Part II: Systems Evaluation
Systems are the foundation of any diesel repair shop business. But, how do you know if your systems are working? How do you evaluate them to determine if they are effective or not? Too many repair shop owners don’t know the answer to these questions. They are running their businesses with systems that produce a result, but there is substantial waste and inefficiency in those systems, because they don’t evaluate their effectiveness by measuring the results.
Simply by asking the question, “How do I evaluate the systems in my repair shop so I know whether or not they are effective?” you’re making an important leadership decision. You’re deciding to be proactive, entrepreneurial, and smart.
Systems evaluation is essential to understanding your business better. It will tell you what’s not working and lead you to innovation. As you evaluate your systems, you will be faced with four simple choices: 1) improve an existing system; 2) eliminate an existing system; 3) design and implement a new system; or 4) leave the system as it is (for now).
The Systems Evaluation Process:
1. Choose a system to evaluate. This can be any type of system in your repair shop. You may want to review several systems at once and make your selection based on the ones that require the most attention.
2. Determine the importance of the system. When deciding which system to evaluate, take into consideration the impact it has on your customers and on your business. Prioritize the systems for evaluation, based on their impact.
3. Determine the effectiveness of the system. The next measure for evaluating a system is how well it’s achieving its desired result. Is it as effective as it should be? Are you getting the best result for the least cost?
4. Document your findings. As you evaluate your systems, keep track of what you learn about them and record your findings. This will provide you with quantifiable information to help you make your decision about whether or not to upgrade your systems. You’ll also have a way to measure your improvement when you upgrade your systems.
Evaluating System Importance:
When evaluating a system, the objective is to make judgements regarding its importance and effectiveness. You make those judgements by determining how well the system is doing what it was intended to do, and understanding how important the system is in terms of its impact on your customers and your business.
If the system has a significant impact on your customers, or has a high-cost and utilizes a large amount of company resources, then it’s an important system and should be given a high priority. For example, if you’re initial problem diagnostic and evaluation process takes longer than it should, then it will delay the repair estimate, upsetting the customer, and consequentially, losing the customer. This would result in lost time, lost labor, and lost revenue that you can’t re-coup. Not to mention the future revenue that customer may have generated for your repair shop.
If the system does its job extremely well – achieves optimal results using minimal resources at a low cost, it is considered a very effective system and may not need to be changed or improved upon. For instance, if your sales process allows ample time for the service advisor to thoroughly review repair estimates with customers and explain why the repairs are needed, they have a greater chance to sell customers on the repair services, thus increasing their sales closing ratio. This is a good example of an important system that requires little time and effort to increase revenue for the shop.
When you really think about it, it’s very obvious whether a system is important or not. But how do you judge its effectiveness?
Evaluating System Effectiveness:
To evaluate the effectiveness of a diesel repair shop system, you don’t analyze its inner workings, you analyze the result it produces and what it takes to get that result. An effective system is one that minimizes costs, makes the best possible use of your resources, and gets the results you want.
The key to evaluating the effectiveness of your repair shop systems is to think of them in terms of input, output, and costs.
System Input: The input of a system includes all the resources used by the system to produce its desired result. These resources may include the number of customers, employees used, parts purchased, equipment and tools required, and paperwork. System inputs have specific metrics associated with them, such as time, quality, and efficiency that can be measured and analyzed to understand their impact on the results of the system.
System Output: The output of a system is the result it produces, plus any by-products and waste it may generate. System outputs also have specific metrics associated with them that can be measured and analyzed to understand the effectiveness of the system. Outputs from a diesel repair shop system may include the number of parts installed in a day, the time it took to install the parts, the quality of the parts installed, disposal of the used parts, and profits generated from sales.
System Cost: System costs are the specific costs directly attributable to the system and its implementation. These direct costs do not include overhead costs or any other cost that is not related to the system in question. For example, if a system requires 2 diesel repair technicians to operate it, then their pay and benefits are part of the system’s labor costs. But management salaries, your advertising budget, or office staff are not part of the system costs.
System inputs, outputs, and costs are Key Performance Indicators that need to be identified, analyzed and measured in order to determine the effectiveness of the systems that run your diesel repair shop. Once this has been done, you can use the data to establish baselines for systems improvement and innovation.
Please visit our blog post weekly to learn more about how systems development and innovation can benefit your diesel repair shop.