Effective Labor Rate

[Fixedopsmgr]

Just a question about billing labor for maintenance/special repairs. When I bill maint and other special op-codes the labor is locked in at a certain price. The downside is that the effective labor rate suffers on paper. What do you do with it?
Does anyone charge retail and then discount it. By doing it this way the effective rate would be higher but so then would the discount account. For instance our rate for a 5k,10k is 45.00 an hour which is then billed as such. I know it all comes out in the wash but when your dealer goes to 20 group they ask the question about why it is low. Our door rate is 75.00 and our effective rate is 64.00. I really dont want to have to review each ticket each day just to find out what I already know.

[6303]

WHAT MAKE ???
MOST IMPORTS CP ELR WILL BE LOWER DUE TO MAINTENANCE SALES-HAVE YOU THOUGHT OF USING GRID PRICING ???
WATCH HOW MANY SPECIALS YOU ARE RUNNING AND HOW THEY ARE BEING BOOKED OUT

[Fixedopsmgr]

VW. I realize that the specials drag it down. Do you bill full labor and then discount the ticket or let it go with the reduces rate as a sale?

[Old Irish]

This is one of the problems with 20 groups. There's a hundred ways to, intentionally or unintentionally, skew the numbers so you come out looking like a hero in a few areas, and then shrug off the off-setting expense in other areas. In fact, I just came back from a 20 Group meeting and reaffirmed that many of us do the same things, differently.

Personally, I don't believe it is correct to bill out full price only to discount it at the bottom of the invoice but, hey, every dealer has certain statistical hot buttons and you gotta do whatcha gotta do .

ELR is dificult unless you've come up with an iron-clad method of truly controlling your work mix (if you have, please share). You may want to make sure that your advisors are not *needlessly* discounting labor.....as that is one thing you CAN control.

I spent countless hours explaining all this to my dealer and GM to no avail. Finally, a few months ago, they came back from a 20-group meeting and said "Gee. Other than controlling the advisors, there isn't much you can do about ELR so why are we worrying about it?"

Cheers
DD

[Old Irish]

BUT.....put a good agressive labor grid in place and that'll help, too.

Cheers
DD

[TomD]

Mark-

Although everybody likes to brag about effective labor rates- its the gross side that counts... I know very profitable Service Managers that get $95.00 a hour to plug a tire...they charge the customer $9.50 and pay the tech .1 .... Get the Idea!

Don't worry about your labor rate for services but what your cost is to do each service.

Tom

[This message has been edited by TomD (edited 02-25-2005).]

[asekevin]

I have a pretty nice matrix set up in excel if you are interested. Email me and I will send it

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Kevin-Honda Service Manager, TX

[mozuna]

There is somthing to say for Gross and ELR. I recently took a ford store that had a effective labor rate of 58.00 per hour with a posted rate of 85.00 per hour. After a few months we were running give or take a few bucks at 80.00 per hour. that raised the gross and it also raised the net. In fact in 2003 the store neted 51,000 in service. Through April 2004 it had a total net of 11,000 for the year. I started on May one and set records everymonth in C/P Gross and Total net ending the year with 538,000 net for service. EFL does make a diference ion both net and gross. Also the store had a ro average of .9 at the posted rate and it has a ro average of 2.0 at the psot labor rate. Your EFL rate should be with in 10 percent of your posted rate. Mine is usually pretty close to my post rate.

Miles

[CFSERVICE]

Most of the computer systems will let you use multiple labor types. This is how I track mine. Just set up lab types for maint. warranty, cp., ins. etc. This will break down your ELR for each type and give the total for all depts.Hope that helps.

[fixops]

We are a 7 store group. The last 4 acquisitions ALL had service departments that fit your issue descriptions.

The same method of grid labor was installed and the Service Advisors were trained on presentation with the emphasis on customer's perception and relationship selling. That's it.

Our effective labor rates at all our stores are consistently between 95%-99% of our door rate, and we do as much discounted maintenace as anyone else in our area. And if you get out that 20 Group measuring stick, a 90%-95% ELR of your door rate is "preferred."

In our state, we must show a discount as a separate line at the bottom of the invoice. I've done it both ways, before it became mandatory and there is literally no difference in gross, GP% or ELR if you have everything else in place and are using an effective grid.

Grid labor rocks. But it will only rock if you have rock stars using it. And the task of turning Service Advisors into believers, falls squarely on the shoulders of the Service Manager, like everything else in the store.