How to Manage the 8 Controllables of Dealership ... - DealersEdge

How to Manage the 8
Controllables of Dealership
Service Profits!
With
Don Reed from DealerPro Training
Moderated by
Mike Bowers, Executive Editor at DealersEdge
Thursday, June 13, 2013
1 – 2:30pm ET
DealerPro Training is the Largest Performance Based Fixed
Operations Training Organization in North America.
Don Reed is the founder and prime mover of DealerPro
Training. With 26 years of success in all aspects of a dealership -
from parts manager to dealer principal, Don knows what it takes
to succeed.
It takes a well trained team. And Don has built a team of the
best and brightest - 22 Fixed Operations Specialists averaging 23
Years of Experience. This group of experts has trained in more
than 700 Dealerships in the U.S. & Canada.
Achieve 100% Service Absorption
• The 4 Essentials to 100% Service
Absorption
• Service Advisor Sales Training
• Service Management Training
• Technician Sales Training
• Training the Customer
• Telephone Training
• On-line Maintenance Menu
• Interactive On-line Training
Parts PRO Training
• Sales Training
• Telephone Training
• Control Obsolescence
• Increase Stock Order Performance
Body Shop PRO
• Reduce Cycle Times
• Increase Productivity
• Sales per Transaction
• Insurance Company Relationships

Managing the
Essential Eight
Controllables
To Maximize Profitability
Presented by:
Don Reed, DealerPro Training Solutions
The Essential Eight
Expense
Controls
Working
Days
Gross Profit
Margins
Effective
Labor Rate
Maximize
Profitability
Calendar
Utilization
Hours
Available
Technician
Productivity
Number of
Technicians

Essential # 1
Working Days=25
What are the Options?
Open Saturday and/or Sunday
Open Holidays
How to Implement?
4 Day Work Week @ 10 Hours per Day
Production Groups (3 Rotating Shifts)
Lateral Support
Simple Support
Production Teams
Three Week Rotation

Essential #2
Calendar Utilization=90%
Typically the Least Managed Essential
Calendar Utilization is a measure of the days
actually worked as a percentage of the
available work days.
Calendar Utilization is Affected by:
Vacation
Sick Leave (Deer Season & Harvest Time)
Replacement Time (Turnover)
Training
Calendar Utilization Calculation
Formula:
What Opportunities do You see
for Improvement in Your Store?

Essential #3
Hours Available
Opportunities for Improvement
6 Days @ 10 Hours each With Three
Groups
5 Days @ 9 Hours Each
Second Shift
Production Teams (Multiple Technicians
per Bay)

Available Hours of Operation
Which ones Improve Owner Retention?
Essential #4
Technicians Available
What type of Technicians do you Need?
Lower Skilled Technicians (Maintenance)
PDI Technicians
Where do you find them?
Aftermarket Service Facilities
Other Auto Dealers
Ex-Military Techs

Essential #5
Technician Productivity=120%
Formula: # of Technician hours Billed on the
Repair Order divided by # of Technician
Hours Worked
How to Increase Productivity to 120%?
Install Performance Based Pay Plans
Measure Productivity Daily
Train Advisors how to Advise

Essential #5
Technician Productivity
Parts Processes
What is the Primary Mission of a Parts
Department? -Support the Technicians-
Pre-pick parts
Deliver parts to Techs
Improve Work Mix Retail vs. Warranty
Inspection Process for Maximum Reliability
Maintenance Menus (Low Skill & High Return)
500 - 50% - 40% - 0.2 = $10,000 Gross Profit

Essential #6
Effective Labor Rate
Definition: The Actual Labor Rate paid by the
Sales department, the Manufacturer & the
Retail Customer for Services Performed
Formula: Total Labor Sales divided by Total
Hours Billed on the Repair Orders =
Effective Labor Rate
Question: Why is the Effective Labor Rate
typically less than the Posted Retail Rate?
Answer: Discounting & Maintenance
Pricing

Essential #7
Gross Profit Margins = 75% & 40%
Gross Profit = The Sale Amount of a
Product or Service Minus the Cost of Sale
Gross Profit Margin = The Gross Profit
divided by the Sale Amount
Sale Amount Cost of Sale Gross Profit Margin
$112-Labor $28-Tech $84 75%
$90-Parts $54-Supplier $36 40%
Essential #8
Control Expenses
Shop Policy Adjustment – (2% of Labor Gross)
Lot Damage
Comebacks
Tools & Shop Supplies
Charge Out Supplies @ 7% of Labor (State
Laws?)
Store & Dispense Supplies in the Parts
Department (Log)
Personnel (1 Support Person for every 2 Productive)

Copyright 2012 DealerPro LLC ©

Essential Eight Changes
Working Days (No Change)
Calendar Utilization + 5%
Hours Available per Day (No Change)
Number of Technicians + 1
Technician Productivity + 25%
Effective Labor Rate + $4.92
Margins – Labor + 1.5% - Parts + 5%
Expenses + 20% of Additional Gross
Let’s Compare to Sales Department
Performance
Essential Eight NET Profit Potential
$51,103 per Month
$526,376 per year
If I’m Wrong by 50% you Still Get
$263,188 NET Profit
That Equates to Selling an Additional
351 Units at $1,500 per Retail Unit

Essential Eight
Strategy for Implementation
Evaluate your Essential Eight Opportunities
Build your Plan for Implementation
Sell your Employees on the Benefits of
your Plan
Measure their Performance Daily
Compensate to Motivate
Get Ready for Change
Hold Your People
Accountable!