Using KPIs to more effectively manage repair shop operations leads to measurable efficiency and productivity improvements
A likely contender for the top quote cited by generations of business majors, “You can’t manage what you can’t measure,” is attributed to the late legendary management consultant Peter Drucker. However, Drucker would be one of the first to tell you that there is a deeper meaning behind such a seemingly simple and straightforward bit of advice.
If you could have that conversation today, Drucker’s point would be that performance can’t improve without the ability to analyze data. He actually is also quoted as having said, “What’s measured improves,” and in three words tells us what we really need to know.
In repair shop operations, better management decisions are tied to having the right metrics and data analytics. When you have the ability to measure Key Performance Indicators (KPIs), you can identify and address inefficiencies and improve efficiency and productivity.
Part of the key to effectively using data to achieve performance standard goals is to begin with determining the metrics that will be most useful for analysis. In other words, the value of KPIs is in finding things you can measure under your control and improving them.
Increasing revenue and driving savings to your bottom line
At Wayne Truck and Trailer Ltd., President Irvin Bowman looks regularly at two KPIs. “What’s most important to us are measures of gross profit per hour and weekly sales per technician,” he says. “We have overhead costs that we need to compare to billable hours so we can cover our expenses. Without knowing what our margin has to be, we can’t drive savings to our bottom line or quote services competitively.”
With KPIs, Bowman adds, it’s possible to see why the company may have been priced out of the market, or why it may have had a lower than expected margin on a specific service or repair. For example, the metrics allow Wayne Truck and Trailer to understand if its parts prices are too high, or if its labor estimates aren’t accurate. Likewise, lower than anticipated sales per technician may indicate a need for additional training in inspection procedures.
For Troy Willich, CEO and Co-Founder of TDI Fleet Services, a main KPI to follow is technician hours compared to invoiced hours. “While our technicians are commission-based, we still have them clock on and off jobs so we can measure efficiency,” he says. “When we’re billing fewer than 80% of the hours a technician is on the clock, our supervisors are notified immediately. That triggers a look into the reasons for the inefficiency, such as technicians not clocking in properly, staying on the ticket while waiting for parts, or having difficulty with troubleshooting.
“We also follow parts metrics,” Willich continues. “Those KPIs tell us how our margins are trending. If our margins are down, we can discover the reason or reasons why. An additional KPI tells us if a vendor is taking longer to make a delivery, which slows down shop workflow and throughput. This type of constant evaluation helps us grade the performance of our suppliers beyond just price.”
Finding value in common and industry metrics
Joel Levitt, president of Springfield Resources, a maintenance management training and consulting firm, offers a list of valuable KPIs to track. Some of the more common metrics for truck and trailer repair shops include:
- Breakdown reports that detail MTBF (mean time between failures) with MTTR (mean time to repair) information added, so a breakdown can be treated as an educational opportunity to see where the system failed.
- Number of service calls to see how effective maintenance practices are at foreseeing problems and correcting them before they occur. This benchmark would also be factored by significant changes in size, equipment, or mission of the organization being served.
- Mean time to repair (MTTR) to determine how long it takes for the customer to be satisfied.
- Callbacks percentage, defined as work on the same system, indicates a problem with a technician, part, or procedure. This ratio trending over time indicates if the issue is being addressed.
- The hourly/support people ratio indicates if there is excess support staff, a cost and productivity issue that can be resolved by moving personnel to the shop floor or other roles, if possible.
- Accounted for hours is the ratio of work order hours to payroll hours, which should be in the higher range.
- Work order hours/standard hours is an effectiveness ratio that shows how much work is really being done.
Industry metrics can be valuable, too, because benchmarking across market segments allows service providers to measure their performance against similar businesses and discover areas where they can make improvements. A highly-regarded technology in use on an industry level, for example, is the VMRS (Vehicle Maintenance Reporting Standards) coding system from the Technology & Maintenance Council (TMC) of the American Trucking Associations.
VMRS can help service providers see which repairs are happening most frequently, and which vehicle systems and components are mostly costly to maintain, leading to an ability to make cost and downtime-saving recommendations to customers. The parts and labor data that VMRS provides can also help you spot common problems and see where you need to make improvements in your service programs, such as tailoring technician training to the type of repairs being done.
Using software to identify strengths and weaknesses
Repair shop management software is designed specifically to help service providers use KPIs to their advantage. For individual shops and at an organizational level for service operations with two or more locations, it easily and automatically produces highly accurate and current metrics on revenue, costs, and profits. Perhaps most importantly, it can quickly and effectively point to strengths and weaknesses so the efficiency and productivity of your shop operations and technicians can be improved.
“Overall, it would be very hard to track our key KPIs without repair shop management software,” states Irvin Bowman at Wayne Truck and Trailer. “It’s possible, but we’d need a full-time person just to crunch the numbers.”
TDI Fleet Services uses its repair shop software daily to facilitate the use of KPIs, Troy Willich notes. “We were using spreadsheets but it was taking hours every week just to build the data,” he relates. “With software it’s much faster, and it requires less effort to generate metrics.
“With a system doing that all the time at the process level it’s easier to find causes of good or bad performance,” Willich adds. “That way, we can fix the problem or duplicate a best practice, and we can focus on other important things.”