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Production Problems
I run a small specialty shop focusing on Subarus primarily and Saabs as a second brand. Since we specialize many of our projects are heavy line work including many head gaskets and engine repairs. My business has been growing and I have a strong ability to sell the work once I make contact with a potential customer. I keep a fair amount of speciality parts on hand to avoid time delays running to the dealer.
Over the last 18 months as we have grown I have experienced a trend of my techs never staying on schedule. I have changed master techs three times with the results being the same. The schedule gets stretched no matter what — I manage to meet payroll but my family always gets squeezed — I rarely get paid. I have tried flat rate and hourly with the same result. The issue seems complex with many factors adding to the problem — including poor time management, selecting some bad jobs to take on, unexpected issues, and the cars generally fighting us due to age and wear and tear.
My current master tech is a wonderful person with a terrible sense of time — quality is very important to me but the level of detail at times is overboard. I fear I can’t change a tigers strips here. He knows of my concerns and tries to focus. We have a daily schedule that we discuss but its not worth the paper its printed on.
So as the work is piling up and cash flow is tight — we have $11,000 of work sitting on the ground today and growing but it does not get out and little in the bank — I fear if I add more techs and lifts the problem will grow exponentially. I have a master tech and a junior tech working for me. My evenings and weekends are getting tied up with the missed deadlines while my techs get paid and take weekends and holidays off.
I know it’s my business but I try to be very collaborative with my team — yet at the end of the day these guys are doing pretty well while I’m personally sinking. Any guidance would be helpful because I’ve run out of ideas. This issue is probably the hardest business problem I have ever tried to grapple with.
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13 Replies
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Sadly, the national average of technician efficiency is 55 to 60%, that is he is able to bill 22 to 24 hours of labor in a 40 hour week. The good tech’s are not average and will produce 90 to 150% efficiency. With your shop specializing on 2 brands, the tech’s should really be buzzing right along. I’ve taken a couple of days and paid my (new) guys to attend in-house training. This makes sure that everyone does the same job the same way every time (Just like at McDonalds) Everyone knows what to expect from me and I know what to expect from them. After 2 sessions in 2 weeks I saw a 50% guy go to 70%!
Another part of the equation is; are you billing all the hours they are working? You mentioned older cars, in our shop we do not deal with rust for free. If high mileage, old age and rust impedes the job, someone has to pay more. Has it been you? Has it been your techs? Has it been the customer? Again, with your speciality you would know the common trouble areas of a job. Be upfront with the customer and let him know there may be extra charges. If the job comes out cheaper, you are the hero!
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Do you clock the techs time to see what kind of work they are slower on. Major repairs here are promised a week or two out to allow for the better paying work to get done.
Do you used good time guides, or do you figure a job should take (x) or cost (x), What is you labor gross profit, should be about 60-70%, what is your parts gross profit, should be 55-65%. if theses numbers are not in line you will never be profitable –
I had a friend that owned a shop who refused to charge the customer more than list price for parts for fear of them thinking they would feel ripped off- they eventually ran out of money and closed.
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Hi Kieth,
I’d like to get some more info into this conversation.
Sq ft of bays, how many bays, how many AB&C Techs?
Average car count per week/month?
How many Subaru, how many Saab?
Average invoice?
I ask for example because if you have too many Subaru head jobs,
you’re probably significantly too low on price. Shoppers may be
taking advantage of you. Something as simple as a much better
warranty may make you stand above the crowd even with a much higher
profit.
Rust factor is something we take seriously too (as mentioned in
another reply). It’s not too hard to predict once you’ve seen the
car.
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Thanks Tom your points are well taken.
Regarding efficiency. My strategy was to have the techs buzzing by specializing. Every week we see the same pattern failures. My thoughts were that the techs would not have their heads in the manuals and All Data if we got so familiar with the cars that we knew them better then the dealer. We still learn every day but now the information gathering is quite detailed and borders on the obscure ( such as will a 2000 outback head fit on 2003)– I spend my time on this type of research and the weird jobs so my techs are not tied up in research.
I take the same approach with parts so that we don’t have to wait for parts. We stock many of the parts that are hard to find and I stock a lot of them so we don’t run out — including special sized o-rings, bolts, seals etc. Also we have the special tools that make a job go much faster.
Regarding billing hours worked — this is a trick I use an escalator of 40% for age and rust. We bill based on a how long it really takes to complete a job within reason — book time is a starting place. In addition I’m more then willing to lose a job if book time is a joke and my customer is hunting for someone who doesn’t know the real effort in a highly corroded and or problematic operation. For instance we know how long a rusted Subaru ball joint takes to remove from a vehicle without breaking a retaining bolt. We use hot wax and other tricks but your right it takes extra time and I build these factors into my estimates.
Ultimately though I have to balance how long something takes with the market place if the dealer is 10.2 on head gaskets and we’re 15 hours I can make the case to my customers because we service the oil pump replace timing idlers and the rear main seal etc. If the hours were higher many of my customers would elect to junk their cars — so its a careful balance.
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Thanks Frank. I do not formally use a time clock system but I can observe when an operation starts and when it is complete and i have assessed the patterns.
Here’s an example: 2000 Subaru Forester with 188,000 miles on the clock. The car needed everything so this week we focused on the rear.
Passenger rear wheel bearing
E-brake cables, shoes and hardware
Sub frame bushings ( also know as stoppers — lord knows why) 4 of them.
I allotted 5 hours for the bearing (2.8 book), 3 hours for the bushings, and 4 hours for the e-brake cables (2.0 book), shoes and hardware (1.8 book).
The tech started at 8:15 Thursday and at the end of the day Thursday says that we will get the bearing completed on Friday as well as the e-brake but will not have time for the bushings. So in two full days 15 hours — 9 of the 12 hours sold will be completed and he suggests to have the customer come back. There has been no waiting on parts all the parts are here. I’m not trying to be hard on him but I need to pay the guy and if the work doesn’t get out where does the money come from to pay him?
Regarding parts profit I’m adding a margin of 40% so I’m not quite at the 55-65 percent range. Regarding list for parts — the list price is confusing to me — the pricing is all over the place. I know that many of the local dealers charge 20-40 percent over list — then give us a 20% discount. There is one dealer in town that charges list and then a 20% discount our business is concentrated at that dealer and then I charge list for those dealer parts. Most of our parts come from out of town and are steeply discounted and then we charge list and we are at 55-65 for those parts.
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Rob thank you for your thoughtful questions.
We currently have three bays in a 30 by 40 foot build 1200 square feet my office is in a separate building we have storage in two other buildings and outside storage for 20-30 cars or more. Each by is 400 square feet the middle by does not have a lift.
Car count 6-8 (sometimes less and sometimes more) per week 70% Subaru 20% 10% other. Current have a 2000 forester in bay 1 for 2.5 days and an 2003 outback for 3 probably stretching to 4 with 16 bent valves. Will roll out the 2003 to work on others while the upper engine is being reassembled.
Average heavy line invoice (head gaskets etc usually engine work $2000-$2500
Average smaller ticket — Brakes, tranny 600-800
Pricing may be a factor but usually my customers get hooked on our passion and quality. They compare the parts list of the other guys (non Subaru shops) to ours and we are much more thorough. Its not that we’re geniuses but instead know the cars and know what to look for and have all the small parts that are time consuming and are easily skipped (examples timing cover seals or oil pump o-rings, brake hardware). If you roll a Ford or Chevy in the shop we have our heads in the manuals.
Regarding rust — we know what we’re up against and add to the estimate. Things that consume a great deal of time are a harmonic balance pulleys coming loose ruining the pulley and damaging the key way. Shop rules are to use a torque wrench at 130ft/lb but an impact was used and a crank was almost damaged beyond repair. I stock the keys (the dealers do not) but this fiasco cost us 5-6 hours getting things repaired and back together again.
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One thought I have is to add two more lifts in a larger building we have on the property. The building has room for 4 lifts total. This is a separate building then our current shop which creates two separate spaces which is less then ideal I know.
I would then hire an additional tech and eventually two. I would elevate our master tech to shop manger and he would work with and train the junior techs while I work with customers and market the business.
Positives: The added capacity spreads the risk of slow jobs out. Faster techs would produce more work and the slower tech(s) would get help or reassigned.
Negatives: Possibility of more low production just more of it. Two buildings hare to manage. Increase overhead of a shop manager which is a role I’m filling now (although) I’m at max capacity some days.
Your comments would be appreciated.
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Keith
Your problems are classic, much the same many of us have faced throughout the years. Your solution will be different than ours. Your best advice will come from yourself. I was finally able to make some intellegent management decisions after being educated by some of the sponsors of this forum, you will find some links at the bottom of this page. I’m not talking about taking one class, because there are many diverse subjects, but immersing yourself in management training such as AMI (Automotive Management Institute) who use classes by George (Becky) Witt Training and others to achieve the level of Accredited Automotive Manager (AAM).
There, I’ve made a shameless plug for some sponsors, but without them, we wouldn’t be having this conversation.
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Have you considered flat rate tech pay?
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We do VW and Audi only and stock most fast moving parts. We charge almost as much the dealer.Tom saved my life by helping me set up tech incentive pay.We went from 6 tech working at 40-50% to 4 guys working 100-110%. If you do only 2 lines when you are busy it should be easy to do over 100% Last year we had a few months every tech did 50+ hours in a 40hr week. Now that i fixed the production Problems and i need consistent car count.We are very spiky this year but still up over last year.PS: 8 lifts helps a lot 2 lifts per man.
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Ollie thanks for your comments they were really helpful. I think that your model mirrors the approach I’m taking. How do I find out about Tom’s compensation program that “saved your life”. Thanks Keith
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I’ve been in a similar situation, but not as bad as what you are describing. The way I got things turned arround was to get management training, just like others are saying.
First, techs need to be paid only for work completed. This uaually means flat rate. What’s the motovation to get a job done, or correctly if the pay is the same for slow and shoddy work? At my shop we complete an average of 50 cars a week with 3 techs, 4 lifts, 2 flats. We bill between 100 – 150 hours working a 40 hour week. [absolutly no weekends, that’s family time!] Tech efficiency runs from 150% down to 80%. Pay is based on a variable flat rate, with increases for heavy, exotic, and others. We also have a bonus program based on completed BILLABLE hours.
I feel bad bringing this up, but it sounds like your techs may not have the talent to do the work. It is a good Idea to always be looking for someone new that could bring your shop up to speed. I did a google search and found that you a near Minneapolis, seems like you could draw some talent from there.
A last suggestion, charge enough so that you can afford exceptional talent, pay them well, and keep them trained..
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Keith a lot of great comments have already been made. However, I believe that a repair shop management group would be your best return on dollars invested. One was mentioned in this thread already and I would suggest you look on line (Google) the Bottom Line Impact Groups and The Elite management group for cost effective support and training. I have personally participated in these programs and would say without the procedures, support, and training I learned over a ten year period I would not be in business today.
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