Efficiency can have a significant impact on profitability. A 5 percent increase in efficiency can equate to a 5 percent increase in throughput. In other words greater efficiency results in more hours being billed for the same amount of hours worked. Efficiency can be improved by measuring it, offering employees incentives to increase efficiency ratings, organizing work areas and improving process flows. Focus on improving efficiency will result in increased sales and higher profit margins. Labor is a substantial part of sales in auto repair so making the most of it will contribute to success. Following are keys to improving efficiency:
- Start with a Valid Estimate – Efficiency is the measurement of actual time spent performing a given repair vs. the estimated time it should take. It’s important to start with a valid estimate from a credible source.
- Report Actual Time Spent – Measuring efficiency requires that the actual time spent performing specific tasks be reported. It will take time to do this but the benefit of measuring efficiency ratios will far outweigh the cost of reporting.
- Measure Actual vs. Estimate – Efficiency is calculated by dividing the estimated time required by the actual time spent performing the task. So if a task takes 1.5 hours to complete and the estimated time is 1 hour the efficiency rating it .75. If the task takes .75 hours (45 minutes) to complete and the estimated time is 1 hour the efficiency rating is 1.5
- Set a Target Efficiency Rating – A realistic efficiency rating goal should be established. It should be achievable but should also require effort to attain.
- Offer Incentives for Reaching Efficiency Goals – People respond to incentives. Technicians that are paid based on flag hours (hours billed to customer) are incentivized by their method of compensation. Employees that are paid otherwise may be offered a different type of incentive.
- Include Comeback Work in Incentive Calculations – Striving to achieve a higher efficiency rating can bring on quality problems due to people trying to work faster. People should be incentivized to achieve maximum efficiency with minimum quality problems.
- Organize Work Areas to Maximize Efficiency – The physical layout of the work area will make a significant contribution to efficiency. Reducing the distance traveled for equipment, tools and parts needed for repairs will increase efficiencies.
- Design Work Flow to Support Efficiency – Anytime a disconnect in work flow exists the potential for lost time is increased. Work flows should be analyzed and improved with the objective of eliminating wait times.
- Hold Review Meetings for Input on Improvement – Employees have the ability to recognize barriers to increased efficiency. When they’re able to contribute to improved efficiencies and it’s in their own best interest to do so opportunities for improvement will be readily identified.
