By Nei Santa Barbara
When I began writing this article, it had been 27 years, 121 days, 7 hours, and 46 minutes since I started working in a car dealership. During this time, I witnessed the industry gradually adopting and emphasizing digital control tools and applications focused on sales.
This emphasis is still evident at automotive congresses like #ExpoNADA (National Automobile Dealers Association) in the United States. At these exhibitions, more than half of the exhibitors (yes, more than half!) are #CRM companies, promising fantastic sales results with their systems and #DMS.
While managing KPIs and sales is crucial, there's another significant factor affecting retailers' health and bottom-line results: the cost of time in service operations and its contribution to the company's gross margin.
Payroll
Payroll is often a topic of concern among dealership owners, with salaries representing the highest operational cost for most retailers. In many cases, the service department bears the brunt of these costs, as illustrated by the following real data example showing the distribution of payroll costs across different departments in a group of dealerships:
Uncovering Waste in Workshop Production
During our GEMBA walks to seek out, comprehend, and eradicate waste, it's evident, even before measurement, how much of the available labor time is squandered in small increments throughout the process.
If the main cost of a service sector is labor, how much do losses in the production capacity of the technician represent?
In Brazil, data collected by Lean Dealers reveals that workshop productivity averages around 50%, with some workshops operating at as low as 30% productivity.
Low productivity can mean that the dealership basically throws in the trash 50% of their payroll cost
Yet, the repercussions extend beyond just that. For each productive hour, there's a significant burden of labor liabilities, facility costs, tool purchases, equipment investments, and training expenses.
It's a harsh reality to digest, especially when the common perception of a workshop is one of constant hustle and bustle. However, activity does not always equate to productivity.
For managers, it's vital to grasp the operation and understand how the team allocates its time. I once participated in a "time study" activity, shadowing a technician throughout their day. The results were unsurprising: nearly half of the recorded activities were non-productive, or in other words, #waste.
If we're only selling 50% of our available hours, what are workshop staff doing with their time? Through our consultations, we've pinpointed several activities that frequently consume time that could otherwise be sold. These include:
(Below are all instances of waste)
• Waiting for work
• Waiting for parts
• Driving / Moving cars
• Searching for tools
• Searching for cars
• Searching for managers
• Searching for service advisors
• Seeking explanations from advisors about repair orders
• Waiting for customer approvals
• Repeatedly placing cars on work lifts
• Resuming work after breaks
• Preparing estimates for common repair items
Why isn't all of this immediately obvious?
With time we are getting used to the routines at work and we end up accepting the waste of the operation as "normal"
and the queues and waiting as part of the business operations, besides living with low productivity as if it were necessary and nothing we can do anything about.
Looking at your process with Lean lenses, it is possible to identify where you have waste in your process, why they exist in the first place and how to eliminate waste,
adapting the operations to real demand and maintaining the company and the jobs that guarantee good results...even in difficult times!
Some considerations for the resumption of your business:
What part of my payroll brings results to the company?
What is my real productivity (hours sold/hours available)?
How are technicians "spending" production time (what do they do with it)?
What is the contribution of the unproductive(s) in the company's result and to the client?
Think Lean, eliminate waste and help your business survive and get ahead in the resumption!
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Contact us now to learn how you can improve your Dealership Operations with straight forward Lean Thinking.