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International Automotive Technicians Network
Increasing Sales and Profits Through Efficiency
Posted to Shop Management Forum on 8/22/2009 27 Replies

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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