Obsolete Stock Obsolete Stock
Benchmark: < 1% of Stock Value
Description:Wouldn't it be a wonderful world if you were able to sell every single part that you purchased? The truth of the matter is that you are unable to achieve this utopia in the real world and therefore you have to make decisions about how long you keep hold of stock before you admit to yourself that it's just not going to sell. Just think for a moment about the food that you buy. Accompanying the price of the produce there is usualluy a date that tells you when the food must be sold or it will be removed from the shelf and thrown away. This date is commonly known as the "Sell by date".
Example:Although the parts that are occupying your shelves right now do not have a "sell by date" printed on them, you already know that there is a limited amount of time for them to sell because new vehicles are being launched and demand for older parts diminishes. Once this time has expired, those old parts are said to be past their sell by date, or in other words, they become obsolete stock.
Discussion:There are no hard and fast rules for placing sell by dates on your parts stock, but the general rule seems to be around 2 years. After this amount of time, most parts have benefited from Stock Adjustments and are usually written off and thrown in the bin to make way for some fresh stock that will sell so that the profits can be recovered.
Related Terminology: |
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Oil & Lubricants Profitability (Parts Department) Oil & Lubricants Profitability (Parts Department)
Oil Gross Profit ÷ Oil Sales (x100)
Baseline: >50% of Oil Sales
Description:As
an industry, we take a high profit margin from the sale of oil and
lubricants. There is always a debate to be had as to whether the sale
of oil and lubricants should be shown within the Service Department or
the Parts Department. Some manufacturers financial reports show this
statistic within the Parts Department, which provides the reason for
it being shown in this section of the book, however your financial
reports may show it in the Service Department.
Example:A) Oil Sales = R10,357 B) Oil Cost of Sales = R3,936 C) Oil Gross Profit = R6,421 (A - B) D) Gross Profit on Oil Sales = 62% (C ÷ A X 100)
Discussion:Most
financial reports include the value of oil sales together with the
value of oil gross profit; a good report will also show you the
percentage of gross profit that has been retained. Special note: In
order to measure this information accurately, you need to capture the
opening oil stock and the closing oil stock at the end of each period,
taking into account any oil purchases and from this you can determine
how much oil has been used. This of course is your true cost of sale.
If you do not currently use this method, and your oil is not metered,
how do you account for your oil?
Related Terminology: |
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Oil & Lubricants Profitability (Service Department) Oil & Lubricants Profitability (Service Department)
Oil Gross Profit ÷ Oil Sales (x100)
Baseline: >50%
Description:As an industry, we take a high profit margin from the sale of oil and lubricants. There is always a debate to be had as to whether the sale of oil and lubricants should be shown within the Service Department or the Parts Department. Most manufacturers financial reports show this statistic within the Service Department, which provides the reason for it being shown in this section of the book, however your financial reports may show it in the Parts Department.
Example:A) Oil Sales = R10,357 B) Oil Cost of Sales = R3,936 C) Oil Gross Profit = R6,421 (A - B) D) Gross Profit on Oil Sales = 62% (C ÷ A X 100)
Discussion:Most financial reports include the value of oil sales together with the value of oil gross profit; however, it is more meaningful to show the percentage of gross profit that has been retained for trend analysis. Special note: In order to measure this information accurately, you need to capture the opening oil stock and the closing oil stock at the end of each period, taking into account any oil purchases and from this you can determine how much oil has been used. This of course is your true cost of sale. If you do not currently use this method, and your oil is not metered, how do you account for your oil?
Related Terminology: |
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Operating Profit Operating Profit
Gross Profit x All Departmental Expenses
Baseline: > 12% of Department Turnover
Description:The mathematical formula for Operating
Profit is simply Gross Profit minus Departmental
Expenses.
Example:A) Departmental Gross Profit = R107,539 B) All Departmental Expenses = R82,722 C) Operating Profit = R24,817 (A - B)
Discussion:Operating profit is usually seen as the last line or the bottom line of your
financial reports for the Parts Department, hence its colloquial name,
"the bottom line".
However, having this figure reported as a
monetary value is very nice to see, but in terms of plotting its trend,
it is more useful to measure this as a percentage of Turnover.
Example:A) Operating Profit = R24,817 B) Turnover = R165,446 C) Operating Profit % = 15% (A ÷ B X 100)
Related Terminology:This line is sometimes called Direct Profit, Operating Profit and of course the
bottom line. |
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Operating Profit % (Bodyshop) Operating Profit % (Bodyshop)
Operating Profit ÷ Turnover (x100)
Baseline: > 30%
Description:Operating
Profit is exactly the same as Departmental Profit and is calculated by taking Gross Profit minus Departmental
Expenses. To make sense of this figure it is always expressed as a
percentage of Turnover when used for trending as it is the direction of
travel that is of most interest to you.
Example:A) Operating Profit = R183,389 B) Departmental Turnover = R573,088 C) Operating Profit % = 32% (A ÷ B X 100)
Discussion:
Related Terminology:The
Operating profit of the Bodyshop is also called many other
things such as, Direct Profit, and of course the
bottom line. |
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Operating Profit % (Sales Department) Operating Profit % (Sales Department)
Operating Profit ÷ Department Turnover (x100)
Guideline: Franchise Specific
Description:Operating Profit is calculated by taking Gross Profit minus Departmental Expenses. To make sense of this figure it is always expressed as a percentage of Turnover when used for trending as it is the direction of travel that is of most interest to you.
Example:A) Operating Profit = R97,208 B) Departmental Turnover = R3,240,233 C) Operating Profit % = 3% (A ÷ B X 100)
Discussion:
Related Terminology:The
Operating profit of the Sales department is also called many other
things such as, Departmental Profit, Direct Profit and of course the
bottom line. |
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Operating Profit % (Service Department) Operating Profit % (Service Department)
Operating Profit ÷ Turnover (x100)
Baseline: > 35%
Description:Operating
Profit is exactly the same as Departmental Profit and is calculated by taking Gross Profit minus Departmental
Expenses. To make sense of this figure it is always expressed as a
percentage of Turnover when used for trending as it is the direction of
travel that is of most interest to you.
Example:A) Operating Profit = R57,907 B) Departmental Turnover = R165,446 C) Operating Profit % = 35% (A ÷ B X 100)
Discussion:
Related Terminology:The
Operating profit of the Service Department is also called many other
things such as, Direct Profit, and of course the
bottom line. |
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Other Income Other Income
Income From Miscellaneous Items
Guideline: Dealer Specific
Description:This KPI identifies the profit or loss that you have generated from items that are not listed separately on your financial reports. Typically, this could be Warranty Sales, Tax Disc refunds or 3rd party accessories such as Scotchguard etc. The total of this revenue is put into a single accounting line shown as Other or Miscellaneous.
Discussion:Be careful with this one. It is a statistic that requires your investigation because it can often be used as a dumping ground for all sorts of profits or costs that have not been properly identified. Unless you know exactly what is contained here, you could be charged for something without your knowlegde or consent.
Related Terminology: |
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Overall Efficiency % (Bodyshop) Overall Efficiency % (Bodyshop)
Hours Sold ÷ Hours Attended (x100)
Baseline: 105%
Description:This
KPI measures the relationship between the number of hours that have
been sold and the number of hours that the Productives have been
available to work. This
example shows that the Bodyshop has successfully sold more
hours than the Productives have Attended, therefore the Overall
Efficiency of the department is in excess of 100%.
Example:A) Hours Sold = 1,130 B) Hours Attended = 1,040 C) Overall Efficiency = 108% (A ÷ B X 100)
Discussion:The
direction and travel of this key performance indicator keeps you
informed of the balance and harmony that must exist between your
Utilisation and Productivity. Overall Efficiency clearly demonstrates that there is little point in increasing one and ignoring the other. Example:A) Utilisation = 92%
B) Productivity = 114%
C) Overall Efficiency = 104.88% (A X B ÷ 100) Related Terminology: |
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Overall Efficiency % (Service Department) Overall Efficiency % (Service Department)
Hours Sold ÷ Hours Attended (x100)
Benchmark: 95% to 115%
Description:This KPI measures the relationship between the number of hours that have been sold and the number of hours that the Technicians have been available to work. This example shows that the Service Department has successfully sold more hours than the Technicians have Attended, therefore the Overall Efficiency of the department is in excess of 100%.
Example:A) Hours Sold = 1,130 B) Hours Attended = 1,040 C) Overall Efficiency = 108% (A ÷ B X 100)
Discussion:The direction and travel of this key performance indicator keeps you informed of the balance and harmony that must exist between your Utilisation and Productivity. Overall Efficiency clearly demonstrates that there is little point in increasing one and ignoring the other. Example:A) Utilisation = 92% B) Productivity = 118% C) Overall Efficiency = 108.56% (A X B ÷ 100) Related Terminology: |
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