Why Has My Labor Gross Percentage Dropped?

Bruce NewsletterThis was the first question a dealer asked when I entered his store recently. I sat down with the service manager to get his take on the question. He didn’t have an answer. So we got out 100 repair orders to review. After spending several hours looking at repair orders, looking at the DMS, and looking at repair orders again I suggested looking at another tool that might help locate the issue. 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’s now time to look at a more structured process that will take only a small portion of a manager’s time each day. ROSE (Repair Order Survey and Evaluation) is the answer.

 We setup his DMS report generator so the repair data could be extracted and loaded into Microsoft Excel. We then went to the M5 web site and signed-up for the 30-day free trial. From there we uploaded the extracted data to ROSE.

  • Download every repair order from a day, week, month, or even a year. Repair orders can then be processed using a consistent method of importing, analyzing, and reporting data.
  • Identify key performance indicators (KPI’s) and rapidly zero in on problem areas.
  • Easily divide jobs into Maintenance and Repair, to analyze Menu and Grid Utilization.
  • Identify your customer demographics:
    • Where are they coming from.
    • What are they purchasing.

 In this case we sorted the same 100 repair orders by gross profit dollars made on each one. Below is a snapshot when we sorted from the least dollars to the most dollars and you can see the issue yourself.

 09-02-15-A

  • Notice the labor gross dollars are negative? The tech cost was higher than what was charged to the customer.
  • Notice that under the FRH column that the tech was paid 106.6 hours? That number was “fat fingered” but was not caught.
  • Notice how some of the effective labor rates dropped down to about $7? Someone discounted the already discounted competitive labor operation.

 We looked at the same report for their “sister” store. Below is a snapshot of the same report just sorted by the ELR (effective labor rate) column.

09-02-15-B

  • Notice how low the the ELR rates are on this report? Several were at a $22.50 rate. The manager went back to review each repair order and admitted that he had “padded” the tech time to insure the tech, who was on an hours guarantee, would meet it weekly.

 That brought the subject of unapplied labor. The manager said he didn’t “like” unapplied labor. I stated no manager likes to see this number on their financial statement but it is a reality of his business.

 The ROSE tool is so diverse in what it can do to expose the business there is not enough space to write about it. I tell my managers that their staffs “can run but cannot hide” with this information.

 If you have questions about your business, and want to save time from reviewing each repair order daily, I highly recommend you download ROSE from our website. Go to www.m5ms.com and click on ROSE at the top left part of the screen. Register for 30-day free trial. Contact David at 205-358-8717, or any M5 consultant, for setup assistance.

 

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