You’ve got a dependable crew and your shop is doing OK, but do you wonder if it could do better?
If there seems to be a discrepancy between your profits and how busy your techs are, there’s room for improvement. It may be time to look at some numbers to determine where the problem lies. In most businesses, profits are directly linked to productivity and efficiency.
When it comes to shop efficiency vs. productivity, owners and managers should know the difference as well as how to maximize both.
The Difference Between Shop Efficiency vs. Productivity
If a heavy-duty repair shop is turning a profit, it’s productive, right? And if it’s productive, then it must be efficient.
The truth is that neither statement is necessarily correct.
Even if your shop is profitable, that doesn’t mean there isn’t room for improvement in both productivity and efficiency. When you’re comparing shop efficiency vs. productivity, one is about speed and the other is about volume—and both relate to billable hours.
Efficiency has to do with how quickly a tech does a job. You measure efficiency by comparing the number of hours your techs work to the number of hours you bill customers. If a tech is clocked in for eight hours a day, you should be able to bill at least that much. However, a super-efficient tech will do enough work to produce 10 or more billable hours a day.
Productivity, on the other hand, refers to how many jobs the tech completes on any given day. He may be clocked in for eight hours and busy the entire time. However, if he only completes one job that you bill out at six hours, he’s not that productive. Instead, an example of a productive tech is one who completes two or three jobs that you bill at four hours each in that same eight-hour span.
Is One Better Than the Other?
When looking at shop efficiency vs. productivity, you might wonder if one is better than the other. Maybe your instinct is to focus on making your team more productive and hope efficiency will naturally follow.
In reality, a more efficient shop is a more productive one. If you create a culture of efficiency in your shop, jobs move through the bays quicker. That makes room and time for more jobs. More jobs mean a bigger bottom line. Therefore, since efficiency leads to productivity, both are equally important for a profitable shop.
Shop Efficiency vs. Productivity: What’s Realistic?
So, you understand that shop efficiency and productivity are two different but intertwined things. Your next step is to understand how to increase both—and how to set realistic goals while doing so.
Some feel it’s reasonable to expect 100 percent efficiency from techs, but that it’s harder to get 100 percent productivity. Many times, shop managers only expect 90 percent productivity. The reality is that if you can make your shop more efficient—more than 100 percent—you can expect high productivity.
Expecting and getting 110, 120, even up to 150 percent productivity from techs is possible if you establish an efficient workflow. If you haven’t been tracking efficiency and productivity metrics, shooting for 100 percent efficiency and 90 percent productivity is a place to start. Then, challenge your team to increase from there after streamlining your processes.
What’s Standing in the Way?
So, what’s holding your team back from reaching the numbers you set for shop efficiency vs productivity? Some of the issues that hinder efficiency and productivity include:
- Random job assignment—not matching jobs with techs who have the expertise
- Delays in job assignment
- Incomplete and inadequate repair orders
- Parts availability
- Lack of training
On the surface it might look like low productivity is a tech problem. However, most of the issues occur before the tech even gets the job. That’s why general shop efficiency is vital for tech productivity.
One thing to keep in mind is that productivity is a team effort. Once a repair order is written, it shouldn’t sit on the service manager’s desk. It should get assigned immediately, and to the tech best-qualified for the job. The order should be complete and readable so the tech can jump right into the repair and get the job done fast. If the tech needs any parts that aren’t on hand, those should be ordered and on their way by the time he’s digging into the repair.
Setting the Bar
Once you’ve identified and fixed problem areas, you can set the bar and implement incentives to help your crew become the highly-efficient, productive team you know they can be. Some shops pay using a tiered system, guaranteeing a certain dollar amount per hour to techs that maintain 100 percent productivity, for example. Then, they pay more to techs who exceed that number.
For instance, technicians might get a $50 bonus when they hit 110 percent, $75 when they exceed 120 percent, and $100 for 130 percent productivity. The key is to set them up to succeed. Look to increase efficiency in all areas of your shop, but particularly work to encourage efficiency in the bays by assigning more than one job at a time to each technician when possible. Techs who multitask, such as dropping oil on one truck while running diagnostics on another, are capable of 120 percent productivity and more.
Figuring Out The Numbers
We’ve talked a lot about the differences between shop efficiency vs. productivity, how both are important to each other and for increasing profits, and how to encourage your departments and techs to hit the goals you set. But how can you measure where your shop is at now and monitor it as you improve? It all comes down to a few simple, similar calculations.
First, although the efficiency of the shop in general is essential, it’s easiest to specifically measure repair tech efficiency. That’s because you can compare the amount of time it takes a tech to complete a job to how many hours you bill for it. Finding how efficient a tech is at that job is as easy as dividing the invoiced hours by the labor hours. We call this the technician efficiency formula:
invoiced hours/labor hours=efficiency percentage
For instance, if you have a job that bills a flat three hours no matter what and it only takes your tech two hours to complete, you can tell the tech is 150 percent efficient at doing that job: 3/2=1.5.
On the other hand, maybe it takes four hours for another tech in your shop to do the same job. Dividing the billed hours by the worked hours shows that tech is only 75 percent efficient: 3/4=.75.
In a perfect world, a tech who clocks in for eight hours a day will spend all eight of those hours repairing trucks. Since every minute of the workday isn’t spent on jobs, you measure productivity by dividing the number of hours you invoice customers by the number of hours your techs are clocked in at the shop:
total invoiced hours/total labor hours=productivity percentage
Let’s say you have a super-efficient tech who completes three jobs in six hours. For the first job, you bill three hours; the second job bills at two hours; the third job gets billed at 3.5 hours. In six hours, the tech did 8.5 hours’ worth of work. The math shows that tech has productivity of about 140 percent: 8.5/6=1.416.
ACCURATE LABOR TIMES = MORE EFFICIENCY
Understanding how long a repair should take is a key component to building a successful estimate (and later, an invoice). For a hand, you can turn to the labor guides from MOTOR!
A labor guide takes the guesswork out of putting together estimates. Is your shop estimating too few hours for a tough job? If so, you’re inadvertently setting your techs (and therefore your shop) up for failure. Set them up for success instead by understanding how long a repair should take.
Additionally, a labor guide can be your best friend if you need to justify repair charges to a customer (“This is the industry standard, sir”) or if you need to start training junior techs on more challenging repairs.
Equipping Your Shop to be Efficient and Productive
Billable hours link profits to efficiency and productivity. Billing at least as many hours as you pay for may be enough, but if it’s possible to do better, why not set the goal higher?
The above examples are hypothetical, but they’re realistic. You simply need to set your team up to succeed by giving them the right tools for the job, and that means more than equipping the bays with lifts, creepers, sockets, and scan tools.
It also means using software like Fullbay to optimize efficiency. Not to brag, but our app streamlines tasks that are typically stumbling blocks, such as:
- Creating service orders
- Assigning jobs
- Ordering and taking inventory of parts
- Getting customer authorization
- Invoicing customers
Plus, Fullbay even tracks the amount of time techs spend on jobs, making it simple to calculate shop efficiency. and productivity. And that’s only a brief example of the many things Fullbay does to help repair shops become more efficient and productive to maximize profits. See what Fullbay can do for your heavy-duty shop—just check out our demo to get started.