.
 DOES TIME REALLY “ACTUALL” EQUALL MONEY? “ Time is Money”
 The hours sold: is it diagnosis time or repair time or both “percentage”?
 The secret to success is making sure that you have something else to do for the rest of the day, otherwise all
that you achieve is a huge amount of the idle time & that just increase your expenses.
Utilization
Hours Worked ➗ Hours Attended (X 100)
Benchmarks: 85% to 95%
 The danger here is that if technicians slow down, Utilization will increase, so it must be analyzed in.
 Utilization is the most powerful profit builder within the whole of the service department.
 Utilization is the key performance indicator that informs you of whether you are making the most of the
resources that are right under your nose in the service department.
 Utilization in the workshop is measuring how much of the available time you are using & how much your are
wasting.
 If you sell 90% of the time that you produced you will make more profit than if you only sold 70% because the
production costs remain the same (you can’t store the Time).
 It measure your ability to convert the technicians available time into productive time.
 Any time that is not utilized can’t be stored to use another day & therefore it falls into an expense called Idle
Time.
Idle Time = Hours attended - Hours Worked
 To keep control over the Utilization, you need to keep the work flowing through the workshop with as little
interruption as possible.
 Why you want to pay overtime if the Utilization is low?
 Overtime payments are all well & good where they are properly justified (Utilization is greater than 90%).
Productivity
Hours Sold ➗ Hours Attended (X 100)
Benchmarks: 93.5% to 118.75%
 The secret to increasing the profitability lies within your ability to control the work, rather that the work
controlling you.
 The general idea to succeed in business is that you need to sell more hours than your technician attend.
 If you wish to improve the Productivity you have to achieve it by improving the efficiency & utilization.
Utilization ✖️ Efficiency = Productivity
 It means that it must increase the efficiency by getting the technician to beat the allocated job times & must
also increase the utilization by filling the time have saved with more work otherwise there’s no point in beating
the allocated job times because it will just create idle time.
 When increase efficiency (reduce hours worked) in this way automatically decrease utilization & it’s the
multiplication of these two area deliver overall efficiency.
 To increase the productivity of the service you have to improve both of efficiency & utilization (increasing hours
sold) at same time.
 When you increase the efficiency by beating the allocated job times all that you are doing is creating the
opportunity to make more profit & fail to get more work into the time you have saved, then all of the efforts
will loos, it doesn’t deliver any more profit to the bottom line because it gets eaten up by the expense called
idle time.
The law of the service department
Utilization = Hours Worked ➗ Hours Attended (✖️100)
Benchmark: 85% to 95%
Efficiency = Hours Sold ➗ Hours Worked Productivity (✖️100)
Benchmark: 110% to 125%
Productivity = Hours Sold ➗ Hours attended (✖️100)
Benchmark: 93.5% to 118.75%
Productivity
Hours Sold ➗ Hours attended (✖️100)
Benchmarks: 93.5% to 118.75%
Utilization
Efficiency
Hours Worked ➗ Hours Attended (✖️100)
Hours Sold ➗ Hours Worked (✖️100)
Benchmarks: 85% to 95%
Benchmarks: 110% to 125%
 In fact, there are not reasons for their placement in the triangle.
 If you keep these thoughts in mind they will help you to remember how the triangle is drawn when you wish to
recall this information to mind.
Utilization ✖️ Efficiency ➗ 100 = Productivity
Productivity ➗ Efficiency ✖️ 100 = Utilization
Productivity ➗ Utilization ✖️ 100 = Efficiency
 The route to success with the service department is to keep the technicians working faster than the allocated
job times & filling the time you have gained with additional work.
 The best service manager in the industry are not good at doing one thing, they are good at keeping everything
in balance.
Technical Efficiency
Allocated Job Time➗ Hours Worked (X 100)
Benchmarks: 95% to 105%
 This KPI measures the speed at which the technicians complete their jobs compared with Flat Rate times (FRT)
as defined by manufactures'’ book times or the service manager.
 This KPI measures a technician on an individual basis as opposed to the whole team of technicians as a
collective.
 It assesses individual skill levels against a consistent allocated job time & not the hours sold.
 The hours sold is not always equal to the flat times because they do not include diagnosis time & also is
influenced by the service advisor’s ability to firstly invoice the work as opposed to leaving it in WIP.
 This KPI removes the service advisor altogether from the equation leaving you with the true technical
competence of the technicians.
Debtor Days
Service Debtors ➗ Service Daily Credit Turnover
Baseline:〈 45 days
 The debtor days KPI is a measurement of the credit activity within the service department.
 Its purpose is to inform you of average number of days that the customers take to pay you.
 To calculate the service daily credit turnover, you will need to take the annualized service turnover which is sold
on credit & divide that figure by 365
• Annual turnover on credit = $861,500.53
• Days in one year
= 365
• Service daily credit turnover = $2,360.28
 A business can survive a long time without profit, but it can’t survive a single day without cash.
Department Profit %
Department Profit ➗ Turnover (X 100)
Baseline: 〉35%
 Department profit of the service department is also called as department contribution, operating profit, direct
profit & bottom line.
Profit = Gross profit – department expenses
 Keeping track of the profit % on monthly basis so that you can see the trends that are emerging.
Department Expenses %
Department Expenses ➗ Turnover (X 100)
Baseline: Own Strategy
 The department expenses of the service department is also called as direct expenses & refer to the total
expenses incurred.
 They represent the sum total of service department expenses (the variable expenses, fixed expenses & semifixed expenses).
 Variable expenses are directly linked to sales volume.
 Semi-fixed expenses are not linked to sales volume.
 Keeping track of the Department Expenses % on monthly basis so that you can see the trends that are
emerging.
Department Gross Profit %
Department Gross Profit ➗ Turnover (X 100)
Baseline: 〉65%
 The basic concept of gross profit is simply sale less cost of sale.
 The trading strategy of the service department will vary according to the level of discount that you give & also
the sub contract work & oil sales that the business conducts.
 Within the service department there are two levels of gross profit that are measured:
1. Labour gross profit
2. Overall gross profit (include labour gross profit)
 it can be very misleading because the overall gross profit result is influenced by 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.
 It is indicative of a dealership’s pricing policies& measure of return on assets.
Diverted Time
Hours Attended - Hours Worked
Benchmarks: 5% to 15% of the Hours Attended
 This term is also known as uncovered time, idle time or lost time.
 The diverted time is typically could be due to a lack of work available, time spent locating a vehicle or waiting
for parts & other such issues.
 The diverted hours exchange to monetary value which usually will be found with the variable expenses of the
service department.
 There’s often a big misunderstanding of diverted time which refer to has not been sold this incorrect, the truth
the technicians time has not been worked.
 The technician don’t sells hours, they work hours, it’s service advisor play role up selling the hours.
Hours Attended
Total number of hours available to work
Baseline: Own Strategy
 This term represents the technicians are clocked-in at the dealership from morning until the evening.
 Factors that will influence the number of hours attended are the times spent on training courses, time off on
holidays & absence, all of these factors should be analyzed separately.
 It’s the task of the workshop controller to ensure that when the technicians are available to work, they spend
between 85% to 95% of their time clocked onto jobs.
Hours Bought
Total number of hours paid to technicians
Baseline: Own Strategy
 The terms represents the total number of hours that pay the technicians for whole year & includes holiday,
absence & training.
 Hours bought is never used in the KPIs because the technicians are not available to be utilized when they are
on holiday, absent or on training.
 The hours bought are used for the budgets & business plans because you need to know the total financial
exposure you have with technicians.
 Simply, by multiplying the hourly rate that pay to the technicians (excluding any bonus Programmes may offer
them) you are able to calculate a reasonably accurate forecast for the technicians salary.
 If you plan to conduct overtime throughout the year, you may should include those hours into the hours
attended.
Hours Sold
Total number of hours invoiced to the customer
Baseline: 70% Retail, 20% Internal, 10% Warranty
 The terms represents the total number of hours that have been invoiced to the customers.
 The Hours sold are usually shown within a minimum of three different income streams within a franchised
dealership:
1. Retail hours sold
2. Internal hours sold
3. Warranty hours sold
 It is important to keep track of the numbers of hours sold as it is to keep track of their monetary value.
 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 reflection of the direction of the business, but the rather that of
discounting where it is applicable.
 Keep in mind that it may be possible for the service advisor to influence this figure by discounting the hours
sold, rather than the labour rate & it is also influenced by the skill of the service advisor to identify all of the
work that’s been conducted to dell it effectively to the customer.
Hours Sold per Parc
Annualized Hours Sold ➗ Number of Vehicles in Parc
Purpose: Budget & Composite Analysis
 This KPI might be useful for assessing the current performance in hours sold against the fellow dealerships or
the total market potential, but it can be misleading because it’s influenced by the age of the vehicles in the parc
& of course customer retention.
 Keep in mind that this statics is utilizing every vehicle in the parc & if you are assessing a 10 years parc some of
these vehicle may no longer be in your area or even existence.
 You have ask yourself a question about the age profile of the vehicles that your dealership attracts.
 It would be far more variable to this statics calculated on a year-by-year basis & model-by-model basis too, this
will provide with a more realistic & accurate figure with which to measure the territory penetration & retention.
Hours Sold per Job Card
Hours Sold ➗ Number of the Job Cards
Purpose: Budget & Composite Analysis
 This KPI might be useful for assessing the current performance in hours sold against the fellow dealerships or
the total market potential, but it can be misleading because it’s influenced by the mix & types of work that you
conduct, is there such a thing as an average job?
 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 year.
 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.
 Again they are NOT operational measures because the results are affected by so many different things.
Hours Sold per Technician
Hours Sold ➗ Number of Technicians
Purpose: Budget & Composite Analysis
 This KPI is used on composite reports to level the playing field so as to compare a large dealership with a small
dealership.
 It is NOT a day-to-day operational measure within a service department.
 This KPI is often 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.
 Technicians work on vehicles & pass the job cards to the service advisor & it is they who produce the invoices to
generate the hours sold.
 This KPI might be useful when putting a business plan or a budget together when you are able to compare the
number of hours sold with the number of technicians you have.
 Once you have ascertained the hours attended, hours worked & efficiencies for the year ahead you will
generate the number of hours sold.
Hours Worked
Hours attended - Idle Time
Benchmarks: 85% to 95% of the Hours Attended
 This KPI reparents the number of hours that the technicians have been clocked onto job cards, working
productively.
 Working productively means the technicians are available for work & are clocked onto job cards, spanner-inhand, head-under-bonnet working on customers’ vehicles.
 There is only one way to accurately capture the number of hours worked & that is for each technician to clock
on & off each individual customer concern.
 A clock machine whether digital or analog is 100% essential.
 You have ask yourself question if you don’t have accurately record this KPI arear when you do have a problem
that you want to resolve, where do you begin to look for the answers?
If you can’t measure it, you can’t manage it
Labour cost of sales
The money paid to technicians for the Hours Worked
Baseline:〈 25% of Labour Sales
 This statics captures the amount of money that is paid to technicians for every hour that is spent clocked onto
jobs, working on customers'’ vehicles.
 The cost of sales of any product or service is the purchase prices of those item.
 In the case of a service department, the labour cost of sales represents the amount of money paid to
technicians whilst they are repairing vehicles & NOT the total technicians salary.
 The technicians total salary is divided into four sections as follows:
1.
2.
3.
4.
Hours worked productivity (Clocked onto jobs - This is found within the Labour cost of sales)
Idle time (In attendance, but not clocked onto jobs - This is found within the Direct Expenses)
Rectification (rectification & goodwill - This is found within the Direct Expenses)
Holidays, sickness & training (Not in attendance - This is found within the In-Direct Expenses)
 It is only hours worked productively that is represented in the labour cost of sales.
 The other three categories are classified expenses.
 If the management accounts are not structed in this way, then you may be blind to any problem or
opportunities that may exist.
Labour Gross Profit
Labour Sales – Labour Cost of Sales
Baseline: 〉75% of Labour Sales
 This is probably one of the most misunderstood calculations of all.
 The definition is the invoice value of the hours sold minus the money paid to the technicians for the hours
worked.
 Some people are assumption that the labour gross profit is labour sales minus the technicians total salary
which is hours bought, if this were the case, then the idle time would be reported at zers & there would be no
expense shown for rectification, holiday, sickness, training & all of the operational efficiencies would be totally
incorrect.
Labour Gross Profit %
Labour Gross Profit ➗ Labour Sales (X 100)
Baseline: 〉75% of Labour Sales
 This KPI asks what percentages of gross profit you have retained from the hours sold after you have paid the
technicians for the time taken to complete the work.
 All profit-related KPIs are measured against turnover.
 The things that influence this area are the cost of technicians, which varies across the world dependent upon
location & technicians’ skills & of course service advisors’ skills of selling because they influence both the
number of hours sold & level of discount given.
 it’s critical to have the correct accounting structure to identify all these areas, otherwise you’re running blind.
Labour Sales Mix
(Sector) Hours Sold ➗ Total Hours Sold (X 100)
Baseline: 70% Retail, 20% Internal, 10% Warranty
 This KPI simply inform you of the balance between the service department sales of hours.
 The Hours sold are usually shown within a minimum of three different income streams within a franchised
dealership:
1. Retail hours sold
2. Internal hours sold
3. Warranty hours sold
 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.
 Understanding the work mix can help for marketing Programmes, customer retention & the reliance upon
internal & warranty work.
Lead Time
“I want my vehicle serviced, when you can fit it in”
Baseline: 3 days or less
 The lead time is the length of time a customer must wait before their vehicle can be seen by the service
department.
 A short lead time of two or three days is usually expected & generally accepted by a customer unless they have
a serious problem that needs immediate attentions.
 A long lead time of seven to ten days is not generally understood nor accepted by customers & usually results in
them taking their vehicles elsewhere forever!
 Factors that affect the length of lead time are availability of courtesy cars, collection & delivery, workshop
loading, customer retention & aftersales marketing.
 If the lead time is seven days or more on a consistent basis, then you should certainly examine the capacity of
the workshop & you may consider taking on additional technicians if the facility available or review the courtesy
car procedure.
 If the lead time is nonexistent on a continual basis, then the aftersales marketing campaigns may need an extra
boost to attract additional work.
Oil & Lubricants Profitability
Oil Gross Profit ➗ Oil Sales (X 100)
Baseline: 〉40%
 As any industry, we take a high profit margin from the sale of oil & lubricants.
 Most manufactures'’ financial reports show this statistic within the service department for trend analysis.
Parts Sales per Hours Sold
Invoiced Parts Sales to the Workshop ➗ Hours Sold
Purpose: Budgeting & Composite Analysis
 This KPI produces a monetary figure that is the average invoice value of parts sold to the workshop for every
labour hour that is sold during the same period.
 This static is influenced by many different areas such as discount, type & mix of work, etc.
 This KPI is NOT measure of the service advisor’s ability to sell up additional work.
 The root of this KPI lies in manufactures'’ composite reports trying to compare the performance of parts
department of large & small dealerships.
 The only way to flatten out the size difference between large & small dealerships is to divide the parts sales by
hours sold to give more kind of average.
Parts Sales Mix per Hour Sold
(Sector) Invoiced Parts Sales to the Workshop ➗ (Sector) Hours Sold
Purpose: Budgeting & Composite Analysis
 You should be aware of parts sold into each income stream of service department because each income stream
will be different for every specific reasons.
 For instance, most warranty work is generally parts replacement, there’s no regular service schedule so it’s
quite conceivable for warranty parts sales per hours sold to be at least double.
Parts Sales per Technician
Invoiced Parts Sales to the Workshop ➗ Number of Technicians
Purpose: Budgeting & Composite Analysis
 This KPI produces a monetary figure which is the average invoices value of parts sold to the workshop divided
by the number of technicians.
 The first thing to point out is that this is not an operational measure because technicians don’t sell parts.
 This static is influenced by many different areas such as discount, type & mix of work, parts availability, VOR
percentage, etc.
 The root of this KPI lies in manufactures'’ composite reports trying to compare the performance of parts
department of large & small dealerships.
Policy Costs
“Certainly, we’ll rectify that as a gesture of goodwill”
Baseline: Own Strategy
 This term is also known a policy adjustments, goodwill, policy grants or rectification.
 It refers to those costs that must be borne by the service department that can’t be reclaimed or recharged on
to warranty or any other department.
 When the vehicle report back, you can’t expect the customer to pay any more money because they’ve already
paid you once for the job, the question is, who pays the bill?
 A hours worked on the vehicle should be charged at cost price & shown in the management accounts in the
semi-fixed expenses as policy cost.
Productive Ratio
Number of Technicians ➗ Number of Staff
Baseline: Circa 3:1
 This KPI measures the ratio between productive staff & non-productive staff, however since we should not
address any staff s non-productive.
 To be accurate measures the ratio between number technicians & the number of staff.
 The ratio can vary widely & is dependent upon how the portion apprentices, master technicians & a foreman.
 If the productive ratio is lower than 3:1 you could be over-staffed or in a small or new start up business.
Recovery Rate (Overall)
Total Labour Sales ➗ Total Hours Sold
Baseline: Not Applicable
 The service department will have published labour rates (charge out rates) but how often are you able to
charge the full amount to every customer on every job without giving a discount?
 The recovery rate is asking how much revenue you have recovered per hour sold after any discount.
 The problem here is that you will have different labour rates for retail, internal & warranty so this figure does
not reveal if any discount has been given because it changes with the volume of hours sold in each sector.
 Apart from controlling the discount levels, there are two main issues:
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
calculating the recovery rate % for each income stream.
Recovery Rate (Sector Breakdown)
Sector Labour Sales ➗ Sector Hours Sold
Baseline: Own Strategy
 Here you can see the recovery rate for each sector, but it’s pretty useless unless you match them to the charge
out rates.
 It’s very difficult to compare these results with other businesses because they will probably have different
charge out rates.
 To make sense of recovery rates you need to convert these monetary values in to meaningful KPI.
Recovery Rate % (Overall)
Recovery Rate ➗ Charge Out Rate (X 100)
Baseline: Dependent upon Labour Sales Mix
 The Recovery Rate % is much more informative for comparing the performance with other businesses than the
recovery rate because it eliminates all factors relating to currency.
 This KPI is simply asking what percentage of the charge out rates are begin retained so it can be accurately
compared (discounting & retention).
Recovery Rate % (Retail)
Retail Recovery Rate ➗ Retail Charge Out Rate (X 100)
Baseline: 〉90%
 This KPI is simply asking what percentage of the retail labour rate is being retained for each hour sold on the
retail customers invoices.
 This KPI is analyzing the retail labour sales as opposed to total labour sales & is demonstrating a retail recovery
rate %
 You can use this KPI to isolate the discounting & then take the necessary action to prevent the discounting if
deemed necessary.
 In additional, you can also assess the value of discount begin given in the retail sector.
Recovery Rate % (Internal)
Internal Recovery Rate ➗ Internal Charge Out Rate (X 100)
Baseline: 〉98%
 The term internal represents work conducted by the service department that will be charged to the sales
department.
 It’s not uncommon for the sales department to receive an agreed discount on all labour, although this example
it’s the same as retail.
 This KPI is asking what percentage of that agreed labour rate is being recovered.
 The reason for the 〉98% baseline is because the service department may offer a further discount to conduct
work on a used vehicle being offered as a trade in, which might otherwise be turned away by the sales
department.
Recovery Rate % (Warranty)
Warranty Recovery Rate ➗ Warranty Charge Out Rate (X 100)
Baseline: 〉98%
 The term warranty represents work conducted by the service department that will be charged to the vehicle
manufacture for vehicles that are still within the manufactures’ warranty period.
 This is different to rectification of own work that may come back to you.
 To all intents & purposes, the warranty recovery rate should be 100%
 It’s not uncommon for manufacture to conduct an audit of warranty claims & dispute some of the invoices
submitted.
 Where this is the case, the warranty claim will be rejected & the service department will not receive the money
for that claim.
 Although the warranty labour sales will reduce on the dealer management system, the hours sold may remain
the same, you will see a reduction in the reduction in the warranty recovery rate % hence the baseline of 〉
98%
Repair Orders per Technician
Number of Repair Orders ➗ Number of Technician
Purpose: Budget & Composite Analysis
 This KPI is used to level the playing field within a composite report so as to compare a large dealer with a small
dealer.
 The problem here is that there are a multitude of factors affecting this statics including the speed at which a
technician completes the task, the volume of work available, workshop loading & the type of work being
undertaken such as regular servicing schedules compared with an engine change, all of these factors will
change the results considerably.
 You might glance at it when constructing the budget & business plans.
 Its main use is to compare the size & scale between dealerships & it’s not one of those KPI that you’d choose to
measure on a regular basis within the service department daily operating controls because it’s not an indicator
of day-to-day operational performance in the workshop.
Retail Hours Sold per Retail Repair Order
Retail Hours Sold ➗ Retail Repair Order
Purpose: Budget & Composite Analysis
 This KPI gives an average number of hours sold per retail repair order.
 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 dealerships are the same, this
why manufactures'’ composites & inter-firm comparisons create this statics in an attempt to make fair
comparison.
 When compare the results to the national average you should keep in mind that this statics is influenced by the
type of work that is being undertaken, the mix of work, the technician ability to find additional work & the
service receptionist’s ability to sell that additional requirements on to the customer.
 imagine how this might be reported if dealership A conducts a lot of service schedules & PDI work & dealership
B encounters an engine replacement or two.
Retail : Internal Ratio
Retail Hours Sold ➗ Internal Hours Sold
Baseline: 〉2.5:1
 When you wish to grow a service department, you need to see real growth in the retail hours sold, but simply
having more retail hours sold is not enough, you need to see growth against the internal hours sold which
means that customer retention is good & the department is not reliant the sales department.
 One of the factors affecting this statics is a rapid growth rate in vehicle sales, which in the short-term will shift
the bias to internal work.
 However in the following months the balance should be redressed as those vehicles return for schedule
servicing, if those vehicles don’t return, this ratio will show a downward trend.
 If the underlying trend of this KPI is demonstrating a high dependence upon internal work, it could mean that
the dealership is losing its retail customers, there no efforts in place to grow the retail sector of the business, or
there is little or no control for invoicing procedures between the sales & service department.
 This strong indicator of the service manager’s ability to grow the workshop without the reliance upon internal
& warranty work.
Revenue per Technician
Department Turnover ➗ Number of Technician
Purpose: Budget & Composite Analysis




This KPI produces a monetary figure.
The problem here is that technicians are not responsible for the turnover.
Technicians work on vehicles & it’s the service advisor who conducts the invoicing to produce the turnover.
Another issue is that there are variations across reports with the calculation because some reports class the
revenue as total department turnover whilst others class revenue as the total value of the hours sold.
 You might glance at this statics when constructing the budgets & business plans.
 Its main use is to compare the size & scale between large & small dealerships & it’s not one of KPI you’d choose
to measure on a regular basis at own business because it’s not an indicator of day-to-day operational
performance in the workshop.
Fixed Expenses %
Fixed Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
 Fixed Expenses are those expenses that are not directly linked to the volume of business that you conduct.
 They represents those expenses that have to pay to keep the department running whether sell anything or not:
1.
2.
3.
4.
5.
6.
Rent
Depreciation
Taxes
Insurance
Utilities
Repairs & maintenance
 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 %
Semi-Fixed Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
 Semi-Fixed Expenses are those expenses that are not directly linked to the volume of business that you
conduct.
 They represents those expenses that have to pay to keep the department running whether sell anything or not
like:
1.
2.
3.
4.
5.
6.
Company vehicle expense
Office supplies & stationary
Advertising
Telephone
Training
Bad debts
 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.
 The reason that called Semi-Fixed is that they are fixed each month irrespective of sales volume but the
directors of the business decide those expenses are fixed.
Personnel Expenses %
Personnel Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
 They represents any expense that is associated with payroll or employee benefits.
 Financial statement account descriptions the following examples:
1.
2.
3.
4.
5.
6.
7.
8.
Compensation – supervision
Compensation – clerical
Other salaries & wages
Payroll taxes
Pensions
Advisors pay
Uniform
Absentee compensation
 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
Annualized Labour Sales➗ Vehicle in Parc
Purpose: Budget & Composite Analysis
 This KPI need to thoroughly examine & fully understand before make any judgement whatsoever as it makes
some far-searching assumption.
 Its purpose it to ascertain the value of service sales that you are achieving across the vehicle parc.
 Different manufactures account for vehicle parc over different spans time.
 For instance, some manufactures use a five-year parc, some use a seven-year parc & others use ten years.
 Also note that the age span of vehicle parc for the service department is often different to that of the parts
department.
 Be sure to obtain the correct interpretation from the respective manufacture.
 Of course the Service Sales per Parc Unit are influenced by customer retention & parc penetration.
 Its useful & accurate method of calculating territory penetration is to measure vehicle parc on a year-by-year
basis.
Sub Contract Profitability
Sub Contract GP ➗ Sub Contract Sales (X 100)
Baseline: 〉20%
 Sub Contract refers to the jobs that you take in & undertake a 3rd party to conduct on behalf, an example fitting
of windscreen.
 Profitability in this area of the business varies greatly between manufactures it can be low 5% & high 25% or
more depending upon the type of work being commissioned.
 There are many reasons for this high tolerance in performance & one of the main reasons being breakdown &
recovery.
 There are some dealers don’t make any profit margin from Sub Contract sales & research confirms that fear is
the key to this shortfall.
 However, you should realise that the liability of any Sub Contract work lies with you as it is you who has
invoiced the customers’ therefore you are perfectly entitled to make a profit on this work.
Variable Expenses
Variable Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
 Variable expenses are those expenses that are directly linked to the volume of business that conduct like
consumables.
 Variable 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.
 The term variable doesn’t mean that an expenses varies by value nor does it mean that it may change in some
way, it simply means that this type of expense grows with the level of business that conduct.
Vehicle Parc
Manufacturer provide all the vehicles registered within the
Dealerships area responsibility over a given period of time
 These vehicles could be registered by the dealership or by another dealership that is selling vehicles into same
area.
 In many cases the time period for measuring vehicle parc spans 10 years, although this varies from
manufacturer to manufacturer.
 The current vehicle registrations are added & year 10 of the calculation & is replaced with the year 9 statistics &
so on.
 Each year should be assessed separately for meaningful analysis.
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 vital KPI informs of the number of days work in progress that you have accumulated.
 Many financial reports have a tendency to provide WIP as a total monetary value, but this can often be
misleading.
 You must ask the question, is it reporting a value based upon the labour cost of sales, hours sold at retail value,
or hours sold at the current recovery rate?
 Be aware that an increasing trend in this KPI is a bad thing because it’s affecting profitability, cash flow &
perhaps more importantly, customer satisfaction.
 If you are not able to get the WIP anywhere near 3 days or less, you may wish to investigate the productive
ratio & ask yourself the question of whether you have enough staff to cope with the volume of work service
department is conducting.
Additional Gross Profit
Additional gross profit other than labor sales
Purpose: Budget & Composite Analysis
 This is gross profit that is derived from service department operation other than labor sales or parts gross profit
transfers, e.g., shop supplies and sublet.
Additional Service Request Closing Percentage (ASR closing %)
Total ASR Hours Sold ➗ Total Hours Requested
Purpose: Budget & Composite Analysis
 Additional Service Request Closing Percentage (ASR closing %) is the amount of labor sales, or flat rate hours
sold versus amount requested.
Annualized Net Turn
The annualized improvement from one time period to another
Purpose: Budget & Composite Analysis
 Annualized Net Turn is the annualized improvement from one time period to another.
Calendar Utilization Percentage
Total Number of Days Worked Annually➗ Total Annual Days Planned to be Worked
Purpose: Budget & Composite Analysis
 Calendar Utilization is a comparison of the number of days worked versus the days planned for work, expressed
as a percentage.
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 Days Available X Calendar Utilization
X Overall Effective Labor Rate
Purpose: Budget & Composite Analysis
 Monthly Technician Labor Sales Value is the average monthly labor sales value per technician.
Number of Technicians Needed
Labor Sales required➗ Technician Labor Sales Value
Purpose: Budget & Composite Analysis
 Number of Technicians Needed is the labor sales required divided by technician labor sales value.
Potential Billable Hours
Hours Attended daily X monthly days worked X calendar utilization X Productivity
Purpose: Budget & Composite Analysis
 Potential Billable Hours is the available daily clock hours multiply by monthly days worked multiply by calendar
utilization % multiply by production %
Sales Needed to Break Even
Average monthly expenses➗ Gross Profit %
Purpose: Budget & Composite Analysis
 Sales Needed to Break Even is the average monthly expenses divided by gross profit %
Sales Needed to Net Desired Percentage
Average monthly expenses➗ (Gross Profit % - desired net %)
Purpose: Budget & Composite Analysis
 Sales Needed to Net Desired Percentage = Average monthly expenses divided by (gross profit % minus desired
net %).
Auto Service Department KPIs
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 starting point for a given area of performance, this is a minimum
expectation.
4. Baseline suggests that you should reach a given level of performance as an absolute minimum & you should
continue 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 Estimator.
7. Actions 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 identify 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 direction.
11.Allocated Job Times: This represents the time allowed or the time gives to a Technician to complete a job, it is
not the same as the Hours Sold.
12.The allocated job time is generated in one of two ways:
A. In franchised dealership: manufacturer's book times should be used as the allocated job time 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 time 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 estimate.
13. The top achievers have well trained service Advisors who clearly understand the manufacture's book times &
their own DMS.
Auto Service Department KPIs Digest
S
KPI
1
Efficiency = Hours Sold / Hours Worked (X 100)
2
Utilization = Hours Worked / Hours Attended (X 100)
3
Productivity = Hours Sold / Hours Attended (X 100)
4
Technical Efficiency = Allocated Job Time / Hours Worked (X 100)
5
Debtor Days = Service Debtors➗ Service Daily Credit Turnover
6
Department Profit % = Department Profit ➗ Turnover (X 100)
7
Department Expenses % = Department Expenses ➗ Turnover (X 100)
8
Department Gross Profit % = Department Gross Profit ➗ Turnover (X 100)
9
Diverted Time = Hours Attended - Hours Worked
Benchmarks/Baseline/Purpose
Remarks
1. This is NOT measure of Technician's Efficiency, it's measures
against the Hours Sold.
2. The
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
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.
2. here's the Key … In the time the Technicians have saved by
Benchmarks: 93.5% to 118.75%
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
Benchmarks: 95% to 105%
their jobs compared with Flat Rate Times.
A business can survive a long time without profit, but it can’t
Baseline:〈 45 days
survive a single day without cash.
Keeping track of the profit % on monthly basis so that you can see
Baseline: 〉35%
the trends that are emerging.
Keeping track of the Department Expenses % on monthly basis so
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
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
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.
10
Hours Attended = Total number of hours available to work
11
Hours Bought = Total number of hours paid to technicians
12
Hours Sold = Total number of hours invoiced to the customer
13
Hours Sold per Job Card = Hours Sold ➗ Number of the Job Cards
14
Hours Sold per Parc = Annualized Hours Sold ➗ Number of Vehicles in Parc
15
Hours Sold per Technician = Hours Sold ➗ Number of Technicians
16
Hours Worked = Hours attended - Idle Time
17
Labour cost of sales = The money paid to technicians for the Hours Worked
18
Labour Gross Profit = Labour Sales – Labour Cost of Sales
19
Labour Gross Profit % = Labour Gross Profit ➗ Labour Sales (X 100)
20
Labour Sales Mix = (Sector) Hours Sold ➗ Total Hours Sold (X 100)
Factors that will influence the number of hours attended are the
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
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%
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
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
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
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
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
Baseline:〈 25% of Labour Sales
labour cost of sales.
The definition is the invoice value of the hours sold minus the
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
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%
from the hours sold after you have paid the technicians for the
Warranty
time taken to complete the work.
Baseline: Own Strategy
21
Lead Time = “I want my vehicle serviced, when you can fit it in”
Baseline: 3 days or less
22
Oil & Lubricants Profitability = Oil Gross Profit ➗ Oil Sales (X 100)
Baseline: 〉40%
23
Parts Sales per Hours Sold = Invoiced Parts Sales to the Workshop ➗ Hours Sold
Purpose: Budgeting & Composite Analysis
24
Parts Sales Mix per Hour Sold = (Sector) Invoiced Parts Sales to the Workshop ➗
(Sector) Hours Sold
Purpose: Budgeting & Composite Analysis
25
Parts Sales per Technician Invoiced Parts Sales to the Workshop ➗ Number of
Technicians
Purpose: Budgeting & Composite Analysis
26
Policy Costs = Certainly, we’ll rectify that as a gesture of goodwill
Baseline: Own Strategy
27
Productive Ratio = Number of Technicians ➗ Number of Staff
Baseline: Circa 3:1
28
Recovery Rate (Overall) = Total Labour Sales ➗ Total Hours Sold
Baseline: Not Applicable
29
Recovery Rate (Sector Breakdown) = Sector Labour Sales ➗ Sector Hours Sold
Baseline: Own Strategy
30
Recovery Rate % (Overall) = Recovery Rate ➗ Charge Out Rate (X 100)
Baseline: Dependent upon Labour Sales Mix
31
Recovery Rate % (Retail) = Retail Recovery Rate ➗ Retail Charge Out Rate (X 100)
Baseline: 〉90%
32 Recovery Rate % (Internal) = Internal Recovery Rate ➗ Internal Charge Out Rate (X 100)
Baseline: 〉98%
33
Recovery Rate % (Warranty) = Warranty Recovery Rate ➗ Warranty Charge Out Rate (X
100)
Baseline: 〉98%
34
Repair Orders per Technician = Number of Repair Orders ➗ Number of Technician
Purpose: Budgeting & Composite Analysis
35
Retail Hours Sold per Retail Repair Order = Retail Hours Sold ➗ Retail Repair Order
Purpose: Budgeting & Composite Analysis
A long lead time of seven to ten days is not generally understood
nor accepted by customers & usually results in them taking their
vehicles elsewhere forever!
Most manufactures'’ financial reports show this statistic within
the service department for trend analysis.
The only way to flatten out the size difference between large &
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
service department because each income stream will be different
for every specific reasons.
The first thing to point out is that this is not an operational
measure because technicians don’t sell parts.
A hours worked on the vehicle should be charged at cost price &
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
or in a small or new start up business.
The recovery rate is asking how much revenue you have
recovered per hour sold after any discount.
Here you can see the recovery rate for each sector, but it’s pretty
useless unless you match them to the charge out rates.
This KPI is simply asking what percentage of the charge out rates
are begin retained so it can be accurately compared (discounting
& retention).
You can use this KPI to isolate the discounting & then take the
necessary action to prevent the discounting if deemed necessary.
The term internal represents work conducted by the service
department that will be charged to the sales department.
Although the warranty labour sales will reduce on the dealer
management system, the hours sold may remain the same, you
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
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
dealerships are the same, this why manufactures'’ composites &
inter-firm comparisons create this statics in an attempt to make
fair comparison.
36
Retail : Internal Ratio = Retail Hours Sold ➗ Internal Hours Sold
Baseline: 〉2.5:1
37
Revenue per Technician = Department Turnover ➗ Number of Technician
Purpose: Budgeting & Composite Analysis
38
Fixed Expenses % = Fixed Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
39
Semi-Fixed Expenses % = Semi-Fixed Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
40
Personnel Expenses % = Personnel Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
41
Service Sales per Parc Unit = Annualized Labour Sales➗ Vehicle in Parc
Purpose: Budgeting & Composite Analysis
42
Sub Contract Profitability = Sub Contract GP ➗ Sub Contract Sales (X 100)
Baseline: 〉20%
43
Variable Expenses = Variable Expenses ➗ Total Turnover (X 100)
Baseline: Own Strategy
44
Vehicle Parc = Manufacturer provide all the vehicles registered within the
Dealerships area responsibility over a given period of time
45
Work In Progress (Days) = WIP Hours ➗ Nº of Tech’s ➗ Hrs. attended in 1 day
Baseline: 3 days or less
46
Additional Gross Profit = Additional gross profit other than labor sales
Purpose: Budget & Composite Analysis
47
Additional Service Request Closing Percentage (ASR closing %) = Total ASR Hours Sold
➗ Total Hours Requested
Purpose: Budget & Composite Analysis
48
Annualized Net Turn = The annualized improvement from one time period to another
Purpose: Budget & Composite Analysis
49
Calendar Utilization Percentage = Total Number of Days Worked Annually ➗ Total
Annual Days Planned to be Worked
Purpose: Budget & Composite Analysis
50
51
Effective Labor Cost = Technician Pay ➗ Hours Sold
Monthly Technician Labor Sales Value = Hours Worked Per Day X Productivity X Work
Days Available X
Calendar Utilization X Overall Effective Labor Rate
Purpose: Budget & Composite Analysis
Purpose: Budget & Composite Analysis
This strong indicator of the service manager’s ability to grow the
workshop without the reliance upon internal & warranty work.
The problem here is that technicians are not responsible for the
turnover.
They represents those expenses that have to pay to keep the
department running whether sell anything or not
The reason that called Semi-Fixed is that they are fixed each
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
employee benefits.
Be sure to obtain the correct interpretation from the respective
manufacture.
Sub Contract refers to the jobs that you take in & undertake a 3rd
party to conduct on behalf, an example fitting of windscreen.
Variable expenses are those expenses that are directly linked to
the volume of business that conduct like consumables.
In many cases the time period for measuring vehicle parc spans
10 years, although this varies from manufacturer to
manufacturer.
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
operation other than labor sales or parts gross profit transfers,
e.g., shop supplies and sublet.
Additional Service Request Closing Percentage (ASR closing %) is
the amount of labor sales, or flat rate hours sold versus amount
requested.
Annualized Net Turn is the annualized improvement from one
time period to another.
Calendar Utilization is a comparison of the number of days
worked versus the days planned for work, expressed as a
percentage.
Effective Labor Cost is the technician pay divided by hours sold.
Monthly Technician Labor Sales Value is the average monthly
labor sales value per technician.
52
Number of Technicians Needed = Labor Sales required➗ Technician Labor Sales Value
Purpose: Budget & Composite Analysis
53
Potential Billable Hours = Hours Attended daily X monthly days worked X calendar
utilization X Productivity
Purpose: Budget & Composite Analysis
54
Sales Needed to Break Even = Average monthly expenses➗ Gross Profit %
Purpose: Budget & Composite Analysis
55
Sales Needed to Net Desired Percentage = Average monthly expenses➗ (Gross Profit %
- desired net %)
Purpose: Budget & Composite Analysis
Number of Technicians Needed is the labor sales required divided
by technician labor sales value.
Potential Billable Hours is the available daily clock hours multiply
by monthly days worked multiply by calendar utilization %
multiply by production %
Sales Needed to Break Even is the average monthly expenses
divided by gross profit %
Sales Needed to Net Desired Percentage = Average monthly
expenses divided by (gross profit % minus desired net %).
Thank You
Mohamed Shehata
www.linkedin.com/in/mohamedshehata
Auto Business way
Autobway@gmail.com