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How Much is Time Worth?

Updated: Mar 26

If we look at the main contribution across the different services offered by a dealership the main contribution is the team hours from productive staff in the service department. But, as we have commented in previous articles, this service is perishable, that is, if the hours not used they are "lost". When we discuss productivity, this indicator should bring us the following information:

Of the hours I have available, how many can we sell?

This information, analyzed in conjunction with booking availability, for example, should help us decide whether the team is able to meet the demand or whether it is necessary to hire new productive staff. However, the result of this equation is a fairly common scenario: we have several days of waiting to get an appointment, and at the same time, low productivity in the workshop.

This is a good indication of problems in process management.

There's no one to blame for that. The real cause is poorly planned growth, based on bad patterns that incorporate problems as part of the business, even before building the dealership facility.

How to calculate Productivity
How to calculate Workshop Productivity

Manufacturer standards such as "for each lift, we need five parking spaces", which we find in manuals of automakers, for example, assumes that it is normal to have five vehicles stopped for one vehicle in service.

In a meeting with a automotive manufacturer, I heard that their standard is to have two lifts per workshop technician, that means that the customer's vehicle will be "hanging" in the box, with no one working on it, while customer is without his car!

This seems so normal that it's even in the facility manual.

As well as determining the ideal picture of people and functions, ignoring the particularities of each company, region and market, does not seem strange to them.

Challenging these old standards brings innovations to our workshops, like Pedro Simão did, a pioneer in Lean dealerships who revolutionized the way of managing his dealers in the 1990s.

The causes of waste are common in automotive dealers, we know as we have been working across all industry segments. They also don't vary much even between customers’ social class or sales volume, light or heavy.

There is waste everywhere!

But what is the impact of this wasted time on your dealership's operations?

How much is the five minutes a technician waits at the parts counter worth every time he picks up a part? Or how long does it take to search and bring a vehicle to the lift? Let us do the check!

How much is the minute worth?

Let's analyze these numbers collected from a Brazilian dealership in 2020 by Lean Dealers:

So for every minute sold we have:

Thus, we conclude that

every unsold minute, your dealership reduces the possibility of gross profit by $ 10.35.

Where do we spend our time?

Now, we analyze the activities that the technician conducts to perform a maintenance, repair or diagnostic. It is common to see a lot of time spent that do not create value for the customer, who in their turn will not pay for them. The following is an example of tasks and the time required, in minutes.

Analyzing your process, you will certainly find these and other activities that are performed but not paid for by the client.

Remember: if the customer doesn't pay for some task that someone on your team performs, there's a huge chance it's pure waste!

For each service performed, the technicians of this team spend, on average, 23 minutes on tasks that are not paid by the client.

The result of this analysis should indicate how much each technician could add to the gross profit selling its available hours.

Learning from experience a Lean Dealer Coach knows what and where in each process steps we are wasting time in the operation. A Lean Dealer Coach can work with your team to eliminate the root causes of these losses and solve the problems one by one. By improving process flow, you can easily reduce losses by more than 50%. In this same dealership, with an optimized process, we easily lowered this time to eight minutes, reducing the loss by 15 minutes per vehicle. 

Considering the dealer's customer demand and the gross profit of every minute sold, this is the potential result of saving time:

The numbers highlight the impact of the productive "minutes" that we lose daily. In a more detailed analysis, much more waste can be found. Knowing this data, productivity rates below 50% no longer sound so unlikely.

Taking into account value creation, and identifying waste and diagnosing and eliminating the problem, is quite different from looking at a productivity report at the end of each month. It also illustrates the difference between "motivating" and "solving" the root cause of the problems together with the team.

Want to learn more or need support, don't hesitate to drop as message. During this COVID19 period, we offer free online coaching session!

Think #Lean, go to #gemba, eliminate waste and help your company survive and get ahead in the resumption!

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