The clock is ticking 'Time is cash' in bodyshops and repair workshops. Primarily, these operations purchase and promote the time of panel beaters, painters and technicians. A service workshop, for instance, may purchase one hour from a technician for £10 and promote it to a buyer for £40, and make a revenue of £30. (These figures are, after all, notional). Shopping for and promoting the time of productives is, or ought to be, the key income and revenue in bodyshops and repair workshops. Income from the sale of spare elements; oils and lubricants; paint and supplies; and sublet and varied are all subsidiary to the shopping for and promoting of productives' time. Should you do not promote time, you do not promote any of those different issues. Simply as you'd take nice care when shopping for and promoting a spare half, it's important to pay equal consideration to purchasing and promoting productives' time - or much more so, since you can not 'inventory' productives' time. In different phrases, if you happen to do not promote their time in the present day, you can not promote it tomorrow. Time on the market So as soon as time is gone it is gone, whereas a spare half will nonetheless be in inventory. So it's a good suggestion to know the way a lot time you could have on the market. This would appear fairly easy. When you have six productives, and they're there eight hours on daily basis, certainly you could have 48 hours on the market? Nicely, no, you do not. For a begin, productives may be within the workshop for eight hours on daily basis, however they do not work on paying jobs for eight stable hours. For instance, a buyer may come again with a automobile that you just serviced yesterday and complain that it retains stalling. It should then be crucial for a productive to rectify the issue, and naturally you can not cost the shopper for that. If it takes two hours, then you definately solely have 46 hours left to promote, in our instance. Time bought To complicate issues additional, you may truly find yourself promoting greater than 48 hours. Think about, for example, car producer's commonplace time for a serious service is 2 hours and also you quote the shopper on this foundation. In case your technician completes the service in a single hour (unlikely, we all know) then you'll nonetheless cost the shopper for 2 hours. If this occurred all day lengthy, you may promote 96 hours much less the 4 hours you may have bought if certainly one of your technicians hadn't spent two hours spent rectifying the engine stalling drawback. (It is 4 hours since you are promoting two hours for each hour labored on this instance.) So in case your productives may halve the usual occasions all day, that is 92 hours bought relatively than 48 hours. Three measures of time What we're speaking about right here is the three sorts of time accessible in a bodyshop or service workshop: Attended time - that is the time that panel beaters, painters or technicians are within the office accessible to work. Work time - that is the time they spend truly engaged on jobs that, on the finish of the day, a buyer pays for. Clearly 'work time' doesn't embody any time spent rectifying issues, or the rest they do that doesn't have a paying buyer on the finish. Bought time - that is the time that you just cost prospects for. It may very well be the time quoted on an estimate for an insurance firm, or a menu-priced service. You possibly can say that 'attended time' and 'work time' are each 'actual', as a result of you may virtually see them. You possibly can see when a productive is within the workshop, and you'll see a productive engaged on paying jobs. What's extra, you may measure 'attended time' and 'work time' utilizing a clock. However, 'bought time' shouldn't be 'actual'. You possibly can't see it, and you'll't measure it utilizing a clock. However on the finish of on daily basis you may add up on a regular basis you could have bought to prospects out of your job playing cards or invoices. How briskly and the way lengthy Should you measure attended time and work time, and add up bought time on the finish of the day, you may then see how briskly and the way lengthy your productives have labored through the day. How briskly they've labored is bought hours divided by work hours. In our instance, that is 92 hours bought in comparison with 46 hours labored, or 200% expressed as a share. That's, your productives are working twice as quick as the usual time. How lengthy they've labored is figure hours divided by attended hours. In our instance that is 46 hours in comparison with 48 hours, or 95.8% expressed as a share. That's, your productives had been engaged on paying jobs for 95.8% of the time. Labour effectivity What we've simply labored out as percentages are two 'labour efficiencies': Productive effectivity tells you how briskly productives are working in comparison with commonplace occasions, or the estimate within the case of a physique restore job - what number of bought hours they produced in comparison with the work time it took them to provide these bought hours. Labour utilisation (typically referred to as 'promoting effectivity') tells you ways lengthy productives labored on paying jobs in comparison with the time they attended the office. As formulae, productive effectivity and labour utilisation are calculated like this: Productive effectivity = (Bought Hours/ Work Hours) x 100% Labour utilisation = (Work Hours/Attended Hours) x 100% Total labour effectivity There's one different measure of labour effectivity and that is referred to as total effectivity. This can be a easy mixture of productive effectivity and labour utilisation, and comes from multiplying them collectively: Total Effectivity = Productive Effectivity x Labour Utilisation Or, one other method of total effectivity is as bought hours divided by attended hours: Total effectivity = (Bought Hours/Attended Hours) x 100% How labour effectivity impacts revenue Clearly you'll make extra revenue if you happen to can squeeze extra bought hours from the hours your productives attend. We've already mentioned that if you happen to purchase one hour from a service workshop technician for £10 and promote it to a buyer for £40 you'll make a revenue of £30. However if you happen to purchased one hour from the technician after which bought two hours, you'll make rather more revenue - £70. It's equally apparent that if you happen to purchase one hour from a service workshop technician for £10, after which the entire hour is expended rectifying a come-back job for which you can also make no cost, you could have misplaced £10. Much less apparent is that you've got misplaced the chance to promote two hours (in our instance), and thus misplaced the chance to make a revenue of £70. So the explanation for measuring time in a workshop, after which calculating the labour efficiencies, may be very clear. It is all about revenue. And if you happen to do not measure time and calculate the labour efficiencies, it's completely sure you'll not maximise profitability as a result of you'll not know: How briskly your productives are working as a crew and individually, and whether or not they may work quicker in the event that they had been higher skilled or had higher gear How lengthy your productives are working as a crew and individually, and the way a lot time they're losing on work that prospects aren't paying for. How time is measured Probably the most fundamental method of measuring time in a workshop is by utilizing a 'clock' which stamps time on a 'clock card' for attended time and on the job card for work time. The occasions are then correlated manually on a 'each day working management' sheet, and the labour efficiencies calculated. Nevertheless, computer systems have largely outdated this fundamental methodology, with the 'clocking' carried out utilizing barcodes or magnetic swipe playing cards. The pc then completes all of the correlations and calculations immediately. Typical labour efficiencies for the High 25% In recent times, the labour efficiencies achieved by bodyshops and repair workshops have fallen from what would have been thought-about the 'norm' a decade in the past. The explanations for this are advanced. Nevertheless the highest 25% of franchised seller bodyshops and repair workshops are nonetheless attaining cheap ranges of efficiency, sometimes: For a bodyshop, productive effectivity averages 106%, utilisation 88% and due to this fact total effectivity is 93.3% (106% x 88%) For a service workshop, productive effectivity averages 115%, utilisation 92% and due to this fact total effectivity is 105.8% (115% x 92%) For 40-hour attended by a productive in every week, these translate as: For a bodyshop - 40 hours attended, 35.2 hours engaged on paying jobs, and 37.3 hours bought or invoiced to prospects For a service workshop - 40 hours attended, 36.8 hours engaged on paying jobs, and 42.3 hours bought or invoiced to prospects. Why service workshops are normally extra labour-efficient than bodyshops bodyshops are clearly much less environment friendly, however why? Firstly, jobs transfer between productives in a bodyshop - beginning with strip, then panel, then preparation, paint, refit and valeting. Normally this implies transferring the car bodily across the bodyshop, which is way much less environment friendly than the straight in a bay, job performed and straight out scenario of a service workshop. The consequence for bodyshops is a decrease labour utilisation than for a service workshop. Productive effectivity in bodyshops was greater than for service workshops, as a result of bought hours had been negotiated with insurance assessors - so-called 'opinion occasions'. A bodyshop may get 20 hours for a job and the productives would end it in 15 work hours, attaining a productive effectivity of 133%. These days, the occasions in a bodyshop are set by computerised estimating methods with just about no room for negotiation or 'opinion occasions'. service workshops, like bodyshops, have seen commonplace occasions fall, too. However their buyer base is thousands and thousands of motorists relatively than a dozen insurance corporations, so service managers can set no matter occasions they need - inside motive, and naturally, topic to competitors. Misplaced time Clearly it will be nice if you happen to may get away with simply paying technicians when they're engaged on paying jobs, however you may't. What you truly pay them for is attendance, or 'attended time', and so they do not 'work' on paying jobs on a regular basis they're attending. The distinction between attended time and work time is 'misplaced time', which can also be referred to as non-productive time - the few hours each week that technicians are paid for when they aren't engaged on paying jobs. Three widespread issues that make up misplaced time are rectification of defective work ('come-backs'), assortment and supply of vehicles, and cleansing and upkeep. Along with paying for misplaced time, you may pay bonus and extra time, and also you pay for technicians' holidays, sick depart and coaching. Then there's the employer's contribution to Nationwide Insurance coverage, and the price of any perks technicians obtain similar to pension or well being insurance contributions. It is tempting to throw all of those funds into the price of shopping for the technician's time in our instance and calculate what you may see because the 'actual' revenue. Should you did, the price of shopping for the hour would in all probability be round £13, and due to this fact the revenue falls to £27. Accounting for time The details introduced thus far would appear to make calculating the revenue when shopping for and promoting technicians' time fairly easy. Apparently all it's important to do for any interval - a day, every week, a month or a 12 months - is add up all of your labour gross sales and subtract all of your technicians' prices (together with fundamental, bonus, extra time, holidays, sick, coaching, perks and Nationwide Insurance coverage) to reach at your revenue on labour. You possibly can, but it surely is much better to determine all of your technicians' prices individually in your administration accounts, as a result of you may then see how a lot you might be paying them for not working. And by separating these funds to technicians, you may look extra carefully on the results of labour effectivity in your operation, whether or not it's mechanical servicing and restore or physique repairs. The next instance exhibits the standard format for the administration accounts of a service workshop or bodyshop. Right here we've taken the outcomes for one technician over 12 months, assuming fundamental pay of £12 per hour and hours bought out at a mean of £60 per hour. Moreover, we've assumed that the technician attends 44 weeks each year and 40 hours per week, working 37 of these hours with misplaced time of 3 hours. Because of the technician's efforts, the workshop sells 42 hours per week (or 1,848 bought hours each year from 44 weeks x 42 hours), and that is achieved with none extra time or bonus pay. Administration accounts Labour gross sales 1,848 hours bought @ £60 = £110,880 Much less Technician's pay for 1,628 work hours @ £12 = £19,536 Technician's bonus pay (all bonus pay entered if earned) = NIL Technician's extra time pay (all extra time entered if earned) = NIL Gross revenue on labour gross sales (Labour gross revenue) = £91,344 Direct bills Technician's pay for 132 hours of misplaced time @ £12 = £1,584 Technician's pay for hols, sick & coaching (40 days of 8 hours) @ £12 = £3,840 Technician's Nationwide Insurance coverage and perks = £3,744 Direct revenue on labour gross sales = £82,176 Labour gross revenue On this conventional type of administration accounts, then, the price of the technician is split up into a minimum of six strains. The primary three strains seem straight after labour gross sales, and include all pay made to the technician for truly producing work that's then bought to a buyer. This consists of pay for 'work time', and all bonus and extra time pay. Accountants name these the 'price of gross sales'. By subtracting these three strains from gross sales, you find yourself with the gross revenue made out of shopping for and promoting the technician's time - normally referred to as the 'labour gross revenue'. The labour gross revenue is usually expressed as a share of labour gross sales, which on this instance involves 82% (£91,344 divided by £110,880 expressed as a share). The remaining three strains seem within the direct bills part of administration accounts together with the price of non-productive salaries, apprentices, consumables, courtesy vehicles, promoting, and so on. The thought, as we've mentioned, is to determine what you pay technicians for not working. On this instance, the entire price of the technician is £28,704 each year, and £9,168 is for not working. That's almost one-third, and a removed from uncommon proportion! Dividing up the technician's pay The best way a number of the technician's pay is split up is self-evident - bonus, extra time, holidays and so on, and Nationwide Insurance coverage and perks. That simply leaves the technician's fundamental pay, which is split up in accordance with 'work time' and 'misplaced time': In our instance we all know the technician attends 40 hours every week and works 37 of those hours, which implies that the technician works for 1,628 hours in a 12 months (37 hours x 44 weeks), which at £12 per hour is £19,536. That leaves three hours of misplaced time every week, or 132 hours each year (3 hours x 44 weeks), or £1,584 at £12 per hour. In reality, this break up corresponds to one of many measures of effectivity we mentioned earlier - labour utilisation. Labour utilisation is 'work hours' divided by 'attended hours' expressed as a share, or 92.5% on this case (37 hours divided by 40 hours). The break up within the administration accounts allocates 92.5% of fundamental pay as the price of doing the work. The rest (7.5% of fundamental pay) - comparable to the technician's pay for misplaced time - is allotted as an expense. It ought to now be clear that labour utilisation has a direct bearing on how a lot gross revenue is successfully produced from promoting the technician's time, and what's paid to the technician for not working. Calculating labour gross sales In our instance, the workshop sells 42 hours per week because of the 37 hours the technician truly works out of the 40 hours attended. We've already seen that the labour utilisation right here is 92.5% (37 hours divided by 40 hours). The productive effectivity may also be calculated as 113.5% (42 bought hours divided by 37 work hours), and the general effectivity is 105% (42 bought hours divided by 40 attended hours). All these formulae had been coated earlier. The labour gross sales in our instance are calculated by multiplying the bought hours in a 12 months (1,848 hours) by the labour charge of £60 per hour. In full, this calculation is as follows: Annual labour gross sales = 1 technician x 40 attended hours per week x 44 weeks attended per 12 months x 105% total effectivity x £60 per hour labour charge = £110,880 Elevated productive effectivity Now we will take a look at what occurs to the revenue on labour gross sales if labour effectivity will increase. For instance our technician nonetheless works 37 hours out of 40 hours attended, however works quicker (i.e. is extra productive) and achieves 43 bought hours. The utilisation continues to be 92.5% (37 work hours divided by 40 attended hours), however the productive effectivity has elevated to 116.2% (43 bought hours divided by 37 work hours) and the general effectivity has additionally elevated to 107.5% (43 bought hours divided by 40 attended hours). The impact is as follows (and we've assumed once more that bonus and extra time are 'nil'): Labour gross sales 1 tech x 40 att. hours x 44 weeks x 107.5% total effectivity x £60 per hour = £113,520 Much less 1 tech x 40 att. hours x 44 weeks x 92.5% utilisation x £12 per hour = £19,536 Gross revenue on labour gross sales (Labour gross revenue) £93,984 Direct bills 1 tech x 40 att. hours x 44 weeks x 7.5% misplaced time x £12 per hour = £1,584 Technician's pay for hols, sick & coaching (40 days of 8 hours) @ £12 = £3,840 Technician's Nationwide Insurance coverage and perks = £3,744 Direct revenue on labour gross sales £84,816 A small enhance in productive effectivity - nearly three share factors - has resulted in an additional annual revenue on labour of £2,640. Bettering labour utilisation and productive effectivity Up to now, we've defined measure time in a service or physique restore workshop, how labour effectivity is calculated, and the way administration accounts are designed to focus on the sources of labour revenue. We've proven how productive effectivity impacts profitability. Subsequent, we have a look at the consequences on revenue of bettering labour utilisation, after which each productive effectivity and labour utilisation on the identical time. Elevated labour utilisation Taking the identical instance mentioned earlier, let's enhance labour utilisation by assuming that our technician manages to work 38 hours out of 40 hours attended as an alternative of 37, whereas leaving the productive effectivity the identical (113.5%) as within the unique instance. Which means utilisation goes as much as 95% (38 work hours divided by 40 attended hours), and even when the productive effectivity is identical at 113.5%, then our technician will produce 43.1 bought hours (38 hours labored x 113.5%). That's, the technician's total effectivity has elevated to 107.8% (43.1 bought hours divided by 40 attended hours). The impact on labour earnings is then: Labour gross sales 1 tech x 40 att. hours x 44 weeks x 107.8% total effectivity x £60 per hour = £113,520 Much less 1 tech x 40 att. hours x 44 weeks x 95% utilisation x £12 per hour = £20,064 Gross revenue on labour gross sales (Labour gross revenue) = £93,456 Direct bills 1 tech x 40 att. hours x 44 weeks x 5% misplaced time x £12 per hour = £1,056 Technician's pay for hols, sick & coaching (40 days of 8 hours) @ £12 = £3,840 Technician's Nationwide Insurance coverage and perks = £3,744 Direct revenue on labour gross sales = £84,816 The development, from one additional hour labored per week, is £2,640 in a 12 months. Do each! However what would occur if each utilisation and productive effectivity improved on the identical time? That's, the technician nonetheless attends 40 hours, however works 38 hours on the improved productive effectivity of 116.2% (from Half 2) thereby producing 44.2 bought hours (38 work hours x 116.2%) and therefore an total effectivity of 110.5% (44.2 bought hours divided by 40 attended hours). The calculation seems to be like this: Labour gross sales 1 tech x 40 att. hours x 44 weeks x 110.5% total effectivity x £60 per hour = £116,688 Much less 1 tech x 40 att. hours x 44 weeks x 95% utilisation x £12 per hour = £20,064 Gross revenue on labour gross sales (Labour gross revenue) = £96,624 Direct bills 1 tech x 40 att. hours x 44 weeks x 5% misplaced time x £12 per hour = £1,056 Technician's pay for hols, sick & coaching (40 days of 8 hours) @ £12 = £3,840 Technician's Nationwide Insurance coverage and perks = £3,744 Direct revenue on labour gross sales = £87,984 The development is £5,808, multiplied by (say) seven technicians is a sizeable £40,656 additional revenue each year. This exhibits how important for profitability solely comparatively small will increase in labour effectivity could be. Nevertheless, labour earnings may also fall simply as considerably if labour effectivity falls by an equally small quantity. Hidden misplaced time If small enhancements in labour effectivity translate into huge enhancements in labour earnings, however any slight discount means huge falls in revenue, then you have to know what levers to tug to be sure you are on the facet of massive earnings. So what is the secret? Or is it about managing the trivia? There isn't any secret. The trick is managing each side of a workshop. Managers must do every part they'll to ensure technicians, panel beaters or painters are working as quick as doable for so long as doable. In different phrases, you could do every part to minimise misplaced time, and supply your productive employees with each means to help quicker working like coaching, energy instruments... and even inserting sure jobs with productives who're probably the most skilled. When you have a clutch job, then give it to the clutch professional. However there's one secret value figuring out, and that is 'hidden misplaced time'. As we've proven, misplaced time is a killer. However then misplaced time, if it is measured in any respect, is normally about the obvious components similar to rectification of defective work, assortment and supply of vehicles, and cleansing and upkeep. Nevertheless, there's much more misplaced time hidden away inside jobs. Technicians could appear to be working laborious, however too usually they might be ready for spare elements on the again counter of the shops. Or a technician could also be ready in line to make use of a chunk of kit like a wheel alignment rig. The result of 'hidden misplaced time' is a fall in productive effectivity, however labour utilisation is unaffected as a result of you have not measured the losses. However, as you could have seen, the impact on earnings could be enormous. So aside from attending to the apparent and direct influences on labour effectivity, which have an effect on how briskly technicians work (productive effectivity) and the way lengthy (utilisation), workshop managers should additionally attend to something that may sluggish them down when they're alleged to be working.
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