Are You Making The Profit You Deserve?
Software significantly improves an owner’s ability to streamline operations and workflow. This means better tracking and management of inventory and labor. With the right controls in place, maximized profitability is guaranteed.
What is the difference between a shop with and without Inventory controls?
A shop with very tight inventory controls will still have parts loss of 1 to 2% annually. To put this in perspective, if you are carrying $100,000 of inventory this means you will lose $1000 to $2000 per year. A shop with poor inventory controls will easily lose 4 to 5% annually which translates to $4000 to $5000 per year. That’s the difference of $3,000-$4,000 per year of lost inventory without the proper tools and controls in place.
If you are running a busy shop and everyone is at times helping themselves to the inventory, it is likely you are losing more than 4 to 5%. Another area of inventory loss is in the purchasing process. If you can’t track a purchase item directly back to the repair order and vehicle it is supposed to be attached to, it is likely parts aren’t always billed on the ticket which is money lost on the bottom line.
Here is a simple calculation you can do for yourself. You can easily estimate inventory losses based on how well you manage inventory:Total Inventory $ X Annual Losses % = $0 Lost
As a point of reference, below are some things that tightly managed shops do to ensure they have minimized losses.
- They have the proper software to accurately track every item, pricing and costs.
- They utilize purchase orders to ensure they have the most accurate pricing information.
- They count their inventory either through cycle counting (preferred method) or periodic physical counts for accurate inventory evaluation.
- They use barcoding to ease the challenges of managing inventory.
- They control access to their inventory so that parts don’t walk out the door.
What is the difference between a shop with and without labor controls:
A well run shop may bill out 80 percent of the hours available in the technician pool. This means that they have an efficiency loss of 20 percent. It the shop labor rate is $100 per hour and there are 1000 hours available in the technician pool, this means they would not bill $20,000 of available labor that month. Many shops don’t know how many hours they bill out nor do they know how much money is left on the table.
To determine how efficient your shop is, review how many hours you billed out and how many hours you had available.(Monthly Tech Hours Available - Tech hours Billed ) X Shop Rate $ = $0 Lost
As a point of reference, below are some things well run shops do to get the most out of their technician pool:
- They track what every hour and project their technicians work on. This allows them to analyze productivity and job profitability.
- They review shop work flow to see where areas of performance can improve.
- They bill time to customers for routine clean up and supplies in the shop.
- They use labor guides as a reference point on what it should take to do a job.
If you would like an in-depth confidential, non-promotional analysis of your business, please fill out the form below. We have the tools to help you understand how a software solution can affect your bottom line in the span of many years and how an investment as such can pay for itself. While software is our toolbox, customer success is our priority.