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Paint & Materials per Labour Hour

Value of Paint & Materials ÷ Hours Sold (x100)

Guideline: Franchise Specific

Description:

This KPI takes the invoice value of the Paint & Material that you have sold and divides it by the total number of Hours Sold to provide you with an average value of paint & materials per hour.

This example below simply shows that for every hour that you have invoiced, you have sold Paint & Materials to the average value of R7.20

If your reported KPI is reported lower than the national average it could be that you may have a problem with your invoicing procedures and some paint and materials are escaping the invoice.

Example:

A) Value of Paint & Materials = R8,136
B) Hours Sold = 1,130
C) Paint & Materials / Hour = R7.20 (A ÷ B)

Discussion:

Some reports separate this KPI to show paint and materials as a different value, it's all a matter of what you want to measure.

Related Terminology:

Parts Gross Profit

Invoice Value of Parts Sales x Parts Cost of Sales

Guideline: See Parts Gross Profit %

Description:

This is the invoice value of the parts sold less the cost of those parts. Generally, this is expressed as a monetary value and also as a percentage of the total sales value.

The general accounting definition for any type of Gross Profit is simply sale less cost of sale and this statistic is no exception to the rule.

Example:

A) Parts Sales = R695,688
B) Cost of Sales = R507,852
C) Parts Gross Profit = R187,836 (A - B)

Discussion:

The trading strategy of your Parts Department will have an impact upon the value of profit that you make and will vary according to the amount of Trade Sales and the value of internal discount (if any) that your business conducts.

Before you get carried away with the value of Gross Profit that you are generating, use this statistic in conjunction with your Gross Profit % to ensure that your business is travelling in the direction that you want it to travel.

It is possible for the value of your Gross profit to show an increase whilst the Gross Profit % is declining. Make sure that you avoid the busy fool syndrome.

Related Terminology:

Parts Gross Profit %

Gross Profit ÷ Departmental Turnover (x100)

Baseline: > 22% of departmental Turnover

Description:

Financial reports for the Parts Department show Gross Profit on each individual category of Parts sales as well as the overall total Parts Sales.

This page is explaining the total Departmental Gross Profit within all of the individual categories are included. (Please also see Parts Sales Mix.)

Example:

A) Total Gross Profit = R187,836
B) Parts Sales = R695,688
C) Gross Profit % = 27% (A ÷ B X 100)

Discussion:

When you express your Gross Profit as a percentage it is much easier to identify and control the direction of your department. An easy way of identifying your trading strategy is to plot a simple graph that can be updated on a monthly basis. The question that you must have the answer to is where are Rebates and Bonus accounted for?

Related Terminology:

Parts Net Profit per New Unit sold

Departmental Profit ÷ New Units Sold

Guideline: Own Policy

Description:

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Example:

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Discussion:

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Related Terminology:

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Parts Sales

Invoice Value of Parts Sold

Guideline: See Parts Sales per Parc Unit

Description:

This is simply the invoice value of the parts sold. Generally, management accounts separate the different streams of income so that you can see the growth in all areas of the department.

Typically, these different categories are Retail sales, Trade sales with sales to the Service Department and Bodyshop being split between Retail, Internal and Warranty.

Many financial reports show the plit of these different streams of income in the from of a simple pie chart (See Parts Sales Mix)

Example:

Discussion:

In order to calculate many Key Performance Indicators, Parts Sales may need to be annualised (See Annualised Parts Sales). This is simply a projection of your annual sales based on your current performance.

Related Terminology:

Parts Sales Mix

Category Parts Sales ÷ Total Parts Sold (x100)

Guideline: Own Policy

Description:

This information simply informs you of the balance between the different categories into which you sell parts. In most cases the Parts Department is split into seven distinct categories of income, which are:

Retail Counter
Trade Counter
Service

• Retail
• Internal
• Warranty

Example:

Discussion:

On most financial reports your Parts Sales Turnover is segregated into these different categories together with a percentage share of the total sales volume, sometimes in the form of a simple pie chart.

The total Parts Sales volume is usually shown after the full breakdown of these statistics.

Related Terminology:

Parts Sales Per Employee

Annualised Parts Sales ÷ All Parts Personnel

Baseline: > R250.000

Description:

This KPI is generally used for budgeting purposes. The calculation simply takes the Annualised Parts Turnover and divides it by the total number of people employed within the Parts department to provide an Average Parts sales Value Per person.

It is important to note that the number of employees in the calculation includes everyone within the Parts Department including the Parts Manager, and not just the people who sell parts.

Example:

A) Annualised Parts Sales = R695,688
B) Number Parts Employees = 3
C) Annual Sales per Employee = R231,896 (A ÷ B)

Discussion:

It is a useful statistic for ascertaining the overall utilisation of your parts personnel compared with the national average of your franchise.

You may also use it to place a sanity check on your budget. For instance, if your budget requires this KPI to be something in the order of R579,740 per person, then you may question whether you have sufficient people to deliver this result, or you may even question the viability of your budget.

Related Terminology:

Parts Sales per Labour Hour (Bodyshop)

Parts Sales to the Bodyshop ÷ Hours Sold

Guideline: Own Policy

Description:

This KPI produces a monetary figure that is the average value of parts sold for every labour hour that is sold.

It provides you with an indication of whether you Bodyshop is working with minor accident repairs with few parts being issued or the more lucrative larger jobs such as major accident repairs where more expensive parts are being used.

Hypothetically, let's say that your KPI in this area is less than the national average. This might suggest that your Bodyshop is working with smaller jobs that require fewer parts.

On the other hand if your reported KPI is higher than the national average this might suggest that your Bodyshop is conducting more major bodywork jobs and thereby fitting more parts for each hour sold.

Example:

A) Parts Sales to the Workshop = R42,240
B) Hours Sold = 870
C) Parts Sales per Labour Hour = R48.55 (A ÷ B)

Discussion:

This is a useful KPI for getting to grips with the type of work that you are doing and it is also very useful in the preparation of your budgets and business plans.

Related Terminology:

Parts Sales per Labour Hour (Service Department)

Parts Sales to the Workshop ÷ Hours Sold

Guideline: Too ambiguous to benchmark.

Description:

This KPI produces a monetary figure that is the average value of parts sold to the workshop for every labour hour that is sold during the same period. This statistic is influenced by many different areas in the department and it is therefore far too ambiguous to be conclusive. You must study your own trends very carefully for it to have any real meaning and comparison with other dealerships can be misleading and dangerous; take care!

Hypothetically, let's say that the national average for this KPI is R30. The example below might suggest that your Technicians are finding additional work when vehicles come into the workshop and parts are being replaced as opposed to being repaired.

On the other hand if the national average is reported at R65 the example below might suggest that your Technicians are failing to find additional work and parts are being repaired as opposed to being replaced.

Example:

A) Parts Sales to the Workshop = R42,240
B) Hours Sold = 870
C) Parts Sales per Labour Hour = R48.55 (A ÷ B)

Discussion:

Factors that influence this statistic are the type and mix of work that you are undertaking and in order to gain any meaning, this KPI must be calculated separately for Retail, Internal and Warranty.

Related Terminology:

Parts Sales per Parc Unit

Annual Parts Sales ÷ Number of Vehicles in Parc

Guideline: Own Strategy

Description:

this KPI is very useful for assessing your current performance in parts sales volume against your fellow dealers or your total market potential.

Example:

A) Annualised Parts Sales = R695,688
B) Number of vehicles in parc = 2,114
C) Parts sold per parc unit = R329 (A ÷ B)

Discussion:

Keep in mind that this statistic is utilising every vehicle in the parc and if you are assessing a 10-year parc some of those vehicles may no longer be in your area or even in existence.

Related Terminology:

Parts Stock Value

Value of Parts Stock at Purchase Price

Guideline: See True Parts Stock Turn

Description:

This statistic simply provides you with the value of your Parts Stock at any one moment in time.

This figure is usually taken directly from your Balance Sheet from which your Parts Stock can be found within the section labelled Current assets.

The Parts Stock Value takes into account all Obsolete Stock and any parts stock write-down that has taken place within the current year and it is this figure that is used for the calculation of KPI's such as Parts Stock Turn.

It is important to note that this figure is reported as a monetary value and reflects the parts purchases price as opposed to the retail selling price.

Example:

Discussion:

The information that you really want to know here is how much stock should you be holding at any one mo0ment in time? The answer to this question lies in the KPI True Parts Stock Turn.

Related Terminology:

Policy Costs (Bodyshop)

"Certainly, we'll rectify that for you right now."

Guideline: Own Policy

Description:

This term refers to those costs that must be borne by the Bodyshop that cannot be reclaimed or charged on to warranty or any other Department.

Example:

Let's say that three days ago you repaired a vehicle and now the customer has returned to you because one of the doors is not fitting properly.

Naturally, you cannot expect the customer to pay any more money, as they have already paid for the job. Therefore you agree to rectify the problem for the customer, and the question is who pays the bill?

Discussion:

Since this job is the direct responsibility of the Bodyshop, it cannot be charged onto warranty or any other department and therefore the hours spent on the rectification is accounted for within Policy Costs in your management accounts.

Whilst this is a simplistic explanation, the same holds true for any other work that you conduct that cannot be charged elsewhere.

The time may come where you may choose to rectify some work on a customer's vehicle that is not of your doing and you offer to do the work as a gesture of goodwill.

Related Terminology:

Policy Costs (Sales Department)

"Certainly, we'll rectify that for you right now."

Guideline: Own Policy

Description:

This term refers to those costs that must be borne by the Sales Department that cannot be reclaimed or charged on to warranty or any other Department.

Just imagine that you sold a vehicle a couple of weeks ago and the cutomer has returned to you because there is a problem. You agree to rectify the problem for the customer, and the question is who pays the bill? If the answer is the Sales Department then this is known as a Policy Cost and is usually shown as a cost per unit sold.

Example:

A) Policy Costs = R53,760
B) Vehicles Sold = 960
C) Policy Costs per Unit = R56 (A ÷ B)

Discussion:

This KPI is usually shown separately for new and used vehicles as they both deliver very different results. As you can well imagine, Policy Costs for used vehicles are generally much higher.

You can usually find your Policy Costs within the Semi-Fixed Expenses of your management accounts.

Related Terminology:

This term is also known as Policy Adjustments, Goodwill or Rectification.

Policy Costs (Service Department)

"Certainly, we'll rectify that as a gesture of goodwill."

Guideline: Own Policy

Description:

This term refers to those costs that must be borne by the Service Department that cannot be reclaimed or charged on to warranty or any other Department.

Example:

Let's say that three days ago you fitted a new exhaust system for  one of your customers, and now they are back in front of you with a problem. They are saying that the exhaust system is rattling and of course they are not happy.

Naturally, you cannot expect the customer to pay any more money, as they have only just paid you to have the exhaust system fitted. Therefore you agree to rectify the problem for the customer, and the question is who pays the bill?

Discussion:

Since this job is the direct responsibility of the Service Department, it cannot be charged onto warranty or any other department and therefore the hours spent on the rectification is accounted for within Policy Costs in your management accounts.

Related Terminology:

This term is also known as Policy adjustments, Goodwill Policy Grants or Rectification.

Productive Efficiency % (Bodyshop)

Hours Sold ÷ Hours Worked Productively (x100)

Benchmark: 110% to 125%

Description:

This KPI shows you the Productivity and Working Efficiency. It shows you the Productives ability to complete their work within the agreed hours provided by the Estimator.

Example:

A) Hours Sold = 1,083
B) Hours Worked Productively = 958
C) Productive Efficiency = 113% (A ÷ B X 100)

Discussion:

When a customer brings a vehicle to your Bodyshop for repair you provide them with an estimate that states the number of hours to be charged. This allocated time is the maximum amount that you are able to charge.

In order to make gains in profitability, your Productives must complete the job in a lesser time than is allocated by the Estimator, thereby increasing your Productive Efficiency %.

Productive Efficiency is a double-edged sword. If you take more time to complete the job then your Productive Efficiency falls below 100%.

Related Terminology:

This KPI is also known as Productivity and Working Efficiency.

Productive Efficiency % (Service Department)

Hours Sold ÷ Hours Worked Productively (x100)

Benchmark: 110% to 125%

Description:

This KPI shows you the relationship between your Technicians speed in completing jobs and the abilities of your Front Counter staff to sell the hours to your customers.

Most franchise manufacturers provide dealers with allocated times for jobs on all vehicles and this allocated time is what the Hours Worked are usually measured against. The Hours Sold is the responsibility of the front counter staff and they could sell more or fewer hours than the manufacturer's' book times.

In order to make gains in profitability, your Technicians must complete the job in a lesser time than is allocated by the manufacturer, or the front counter must sell more hours on the same jobs, thereby increasing your Productive Efficiency.

Example:

A) Hours Sold = 1,130
B) Hours Worked Productively = 957
C) Productive Efficiency = 118% (A ÷ B X 100)

Discussion:

Productive Efficiency is a double-edged sword. If your Technicians take more time to complete the job than the manufacturers allocated time then your profitability diminishes and Productive Efficiency falls below 100%.

Related Terminology:

This KPI is also known as Productivity and Working Efficiency.

Productive Ratio (Bodyshop)

Productive staff ÷ Non-Productive staff

Guideline: 2:1

Description:

This KPI measures the ratio between productive staff and non-productive staff.

Typically, non-productive staff could be the Bodyshop Manager, Administration and Receptionist.

Composite results appear to average at around 2:1, or in other words, for every 2 Productives that you employ, you have 1 member of staff who is non-productive.

This ratio can vary wildly and is dependent upon how you apportion your Apprentices and Foreman. There are also differences between a franchised Bodyshop and an Independent body repairer.

Example:

A) Productive staff = 12
B) Non-Productive staff = 6
C) Productive Ratio = 2:1 (A ÷ B)

Discussion:

In any event, make sure that you understand what you are looking at when you read this information as some financial reports show this equation in reverse.

Related Terminology:

Productive Ratio (Service Department)

Productive staff ÷ Non-Productive staff

Guideline: 3:1

Description:

This KPI measures the ratio between productive staff and non-productive staff.

Typically, non-productive staff could be the Service Manager, Service Receptionist and Warranty Clerk.

Composite results appear to average at around 3:1, or in other words, for every 3 Technicians that you employ, you have 1 member of staff who is non-productive.

This ratio can vary wildly and is dependant upon how you apportion your Apprentices and Foreman. Obviously, if your Productive Ratio is lower than 3:1 you will need to take corrective action.

Example:

A) Productive staff = 12
B) Non-Productive staff = 4
C) Productive Ratio = 3:1 (A ÷ B)

Discussion:

Make sure that you understand what you are looking at when you read this information as some financial reports show this equation in reverse.

Related Terminology:

Productive Staff : Non-Productive Staff (Bodyshop)

Productive staff ÷ Non-Productive staff

Guideline: 2:1

Description:

This KPI measures the ratio between productive staff and non-productive staff and is sometimes called the Productive Ratio.

Typically, non-productive staff could be the Bodyshop Manager and Receptionist.

Composite results appear to average at around 2:1, or in other words, for every 2 Productives that you employ, you have 1 member of staff who is non-productive.

Example:

A) Productive staff = 12
B) Non-Productive staff = 6
C) Productive : Non Productive = 2:1 (A ÷ B)

Discussion:

In any event, make sure that you understand what you are looking at when you read this information as some financial reports show this equation in reverse.

Related Terminology:

Productive Staff : Non-Productive Staff (Service Department)

Productive staff ÷ Non-Productive staff

Guideline: 3:1

Description:

This KPI measures the ratio between productive staff and non-productive staff and is sometimes called the Productive Ratio.

Typically, non-productive staff could be the Service Manager, Service Receptionist and Warranty Clerk.

Composite results appear to average at around 3:1, or in other words, for every 3 Technicians that you employ, you have 1 member of staff who is non-productive.

This statistic can vary wildly and is dependent upon how you apportion your Apprentices and Foreman. Obviously, if your Productive/Non Productive KPI is lower than 3:1 you will need to take corrective action.

Example:

A) Productive staff = 12
B) Non-Productive staff = 4
C) Productive : Non Productive = 3:1 (A ÷ B)

Discussion:

Make sure that you understand what you are looking at when you read this information as some financial reports show this equation in reverse.

Related Terminology: