A DMS not only helps simplify tasks for employees at the dealership, but also generates large amounts of information that can help management diagnose the status of the business and set accurate goals. Obtaining performance indicators is as important as knowing how to interpret them.
The indicators featured in this series of articles can be obtained from your dealer management system (DMS) and will help determine the performance of the Service Department and the efficiency of the workshop. In addition, we will recommend strategies to improve these indicators and turn lost opportunities into revenue.
In this first stage, we will analyze the following indicators:
- Customer-Pay Maintenance Penetration
- Overall Shop Work Mix
- Customer Pay Work Mix
- Overall Shop Efficiency
- Effective Labor Rate
- Labor (Service) Gross Profit
- Parts-to-Labor Ratio
1. Customer-Pay Maintenance Penetration
This indicator detects the percentage of maintenance services compared to the total quantity of Repair Orders opened in the workshop. It tells the Service Manager if Service Advisors are selling maintenance services.
How to calculate Customer-Pay Maintenance Penetration
Maintenance Services / Customer ROs paid by customers
A maintenance service is defined as a precautionary service, one that the customer is not required to carry it out immediately. If the customer arrives at the dealership to fix the heating system and meets a Service Advisor with sales skills, they may agree to precautionary services on air conditioning, steering, breaks, etc. depending on the state of the vehicle as detected by the Advisor.
One dealership we recently worked with found that they were performing only 18% maintenance services, i.e. 140 services out of the 800 ROs opened monthly. After creating a strategy to improve this situation, the difference became significant when maintenance services increased to 50%, or 400 services out of the same number of ROs.
|Current Value||Ideal Value|
|Repair Orders per Month||800||800|
|Maintenance Services per Month||140||400|
|Monthly Invoicing Improvement||+ $65,000|
(All amounts in U.S. dollars)
The additional revenue was achieved by training the Service Advisor to ask each customer strategic questions and offer precautionary and maintenance services based on the vehicle’s specific situation.
2. Overall Shop Work Mix
What is the difference between a “circumstantial” and a “motivated” service?
Circumstantial services are those that the dealer is not expecting to perform but must, such as warranty jobs or internal ones such as the reconditioning of used vehicles. Motivated services are those that are due to the Service Advisor’s sales skills.
The arrival of the customer at the workshop is circumstantial, which means it occurs only when the vehicle needs servicing. However, the Service Advisor’s skills may lead to more services. For example, repairing the air conditioning is circumstantial, but checking the heating system is an extra service that the customer wasn’t expecting to request.
How to calculate Shop Work Mix
Internal ROs / Total ROs * 100
Warranty ROs / Total ROs * 100
Customer Pay ROs / Total ROs * 100
Dealers should pay close attention to these indicators that describe the composition of customer paid ROs to detect whether Service Advisors are only taking in circumstantial services or if they are skilled enough to suggest and sell more services.
|RO Quantity||Total RO||Indicator|
|Monthly Internal ROs||350||1200||29%|
|Monthly Warranty ROs||50||1200||4%|
|Monthly Customer Pay ROs||800||1200||67%|
In this case the dealer detected that most ROs were customer paid, but the question is: Are these ROs customer-requested services or services sold by Advisors?
3. Customer Pay Work Mix
This indicator is related to the previous one and allows dealers to detect the types of services performed in every Repair Order. The dealer will get answers to questions such as: Of the total amount of customer paid hours, how many hours are we dedicating to oil changes, repairs, and maintenance?
The dealer’s DMS should allow users to indicate standard hours and services to simplify the data load. However, if the aim is to get the most out of dealer management system it is important to define the category of each service so that the system will show if they are:
- Repairs / Service
- Programmed maintenance
- Precautionary maintenance
It is essential to foster two habits among Advisors:
- Always try to have ROs include more than one service
- Define each kind of service in the DMS, for example, if it is a repair service, reconditioning, maintenance, etc. In order to analyze the department’s performance, it is not useful if every service is defined as “standard”.
This indicator will allow the dealer to know which types of services are performed more often, how much time is dedicated to each type, and how workshop ROs are composed.
|RO Quantity||Total RO||Indicator|
“The best Service Advisor knows that his task is not only to receive vehicles but also sell. This skill must be a spotlight in his training. Dealers who train their Service Advisors to be Sales Advisors obtain an improvement in revenue through precautionary and maintenance services”.
In the second part of this article we will learn about the following indicators: Overall Shop Efficiency and Effective Labor Rate…