Browse the glossary using this index

Special | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | ALL

L

Labour Cost of Sales (Bodyshop)

Labour Cost of Sales (Bodyshop)

Value of Hours Attended X Idle Time

Baseline: 90% of Attended Hours

Description:

This statistic captures the amount of money that is paid to Productives for every hour that is worked productively.

The amount of money that you pay your Productives per hour is divided into three sections: Hours Attended, Hours Worked Productively and Idle Time.

Hours attended simply represents the number of hours that the Productives have been clocked in and available to work, these hours are simply divided between Hours Worked Productively and Idle Time.

Labour Cost Of Sales

Example:

A) Value of Hours Attended = R6,290
B) Idle Time = R320
C) Labour Cost of Sales = R5,970 (A - B)

Discussion:

This example demonstrates that the cost of labour for the hours that have been sold can only be the hours spent working productively, and therefore Idle Time (or Diverted Time) is shown as a Variable Expense.

Related Terminology:


Labour Cost of Sales (Service Department)

Labour Cost of Sales (Service Department)

Value of Hours Attended x Idle Time

Baseline: 90% of Attended Hours

Description:

This statistic captures the amount of money that is paid to Technicians for every hour that is worked productively.

The amount of money that you pay your Technician per hour is divided into three sections: Hours Attended, Hours Worked Productively and Idle Time.

Hours attended simply represents the number of hours that the Technicians have been clocked in and available to work, these hours are simply divided between Hours Worked Productively and Idle Time.

Labour Cost Of Sales

Example:

A) Value of Hours Attended = R6,290
B) Idle Time = R320
C) Labour Cost of Sales = R5,970 (A - B)

Discussion:

This example demonstrates that the cost of labour for the hours that have been sold can only be the hours spent working productively, and therefore Idle Time is shown as a Variable Expense.

Related Terminology:

Labour Efficiency % (Bodyshop)

Labour Efficiency % (Bodyshop)

Hours Worked ÷ Hours Attended (x100)

Benchmark: 85% to 95%

Description:

This statistic tells you how much of the Technicians Attended time is actually spent working productively.

In more simplistic terms, each Productive usually clocks in and is available for eight hours each day, but how much of that time is spent spray-gun-in-hand or panel beating or in other words, working on hours that can be charged out to the customer? Labour Efficiency gives you the answer to this question.

Labour Efficiency

Example:

A) Hours Worked = 957
B) Hours Attended = 1,040
C) Labour Efficiency = 92% (A ÷ B X 100)

Discussion:

This example shows that the Productives have attended 1,040 hours at the dealership of which 92% of that time has been spent working productively. The remaining 8% will be shown in your expenses as Idle Time.

Related Terminology:

This KPI is also known as Utilisation, Labour Utilisation and Selling Efficiency.

Labour Efficiency % (Service Department)

Labour Efficiency % (Service Department)

Hours Worked ÷ Hours Attended (x100)

Benchmark: 85% to 95%

Description:

This statistic tells you how much of the Technicians Attended time is actually spent working productively.

In more simplistic terms, each Technician usually clocks in and is available for eight hours each day, but how much of that time is spent spanner-in-hand, head-under-bonnet, working on hours that can be charged out to the customer? Labour Efficiency gives you the answer to this question.

Labour Efficiency

Example:

A) Hours Worked = 957
B) Hours Attended = 1,040
C) Labour Efficiency = 92% (A ÷ B X 100)

Discussion:

This example shows that the Technicians have attended 1,040 hours at the dealership of which 92% of that time has been spent working productively. The remaining 8% will be shown in your expenses as Idle Time.

Related Terminology:

This KPI is also known as Utilisation, Labour Utilisation and Selling Efficiency.


Labour Gross Profit (Bodyshop)

Labour Gross Profit (Bodyshop)

Labour Sales x Labour Cost of Sales

Guideline: See Labour Gross Profit %

Description:

This is probably one of the most misunderstood calculations of all and is therefore worthy of your full consideration.

Most people are of the assumption that the Labour Gross Profit is Labour Sales minus Hours Attended. If this were to be the case then Idle Time would be reported at zero.

The true calculation is the monetary value of the Hours Sold minus the monetary value of the Hours Worked productively.

Labour Cost Of Sales

Example:

A) Labour Sales (hours sold) = R42,240
B) Hours Worked Productively = R7,803
C) Labour Gross Profit = R34,437 (A - B)

Discussion:

It is important to note here that the Labour Cost of Sales is only the value of the hours spent working productively on the hours that have been sold. You can deduce from this calculation that the Productives time is split between hours worked productively and Idle Time.

Related Terminology:


Labour Gross Profit (Service Department)

Labour Gross Profit (Service Department)

Labour Sales x Labour Cost of Sales

Guideline: See Labour Gross Profit %

Description:

This is probably one of the most misunderstood calculations of all and is therefore worthy of your full consideration.

Most people are of the assumption that the Labour Gross Profit is Labour Sales minus Hours Attended. If this were to be the case then Idle Time would be reported at zero.

The true calculation is the monetary value of the Hours Sold minus the monetary value of the Hours Worked productively.

Labour Cost Of Sales

Example:

A) Labour Sales (hours sold) = R42,240
B) Hours Worked Productively = R7,803
C) Labour Gross Profit   = R34,437 (A - B)

Discussion:

It is important to note here that the Labour Cost of Sales is only the value of the hours spent working productively on the hours that have been sold. You can deduce from this calculation that the Technicians time is split between hours worked productively and Idle Time.

Related Terminology:

Labour Gross Profit % (Bodyshop)

Labour Gross Profit % (Bodyshop)

Labour Gross Profit ÷ Labour Sales (x100)

Baseline: > 65%

Description:

Before you read this page, please read Labour Gross Profit to ensure that you have the true understanding of the performance area that your are measuring.

All profit-related KPI are usually measured against turnover, and in this instance the starting figure for your profit retention in the Service Department is 65%.

Example:

A) Labour Gross Profit = R182,241
B) Labour Sales = R253,112
C) Labour Gross Profit = 72% (A ÷ B X 100)

Discussion:

It is important to maintain a high profit margin in this KPI because the Departmental Expenses erode much of it away. Therefore if your performance in this area is below 65%, you will struggle to achieve a reasonable level of profitability when you reach the Direct Profit of your department.

This statistic has a tendency to be lower than that of the Service Department due to lower Recovery Rates and higher Productive costs.

Related Terminology:


Labour Gross Profit % (Service Department)

Labour Gross Profit % (Service Department)

Labour Gross Profit X Labour Sales (x100)

Baseline: >75%

Description:

Before you read this page, please read Labour Gross Profit to ensure that you have the true understanding of the performance area that your are measuring.

this KPI tells you the percentage of money you have retained from the Hours Sold after you have paid your Technicians.

All profit-related KPI are usually measured against turnover, and in this instance the starting figure for your profit retention in the Service Department is 75%.

You could also view this to mean that you pay your Technicians less than 25% of the value of the Hours Sold for the hours that they have worked productively.

Example:

A) Labour Gross Profit = R34,437
B) Labour Sales = R42,240
C) Labour Gross Profit = 81.53% (A ÷ B X 100)

Discussion:

It is important to maintain a high profit margin in this KPI because the Departmental Expenses erode much of it away. Therefore if your performance in this area is below 75%, you will struggle to achieve a reasonable level of profitability when you reach the Direct Profit of your department.

Related Terminology:

Labour Sales Mix (Bodyshop)

Labour Sales Mix (Bodyshop)

(Sector) Hours Sold ÷ Total Hours Sold (x100)

Guideline: See Hours Sold

Description:

This information simply informs you of the sectors into which you are selling hours.

In the case of the franchised dealer, the Labour Sales Mix for the Bodyshop splits into three distinct categories of income sectors, which are Retail, Internal, and Warranty.

In the case of a stand-alone independent Bodyshop, the Labour Sales Mix may be split between, Retail, Insurance, Franchised Dealers and Fleet.

Whatever your circumstances, you may see your Labour Sales Mix being displayed as a Pie Chart to give an instant picture of your status.

However, It is always wise to measure your Labour Sales Mix in terms Hours Sold as opposed to the monetary value of Labour Sales because Recovery Rates vary across each income sector as do the charge out rates.

Example:

Discussion:

Price differences lead to inconsistency when measuring the trend and direction of your Bodyshop and it is therefore more meaningful to measure the Hours Sold into each income sector.

All of the price differences and distortions are eradicated when the number of Hours Sold are analysed as opposed to their monetary values.

Related Terminology:

(Also see Retail: Insurance Ratio)

Labour Sales Mix (Service Department)

Labour Sales Mix (Service Department)

(Sector) Hours Sold ÷ Total Hours Sold (x100)

Guideline: See Hours Sold

Description:

This information simply informs you of the balance between your Service Department's sales of hours.

In most cases the Service Department is split into three distinct categories of income, which are Retail, Internal, and Warranty. For many franchises it is generally accepted that the Labour Sales Mix is:

Retail hours sold 70%
Warranty hours sold 10%
Internal hours sold 20%
Total Hours sold 100%

It is always wise to measure your Labour Sales Mix in terms Hours Sold as opposed to the monetary value of Labour Sales because Recovery Rates vary across each income sector as do the charge out rates.

Example:

Discussion:

All of these price differences lead to inconsistency when measuring the trend and direction of your Service Department and it is therefore more meaningful to measure the Hours Sold into each income sector.

All of the price differences and distortions are eradicated when only the Hours Sold are analysed.

Related Terminology:

(Also see Retail: Internal ratio)

Labour Sales per Parc Unit

Labour Sales per Parc Unit

Annualised Labour Sales x Vehicles in Parc

Guideline: Own Policy

Description:

This is a key performance indicator that you need to thoroughly examine and fully understand before you make any judgements whatsoever as it makes some far- reaching assumptions. Its purpose is to ascertain the value of labour sales that you are achieving as an average across your vehicle parc.

This example below shows that for every vehicle in the parc you are currently achieving an average Labour Sales value of R426.

Different manufacturers account for vehicle parc over different spans of time. For instance, some manufacturers use a five-year parc, some use a seven-year parc and others use a ten-year parc.

Also note that the age span of vehicle parc for the Bodyshop is often different to that of the Service and Parts Departments. Be sure to obtain the correct interpretation from your respective manufacturer.

Example:

A) Annualised Labour Sales = R664,848
B) Vehicle Parc = 1,560
C) Labour Sales Per Parc Unit = R426 (A ÷ B)

Discussion:

This statistic is not to be used to assess territory potential because it is taking your current labour sales as opposed to what could be achieved.

Related Terminology:

Labour Utilisation % (Bodyshop)

Labour Utilisation % (Bodyshop)

Hours Worked ÷ Hours Attended (x100)

Benchmark: 85% to 95%

Description:

This statistic tells you how much of the Productives attended time is actually spent working productively.

In more simplistic terms, each Productive usually clocks in and is available for eight hours each day, but how much of that time is spent spray-gun-in-hand or panel beating, working on hours that can be charged out to the customer? Labour Utilisation gives you the answer to this question.

Labour Utilisation

Example:

A) Hours Worked = 957
B) Hours Attended = 1,040
C) Labour Utilisation = 92% (A ÷ B X 100)

Discussion:

This example shows that the Productives have attended 1,040 hours at the dealership of which 92% of that time has been spent working productively. The remaining 8% will be shown in your expenses as Idle Time (or Diverted Time).

Related Terminology:

This KPI is also known as Utilisation, Labour Efficiency and Selling Effiency.

Labour Utilisation % (Service Department)

Labour Utilisation % (Service Department)

Hours Worked ÷ Hours Attended (x100)

Benchmark: 85% to 95%

Description:

This statistic tells you how much of the Technicians attended time is actually spent working productively.

In more simplistic terms, each Technician usually clocks in and is available for eight hours each day, but how much of that time is spent spanner-in-hand, head-under-bonnet, working on hours that can be charged out to the customer? Labour Utilisation gives you the answer to this question.

Labour Utilisation

Example:

A) Hours Worked = 957
B) Hours Attended = 1,040
C) Labour Utilisation = 92% (A ÷ B X 100)

Discussion:

This example shows that the Technicians have attended 1,040 hours at the dealership of which 92% of that time has been spent working productively. The remaining 8% will be shown in your expenses as Idle Time.

Related Terminology:

This KPI is also known as Utilisation, Labour Efficiency and Selling Effiency.


Lead Time (Bodyshop)

Lead Time (Bodyshop)

"I want my vehicle repaired, when can you do it?"

Benchmark: 7 days or less

Description:

The Lead Time is the length of time a customer must wait before your Bodyshop can repair their vehicle.

A short Lead Time is usually expected and generally accepted by a customer unless they have a serious problem that needs immediate attention.

A long Lead Time of ten days or more is not generally understood or accepted by a customer and usually results in them taking their vehicles elsewhere.

If your Lead Time is ten days or more on a consistent basis, then you should certainly examine your Utilisation or even yoy policy regarding courtesy cars.

If your Lead Time is nonexistent on a continual basis, then your marketing campaigns may need an extra boost to gain additional work.

Example:

Discussion:

Factors that affect the lenght of Lead Time are Utilisation, cutomer retention, and marketing activity.

Related Terminology:


Lead Time (Service Department)

Lead Time (Service Department)

"I want my vehicle serviced, when can you fit it in?"

Benchmark: 3 days or less

Description:

The Lead Time is the length of time a customer must wait before their vehicle can be seen by your Service Department.

A short Lead Time of two to three days is usually expected and generally accepted by a customer unless they have a serious problem  that needs immediate attention.

A long Lead Time of seven to ten days is not generally understood or accepted by a customer and usually results in them taking their vehicles elsewhere.

If your Lead Time is seven days or more on a consistent basis, then you should certainly examine your Utilisation, and you may consider taking on an additional technician if you have the facilities available.

If your Lead Time is nonexistent on a continual basis, then your Aftersales marketing campaigns may need an extra boost to gain additional work.

Example:

Discussion:

Factors that affect the lenght of Lead Time are Utilisation, cutomer retention, and Aftersales marketing. The lenght of Lead Time that your dealership has is really a reflection of the work that is available to you and your ability to cope with its demand.

Related Terminology:

Loan Repayment %

Loan Repayment %

Annual Loan Repayment ÷ Cash Profit (x100)

Benchmark: < 33%

Description:

This KPI informs you of how much money your business can afford to repay in annual loan repayments.

Example:

A) Annual Loan Repayments = R142,879
B) Net Profit After Interest = R508,327
C) Depreciation = R87,000
D) Cash Profits = R595,327 (B + C)
E) Loan Repayment = 24% (A ÷ D X 100)

Discussion:

The logic behind this information is rather similar to your mortgage payments. In simplistic terms, a bank manager will allow you to borrow somewhere in the region of 3 times your salary for a mortgage.

The company's equivalent to your salary is its Cash Profit and the Loan Repayment % states that the amount that you are paying in loan repayments should be less than one third of your Cash Profits.

To ensure that your business can afford to repay its loans, you may need to restructure them over a longer period of time.

Our usual logic tells that we should pay off our loans in the fastest possible time however, it is better to pay a little more in interest payments than it is to go bust through a lack of cash.

Related Terminology:

Lost Opportunity Costs (Used Vehicles)

Lost Opportunity Costs (Used Vehicles)

Days in Stock ÷ Days Stock Turn x GP per Unit

Benchmark: <Gross Profit per Unit x 2

Description:

This statistic measures the profitability of the space that a used vehicle occupies rather than any measurement of the used vehicle itself. Understanding of this difference is critical to this concept.

Let's assume that your used vehicle Stock Turn is 35 days and your Gross Profit is R1,500 per used vehicle.

If you have a used vehicle that remains in stock for a period of longer than 35 days, then the space it occupies is no longer productive at the average rate and is missing profit opportunities.

In order to establish the value of this lost opportunity you must divide the actual number of days a vehicle has been in stock by your Stock Turn and then multiply this by your average Gross Profit.

Example:

A) Actual Days in Stock = 87
B) Current Stock Turn = 35 Days
C) Failed to sell = 2.49 times (A ÷ B)
D) Average Gross Profit = R1,500
E) Lost Opportunity Cost = R3,735 (C X D)

Discussion:

This concept accepts the principle that your used vehicles generate R1,500 every 35 days, whereas this vehicle has failed to do so 2.49 times therefore the profit opportunity of R3,735 has been lost.

Related Terminology:

Lost Time (Bodyshop)

Lost Time (Bodyshop)

Hours Attended x Hours Worked

Guideline: See Utilisation

Description:

Lost Time means that the Productives have been diverted onto tasks that cannot be charged out to the customer and as such the chargeable time is therefore lost. Typically this could be time spent locating a vehicle, waiting for parts and other such issues.

The mathematical formula is simply Hours Attended minus Hours Worked and this is always shown as a monetary value, which can usually be found within the Variable Expenses of the Bodyshop.

Example:

A) Hours Attended = 320
B) Hours Worked = 304
C) Hours Lost = 16 (A - B)
D) Prime labour Cost = R10
E) Lost Time = R160 (C X D)

Discussion:

In addition to this, some financial reports might show the monetary value of Lost Time as a percentage of the Departmental Gross Profit.

Related Terminology:

This term is also known as Unrecovered Time, Idle Time and Diverted Time.

(Also see Hours Attended and Hours Worked)

Lost Time (Service Department)

Lost Time (Service Department)

Hours Attended x Hours Worked

Guideline: See Utilisation

Description:

Lost Time means that the Technicians have been diverted onto tasks that cannot be charged out to the customer and as such the chargeable time is therefore lost. Typically this could be time spent locating a vehicle, waiting for parts and other such issues.

The mathematical formula is simply Hours Attended minus Hours Worked and this is always shown as a monetary value, which can usually be found within the Variable Expenses of the Service Department.

Example:

A) Hours Attended = 320
B) Hours Worked = 304
C) Hours Lost = 16 (A - B)
D) Prime labour Cost = R8,40
E) Lost Time = R136 (C X D)

Discussion:

In addition to this, some financial reports might show the monetary value of Lost Time as a percentage of the Departmental Gross Profit.

Related Terminology:

This term is also known as Unrecovered Time, Idle Time and Diverted Time.

(Also see Hours Attended and Hours Worked)