Many factors are critical to improving technician proficiency, but it must start first and foremost with management
Tysons, Va.—While the technician shortage is a significant challenge — and keeping high-quality technicians — when it comes to profitability, dealers should ask if themselves if they are maximizing their present technician capacity, states the National Automobile Dealers Association (NADA).
Profitability in a service department starts with generating revenue. Revenue is generated by billing hours at an effective labor rate. The effective labor rate is the actual rate that is collected on billed hours. To improve profitability, service centers must first focus on maximizing their billable hours.
According to NADA guides, a regular line flat-rate technician (not including quick lube or oil technicians) should be able to bill at least 125% of the hours available. If a technician works an eight-hour day (available hours do not include vacation or training), they should be able to bill at least 10 hours. At least one or more technicians bill more than 10 hours daily, according to NADA. However, when total shop technician proficiency is examined, most operate below 100%.
An example:
- Technician availability (minus vacation/training) = 1,920 hours/year
- Technician at 125% proficiency = 2,400 hours/year
- Technician at 95% proficiency = 1,824 hours/year
- If a shop’s effective labor rate is $125/hour, the tech that runs at 95% is costing the dealership $72,000 a year in lost revenue.
- If a dealership has 10 techs, that annual loss in revenue = $720,000
If a dealer’s average vehicle inventory runs about $50,000/car, then it is losing the equivalent of 14 vehicles a year. What would the outrage be among owners on missing 14 vehicles from their inventory? Is there the same outrage at losing $720,000 of technician billable hours?
Service centers need to focus on technician hours billed every day. If management focuses on the hours, the entire service department will follow and focus on the hours. A shop worries if a technician is 10 minutes late clocking in, but it doesn’t focus as much on the fact it is only billing 7 hours per day. Many factors are critical to improving technician proficiency, but it must start first and foremost with management making it a priority and holding the technicians accountable.
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