In our last post, we took a look at your shop's productivity, which measures the time and resources dedicated to a job. Now, we're focusing in on efficiency, and how a more efficient shop is a more profitable shop.
What is Efficiency?
Efficiency and productivity are closely linked, but efficiency looks specifically at the hours it actually takes a technician to complete a job vs. how much time the repair was estimated to be completed in.
Tracking efficiency can let you know how effective your shop is. It can also help you identify areas for improvement that can increase some of your other metrics as well. For example, increases in efficiency—particularly systems and workflow—can have a positive impact on your effective labor rate. This in turn directly impacts your bottom line.
Like productivity, efficiency can be looked at on the more global shop level, or on the individual technician level. Many shops aim to have their efficiency rate at 100% or greater, which would then allow them more billable hours, and in turn higher profits. You can calculate your efficiency by dividing the hours billed by the actual number of hours your technicians took to complete the job and multiplying by 100:
What Can be Done to Improve Efficiency?
Just knowing what efficiency is doesn't do your shop a whole lot of good. The more important information is knowing how to improve it. Here are a few strategies you might employ to increase your shop's efficiency:
Improved Estimates and Communication
One of the main things you can do to improve your efficiency is to ensure that the estimates given to customers are as accurate as possible. If customers aren’t quoted a realistic timeframe, your technicians are being set up for failure right from the start. Make sure that you have open lines of communication from the front and back of your shop to help ensure that each estimate is thorough and correct both before it is given to the customer, as well as throughout the repair process.
Scheduling for maximum efficiency doesn't mean pushing your technicians to their physical limits, but rather knowing your capacity and scheduling for it. Make sure you know the maximum number of billable hours your technicians are capable of (more experienced master techs can usually handle more than 8 billable hours, while an apprentice might only be able to handle 6 or 7). This will help you utilize each tech to their fullest. Schedule each repair to the technician best suited for it so that each person's time is spent in the most efficient way possible.
Bringing in Work
To be truly efficient, you have to make sure you're bringing work in to your shop. If your bays aren't full, you're not making money. But even more than that, you want to make sure you're bringing in the right work. Ratchet+Wrench's March 2014 article details this idea. They find that it's important for your business to be able to close sales on jobs that don't waste your technicians' time—partial jobs or unprofitable ones. With these jobs, it’s difficult for your technicians to work faster than the hours booked and their efficiency really takes a hit. It helps, they go on, if you can sell a complete estimate, rather than a customer picking and choosing repairs.
If you don't already have workflow processes in place, it would be a good idea to do so. This will help each of your employees know exactly what they should be doing, as well as what each person is responsible for. Having a set system of steps for jobs can also show you where time is being lost or wasted, and allow you to make improvements to the systems for overall increased efficiency. If you already have workflow systems, evaluate them. Are they still working for your shop? Are there places they could be simplified or duties shifted to reduce the burden on one person?
Training and Equipment
One simple way to boost your efficiency is to make sure that your technicians have the training and equipment they need to complete their jobs. Rather than have your techs struggle on a job they don't have the proper tools for, invest in those specialty tools that will save you money in the long run. Allowing your techs access to continuing training will not only make them more knowledgeable, but they'll be able to work faster because they'll be more confident in what they're doing.
Logical Shop Flow
This might seem like a given, but make sure that your shop is as organized as possible. Each tool should have its place and everyone should know where everything belongs. Lay out the shop as logically as possible so that time is not lost trying to locate something, or having to move large items from far away. Try to reduce garbage and clutter by throwing out old or unnecessary parts. Keep workbenches organized and tidy. This will reduce the amount of time lost because tools or parts can't be located, adding up to increased efficiency and profits.
If you don't have the necessary parts readily available, you lose time on repairs, which loses you money. Try to ship complete orders so that you aren't stuck waiting for one thing to show up before you can continue your work. HHP offers fast shipping—2-days or less to most areas!
For more ideas on improving efficiency, read our past blog post, 5 Ways to Increase Repair Shop Efficiency and Profitability.
Some Things for Consideration
In order to truly foster an environment of efficiency, you need to make sure your employees understand why you're doing it, otherwise they're less likely to follow the systems. Let them know how their efficiency impacts the shop overall, as well as themselves directly. Consider offering incentives to keep them motivated. Keeping your shop a positive environment to work in can also help motivate your employees.
Working faster alone will not make you more money. You need to be efficient in the right ways and be targeted about your approach. This is where the other metrics we've discussed in this series come in. Each one can help point your shop in the right overall direction.
As you begin to emphasize efficiency in your shop, make sure you don't sacrifice quality. Working more efficiently doesn't matter if you have a lot of customers return with issues on their repairs due to sloppy work. Make sure that quality work is seen as just as important as fast work.
Throughout the Profit Boosting Boot Camp series, we've taken a look at the different metrics you could track to help improve your overall profits. Taken individually, you get a small part of the picture, and might see some increased profits, but together is where their power truly lies. They feed into each other. By implementing this monitoring in your shop, you can not only see where money-making opportunities are, you can make a plan to actively work towards achieving your future goals for your shop.
Another way to improve your profits is by saving money on parts. Check out our Repair Shop Value program to see how our great benefits could save your shop money. Learn more here.