Posted to Shop Management Forum on 8/22/2009
Increasing Sales and Profits Through Efficiency
The average tech in the average Indie shop is only actively
working on cars about half the time they're available for
work. This is not their fault, but is the reason that the
people in our trade generally earn less than other trades.
In order to reduce the time techs are NOT working on cars,
we have to evaluate everything they do that DOESN'T produce
revenue. Some of the more common things techs do that should
be reduced or eliminated are: making phone calls to order
parts. This should never happen and if it's part of your
business plan, you need a new plan. Techs in general should
be able to produce $2 a minute in parts and labor sales. A
tech on the phone for just 5 minutes just cost you 10 bucks.
A tech looking for a tool for 5 minutes just cost you
another 10 bucks.
A tech waiting 20 minutes for the parts store to deliver
brake pads just cost you 40 bucks. Holy cr*p, that's more
than your net bottom line profit on that job!!
So, let's look at a very simple thing we all
have--inventory. Even those who claim to have no inventory,
actually have inventory. No one here should be ordering 5
quarts of oil and a filter for an oil change every time you
do an oil change. Each of us probably has an assortment of
air filters and wiper blades, too.
So, we all have inventory.
My inventory is extensive given the size of my shop and
you'll all say, "well, that's easy for you, because you only
work on a few makes of cars".
This is a true statement, but just because you work on a lot
of different stuff still doesn't mean you can't capitalize
on the real value of inventory--less time your techs spend
waiting for parts.
So, let's start by running a report in your management
system listing the parts you sell ranked by the quantity of
each you sell. The stuff you sell the most of will be at the
top (well, duh).
Whether you stock any of these parts or not can be
determined by a number of factors. First, is it a part that
holds up production until the tech gets it? This would be
the number one reason to stock it. Remember the 2 bucks a
minute concept. Remember you already sell a bunch of them,
based on your own reports.
You never need to stock clutches if they're readily
available locally, because it will generally be hours from
the time the tech starts the job until he actually needs the
clutch, for example. Brake pads are different, as they're
generally needed within minutes of the sale.
The next reason is to make more money because you can buy
them at a much better price out of town. You can't hold a
car over every time you need the part, so you buy it locally
and spend more than you should to get it.
A radiator might be a good example. If you pay $150 for one
locally and can buy them out of town for $90, you make an
extra $60 every time you sell one "off the shelf".
The next question to ask is, "is the part coming or going?".
What? The "life cycle" of a part starts when new cars are
built. You don't need a radiator for a 2-year old car, as it
may be 6 years or more before you get a chance to sell one.
So, the sales curve on any part starts with when it's first
needed on a car, peaks when "they all need that" and slowly
declines as those cars are converted into scrap and shipped
to Korea, where they come back as a Hyundai, or a Kia.
If the part is on the upswing, stocking it is easy, if it's
about done selling, don't even think about it.
Finally, accept that fact that some inventory just won't
ever sell and you'll end up writing it off and tossing it
into the dumpster. This thought is what most shop owners
constantly live in fear of doing, without realizing all the
wasted profit that went down the drain while his techs
DIDN'T produce 2 bucks a minute waiting on the part to be
delivered. Or, worse yet, there aren't any in town and the
car has to be put back together and pushed outside.
So, start with the stuff you're selling now and evaluate
each part. How many do you sell in the average month, how
long does it take you to get it and could you get a better
deal if you stocked it.
I think you'll find there are a lot of opportunities out
there to make more money without getting more cars in the
door or selling more to each customer. I call it, "Money for
nuthin' ". Uh, the "chicks for free" part will come in a
future post.... ;o)
George from Nebraska
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27 Replies Received