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Policy Costs (Bodyshop)

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:

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

Policy Costs (Sales Department)

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)

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)

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.


This statistic is not as straightforward as the Service Department equation, as due to the nature of the work it is not possible for a franchise manufacturer to apportion standard times.

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)

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 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 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 (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.

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 : 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 Ratio.

Productive Staff : Non-Productive Staff (Service Department)

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:

Productive Ratio.

Productivity % (Bodyshop)

Productivity % (Bodyshop)

Hours Sold ÷ Hours Worked Productively (x100)

Benchmark: 110% to 125%

Description:

This KPI shows you the Productivites ability to complete their work within the agreed hours provided by the Estimator.


This statistic is not as straightforward as the Service Department equation, as due to the nature of the work it is not possible for a franchise manufacturer to apportion standard times.

Example:

A) Hours Sold = 1,083
B) Hours Worked Productively = 958
C) Productive  = 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 Productivity.

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

Related Terminology:

This KPI is also known as Productivity Efficiency and Working Efficiency.


Productivity % (Service Department)

Productivity % (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 manufacturers' 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.

Example:

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

Discussion:

Productivity 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 Productivity falls below 100%.

Related Terminology:

This KPI is also known as Productivity Efficiency or Working Efficiency.


R

Rebates and Bonuses

Rebates and Bonuses

Guideline: Franchise Specific

Description:

Rebates and Bonuses are two different ways for a franchise manufacturer to reward a dealer for good performance.

Rebates.

These are forms of discount that are claimed back when you hit an agreed purchase target on a specific product line or product group.

Example:

You could have a target to purchase 100 widgets at R10 each with a Rebate of R2. When you hit that target you will be able to claim the agreed Rebate of R2 on all 100 widgets that you have purchased resulting in a Rebate of R200 (qoo widgets with a R2 Rebate on each). Rebates are usually retrospective upon target attainment.

Bonuses.

These are bonus payments in the true sense of the word. Your franchise manufacturer usually provides you with an annual parts purchase target, which is broken down into quarterly segments. When you reach these targets the franschise manufacturers pays you a bonus for hitting this target.

Discussion:

What you need to know is this: When does the value of the Rebates and Bonus payment appear within your reports? Do they appear when you hit the target, or do they appear when you receive the payment?

This makes a considerable difference to the interpretation of your departmental profitability when you are comparing your results with everyone else.

Related Terminology:

Reconditioning Costs

Reconditioning Costs

Reconditioning Costs ÷ Used Units Sold

Guideline: Franchise Specific

Description:

This KPI establishes the average amount of money that you spend on reconditioning each of your used vehicles.

It is very difficult to provide a benchmark for this statistic as dealer standards, specification and price of the vehicles varies considerably.

As with all KPI you need to capture the trend of this statistic if you are to gain control of its direction. Keep in mind that it is only an average of your Reconditioning Costs and something such as an engine or gearbox replacement will have a significant impact on your results.

Example:

A) Reconditioning Costs = R211,200
B) Used Vehicles Sold = 960
C) Reconditioning Costs per Unit = R220 (A ÷ B)

Discussion:

The important thing is to be aware of its trend and the reasons why it is travelling in a given direction as it is influenced by many different factors.

You can keep track of your performance by means of a simple graph that you update monthly, or at the very least, have it included within your Daily Operating Controls.

Related Terminology:

Recovery Rate (Bodyshop)

Recovery Rate (Bodyshop)

Labour Sales ÷ Hours Sold

Guideline: Dependent upon Insurance Content

Description:

Your Bodyshop will have a published labour rate per hour, but how often are you able to charge this amount to every customer on every job?

Recovery Rate tells you how much revenue you have actually recovered per Hour Sold as opposed to how much you would have generated should you have applied your full charge out rate.

Example:

A) Labour Sales = R33,731
B) Hours Sold = 875
C) Recovery Rate = R38.55 (A ÷ B)

Discussion:

The reality of the situation confirms that you are often forced to provide a discount in some instances, especially to Insurance Companies, which of course reduces the amount of revenue that you are able to collect. The question is how much money have you managed to recover?

The key to success with this KPI is to capture individual Recovery Rates for each income sector (See Labour Sales Mix) so that you can accurately pinpoint the areas in which discount is being given.

Related Terminology:


Recovery Rate (Service Department)

Recovery Rate (Service Department)

Labour Sales ÷ Hours Sold

Baseline: 95% of Charge out Rate

Description:

Your Service Department will have a published labour rate per hour, but how often are you able to charge this amount to every customer on every job?

Recovery Rate tells you how much revenue you have actually recovered per Hour Sold as opposed to how much you would have generated should you have applied your full charge out rate.

Example:

A) Labour Sales = R42,240
B) Hours Sold = 870
C) Recovery Rate = R48.55 (A ÷ B)

Discussion:

If we say that the published labour rate for the above example is R50 per hour, then if no discount were to be given the Labour Sales would have been R43,500.

The reality of the situation confirms that you are often forced to provide a discount in some instances, which of course reduces the amount of revenue that you are able to collect. The question is how much money have you managed to recover?

The key to success with this KPI is to capture individual Recovery Rates for each income sector (See Labour Sales Mix) so that you can accurately pinpoint the areas in which discount is being given.

Related Terminology:

Rectification (Bodyshop)

Rectification (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 Rectification or Goodwill within 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.

Related Terminology:

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

Rectification (Sales Department)

Rectification (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.

This KPI is usually shown separately for new and used vehicles as they both deliver very different results. As you can well imagine, Rectification for used vehicles is generally much higher. (Not to be confused with Reconditioning Costs)

Example:

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

Discussion:

Just imagine that you sold a vehicle a couple of weeks ago and the customer 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 Rectification and is usually shown as a cost per unit sold.

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

Related Terminology:

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


Rectification (Service Department)

Rectification (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 putting the right accounted for within Rectification in your management accounts.

Related Terminology:

This term is also known as Policy Adjustments or Goodwill.


Repair Orders per Productive

Repair Orders per Productive

Number of Repair Orders ÷ Number of Productives

Guideline: Own policy

Description:

This is another of those key performance indicators that is used to level the playing field when comparing business with another.

It removes the emotion of the big numbers that may be involved and produces an average number of jobs that an individual Productive undertakes in a given period.

Example:

A) Total Repair Orders = 1,458
B) Number of Productives = 6
C) Repair Orders per Productive = 243 (A ÷ B)

Discussion:

There are a multitude of factors that will affect this statistic including Productivity, Utilisation, and the type of work being undertaken and of course the skill of the Productives and the Estimator.

This KPI is probably more useful in the preparation of budget and business plans as opposed to measuring the effectiveness of your Productives.

Related Terminology:


Repair Orders per Technician

Repair Orders per Technician

Number of Repair Orders ÷ Number of Technicians

Guideline: Own policy

Description:

This is another of those key performance indicators that is used to level the playing field when comparing one dealer with another dealer.

It removes the emotion of the big numbers that may be involved and produces an average number of jobs that an individual Technician undertakes in a given period.

Example:

A) Total Repair Orders = 1,458
B) Number of Technicians = 6
C) Repair Orders per Technicians = 243 (A ÷ B)

Discussion:

There are a multitude of factors that will affect this statistic including Productivity, Utilisation, and the type of work being undertaken and of course the Technicians skill.

This KPI is probably more useful in the preparation of budget and business plans as opposed to measuring the effectiveness of your Technicians.

Related Terminology:


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