|Written by Admin|
|Thursday, 05 November 2009 15:36|
Improving Maintenance Effective Labor Rate
Maintenance ELR Improvement in many service departments is a vital piece of the Net Profit improvement pie because Maintenance can make up to 60% or 70% or as much as 80% of all customer pay work in some stores.
ELR = labor sales dollars collected divided by flat rate hours paid to techs.
Roams enables service managers to measure customer pay repair & maintenance work separately. As soon as we are able to measure something we can begin to manage it better. Managing maintenance ELR is not about raising maintenance labor rates across the board. With roams we are able to make significant improvements in maintenance ELR by identifying and targeting those operations which, when improved, will have the most impact on maintenance ELR and net profit. Identifying the right operations to perform “Open Heart Surgery” on is only part of the solution. Roams also helps us understand whether we should charge the customer more, pay the tech less or both. Improving ELR is always accomplished this way by charging more, paying less or both.
Our “Open Heart Surgery” process helps us with the most difficult part of this process, changing technicians pay time for maintenance operations. Real ELR improvements are only accomplished in most cases with at least some reduction in flat rate time for some operations. Anyone who has ever held a technician meeting to announce changes (reduction) in flat rate times knows just how unpopular and uncomfortable this can be. We recommend that instead of just announcing a reduction in time for some operations, that, instead it is presented as a reallocation of time. Roams enables us to reallocate time on popular operations which are less profitable, to operations with some room for increased price or flat rate time. We use report # 31, Labor Operation Number Audit Report, to identify the best operations to reallocate time from and to. We recommend maintenance operations only and sorting the report first by “LON’S Sold”, which is the number of times Labor Operation Numbers are Sold, set in descending order so you get the most frequently sold operations first. Find those operations, most frequently sold, with an ELR lower than your target maintenance ELR, and perform “Open Heart Surgery” on them! Record all the time from those operations which must be reallocated, (because you reduced flat rate hours to be paid for those operations) and we will drill deeper into your database to find the best operations to reallocate that time to by going a couple pages down on the same report. If you sorted the report in descending order as you go down page by page you will find operations that are not sold as frequently. We have found, through the years, that operations which are not sold as frequently often times have very high ELR and make a great place to reallocate time to. If you take an operation with a very high ELR and reallocate some flat rate time and raise the labor selling price you have in fact allowed the customer to fund your “Open Heart Surgery”! It is not uncommon for these operations to suddenly become more popular because of the flat rate hour increases. So, you have in effect fixed two operations; the first being more profitable than before and as I can't being more popular than before.
We have prepared a video on this topic so you can see Roams actually being used to find the most likely candidates for “Open Heart Surgery”, Click Here to watch the video.
|Last Updated on Wednesday, 24 August 2011 14:26|