Article 1 - The Cost of Wasting Time
By Nei Santa Barbara
When I started writing this article, it was 27 years, 121 days, 7 hours and 46 minutes since I started working in a car dealership. In that time, I saw the industry start to use and focus on, digital control tools and some applications focused on sales.
This focus can still be observed when we visit automotive congresses such as #ExpoNADA (National Automobile Dealers Association) in the United States. In these exhibitions, much more than half (yes, much more than half!) of the exhibitors are #CRM companies, which promise fantastic results in sales if we use their systems and #DMS.
It is obvious that managing the KPIs are basic and taking care of sales is essential. However, there is also another theme related to the health of the retailers and that has a very big impact on the bottom-line results:
the cost of time in the service operations and the contribution rate that it will be able to make to the company's gross margin.
Payroll
We often hear owners’ comment on the weight of payroll at their dealership. Salaries stands for the highest cost of operation in the majority of retailers. In most cases, the service department holds most of the cost on the balance sheet.
See the real data example below on the distribution of different departments payroll costs of a group of dealerships:
Waste in Workshop Production
In our GEMBA walks to find, understand and eliminate waste, it is not difficult to realize, even before measuring, how much of the available labor time that is wasted in small portions along 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, according to data that Lean Dealers collected in the field, the average productivity of the workshops is around 50%. Personally, we've seen workshops with 30% productivity.
Low productivity can mean that the dealership basically throws in the trash 50% of their payroll cost
but unfortunately, it's not just that. For each productive there is added a huge labor liability, costs of facilities, purchase of tools, equipment and training, among other expenses.
It is difficult to digest this reality, since the image we normally have of a workshop is that of the "rush". All working at full throttle.
However, working does not mean producing.
For the manager, it is important to know the operation and understand how the team spends its time.
I participated in an activity called "time study", in which a person accompanies a productive throughout his day. Every five minutes, it is recorded on a sheet what activity the technicians performing at that moment. The unsurprising result of this study is that almost half of the records shows other activities than producing, or if you prefer, #waste.
If we sell only 50% of our available hours, with what does the workshop staff use their time? During our consultancies, we have identified some activities that often consume the time that preferably should be sold.
These include:
(Below are all waste)
• Waiting for work
• Waiting for parts
• Driving / Moving Cars
• Searching for tools
• Searching for car
• Search for manager
• Search for service advisor
• Ask the advisor for an explanation about the repair order
• Waiting for customer approval
• Put the car multiple times in the work lift
• Resume work after a break
• Prepare the budget of frequent repair items.
Why isn't all this 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.
#waste #lean #leanthinking #leandealers #cost #payroll #leanstrategy