What Is Your Shop's Effective Labor Rate?

Motor, Nov 2004 by O'Connor, Bob

Training. Our experience has shown that most employers do not take an active role and/or assume responsibility for reviewing materials and notes employees bring back from training sessions. Nor do they follow up on the implementation of techniques learned.

A formal plan must be put into place that includes a budget and a specific outline of how the need for training is determined, what is expected of employees once they've attended training sessions and incentives attached to immediate implementation of knowledge gained. Anything short of this is a waste of time and money.

Facilities. Many auto repair shops are housed in facilities that were never designed for the use. In addition, they may never have been evaluated for remodeling to improve efficiencies. It's not uncommon for a technician to walk 50 to 100 feet to speak with an advisor, obtain parts or use the technician business center. The facility should be evaluated to ensure that inefficiencies for all staff are reduced.

Equipment. We believe todays auto repair shop should purchase, train staff on and require the use of any piece of diagnostic or service equipment that can bill time while the technician attends to other tasks. Shops should develop an overall equipment plan, in writing, that provides for evaluation of existing equipment to determine its continued usefulness, disposal of the obsolete, purchase and implementation of new equipment, budgeting and a repair process. Too many shops have valuable floor and storage space occupied with obsolete and/or broken equipment.

Products. Quality is the key here. In the old days we sold rebuilt carburetors because they were so much cheaper than new. However, we often had to install at least three before we found one that worked. Labor for two of the three installations was absorbed by both the shop and the technician, since no one felt the customer should be charged. Today, we have a responsibility to both ourselves and our customers to use the best products available in an effort to avoid comebacks. Doing the job right the first time, using quality parts, will lead to increased efficiencies.

In addition to sourcing and using quality products, demanding outstanding delivery service and proper order filling will lead to your billing out more hours by not having to push the vehicle out or having technicians wait for parts. This effort, combined with proper scheduling, can work well for both the suppliers and the shop.

Your Effective Labor Rate Can Go Down or Up

We've identified nine factors that will decrease your effective labor rate:

1. Technicians working longer on a job than the hours quoted and the customer not being charged for all of the time invested. This occurs regularly in most shops today, for three reasons: First, the advisor may have inaccurately quoted the proper time for the job. second, the technician may have run into some nonroutine tasks, like rusted or broken bolts. Third, the technician may have lost track of the elapsed time. All of these issues are easily correctable once everyone in the shop agrees they exist.