The progression of vehicle technology will make a dramatic difference in measuring a typical service shop business. The aftermarket will have to relearn this portion of the business all over again. You may recall where I stated in past articles that a typical shop owner is going to require 6 to 8 days of management training per year moving forward. This labor measurement is one of the changes that will have to be relearned, as the old way of measurement will leave too much money on the table.
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As commodity margins decline and vehicle software grows, everyone must understand where their management attention must be directed.
A redefined labor measurement will take place within the next year to a maximum of 3-year period.
The maintenance labor category will be just that: pure maintenance work based on the manufacturers’ recommended service intervals and repairs of worn out or broken parts.
Diagnostic labor will be the analyzation of a situation or interpretation of information. (What is the problem, what caused it and what is the solution?)
Inspection labor will be all completed, paid inspections.
Re-flash will be strictly updating the vehicle from the OEM website.
Calibration labor will be a category as the lining up of sensors after a repair has taken place will become an additional specialty skill within the shop. Software platforms will have to be understood.
The key information that will need to be understood is “what will the mix of each labor category be within the shop?” This brings back the importance of key efficiency measurements for each category as specific training will have to be required, along with making sure the shop has the right skill set within the team to ensure professional execution of the services on behalf of the client. The efficiency measurement of each category will also help establish the billed hours per R/O and the required “vehicle count” that will be needed for the shop.
Measuring the “effective” rate will be critical in the labor mix measurement. How much labor should we be getting from each labor category to justify the staffing level?
Another big change coming to the industry will be the setting of labor rates for each category. Labor rate multiples will change from what they are now based around — the technicians hourly wage — to working with the individual shops actual total cost per billed hour. This is a very specific measurement calculation and your accounting data must be accurate or you could end up charging a totally wrong rate for your shop.