Automotive and Truck Repair Shop Software
 

 

Impact Analysis 1: Overall System Impact & Cost Justification

This page contains a detailed worksheet which analyzes the economic impact of deploying Service2000 into a shop where no other shop management system is currently in place, or a shop management system is in place which lacks core Service2000 features, such as its integrated resource-based work scheduler, integrated time management, and integration to a comprehensive accounting system. This worksheet is based on assumptions, all of which are documented below. Even if you do not feel that any one particular area of the worksheet applies to your business directly, many other areas probably will. And even if you discount as much as 75% of the increase in gross profit gain suggested by this worksheet, you still have enough left over to cost justify the system.

In many instances this calculation is based on the concept of "recovery" - for example, Service2000 "recovers" lost labor time by making both the technicians and the service advisors keenly aware of the amount of actual job time being spent, and providing the service advisor with accurate, actual job time immediately, such that it can be taken into consideration when billing out the final invoice.

In other instances, the calculation is based on gains in gross profit, or gains in sales. In instances where there is no accurate way to assign a value, a question mark appears. You may wish to assign your own value. You are encouraged to do this. The final result of this exercise is a rather impressive calculation of the increase in gross profit that Service2000 can cause on a per technician basis, per day and per year. Be sure to multiply this number by the number of technicians in your shop to get the total result.

Typical Gross Profit Recovery Resulting From Service2000 Control Mechanisms

Business Condition Control Mechanism Typical Recovery Daily GP$ Annual GP$
SERVICE        
Under/Overbooking Scheduling System 0.5 Billable Hrs/Tech/Day $14 $3240
Unbilled Labor Hours Time Management 1.0 Billable Hrs/Tech/Day $27 $6480
Low Job Profitability Time Management 10% GP Gain/Job/Tech/Day $20 $4704
Low Tech Efficiency Time Management 15% Efficiency Gain/Tech/Day $30 $7290
Tech Waiting For Advisor Time Management 0.5 Billable Hrs/Tech/Day $14 $3240
Tech Poor Attitude Supports Performance-Based Pay 15% Efficiency Gain/Tech/Day $30 $7290
Unbilled Service Supplies Billed Out Automatically 5% of Total Labor Sales/Day $14 $3240
Tel Auth's Not Obtained Time Management 0.5 Billable Hr/Tech/Day $14 $3240
Low Tech Eff Hurts Parts GP Monitors Parts:Labor Ratio 15% Gain In Parts: Labor Ratio varies varies
    SUBTOTAL SERVICE $161 $24,000
PARTS        
Out of Stock & Need Now Stocking Level & Reorder Points 0.25 Billable Hr/Tech/Day $7 $1620
Unbilled/Forgotten Parts Numerous Inventory Controls Recovery of  5% of Parts Sales/Day $10 $2400
Inventory Shrinkage Perpetual Inventory Control Recovery of 10% of Parts Sales/Day $20 $4800
Parts Cost Too High Best vendor & pricing alert 1% GP Gain in Parts Sales/Day $2 $470
Parts Pricing Too Low Extensive Markup/Margin Control 5% GP Gain  in Parts Sales/Day $10 $2352
    SUBTOTAL PARTS $49 $11,642
ACCOUNTING        
Receivables Out of Control Credit Limit Alert to Service Desk 30% Reduction in A/R varies cash flow up
Payables Out of Control Parts Dept Aware of A/P 15% Reduction in Inventory varies cash flow up
Untimely (or no) Profit &Loss G/L Provides Daily Profit & Loss 3-5% Increase in Net Profits varies varies
    SUBTOTAL ACCOUNTING ? ?
MARKETING        
Loss of Repeat Business Mailing & Telemarketing GP of 2% Gain in Gross Sales $9 $2256
Ineffective Ad Placement Customer Source & Zip Reports 20% Reduction in Ad Budget ? ?
My Car Is Too Old Syndrome Vehicle Cost Per Mile Reports 5% Gain in Repeat Business ? ?
    SUBTOTAL MARKETING ? $2256
OVERALL        
General Disorganization System Ties Staff Together 5% Increase in Gross Sales $47 $11,280
Employee Inefficiency System Ties Staff Together Intangible, Invaluable ? ?
Unprofessional Image System is impressive Intangible, Invaluable ? ?
    SUBTOTAL OVERALL ? $11,280
POTENTIAL TOTAL INCREASE IN G.P. PER TECH PER DAY AND PER YEAR:                          $427.61  $102,626

Cost Justification
Multiply by the number of technicians on staff to determine potential total impact. Determine monthly impact and compare to monthly cost of the system. It should be clear that the system more that cost justifies itself. While you may not experience all of these gains, the impact is always dramatic and measurable.

Typical Performance Assumptions
Meaning of Asterisked Items (appearing below) Stated Assumptions
Non-Asterisked Items (appearing below) Calculated Values
Tech Efficiency Definition  Hours Billed / Hours Worked
Available Work Hrs Per Tech Per Wk 40
Shop Labor Rate * $45
Average Hours Worked Per Tech Per Day * 8
Average Billed Hours Per Tech Per Day * 6
Average Unbilled Hrs/Tech/Day 2
Average Cost of Labor/Actual Hr * $18
Average Tech Efficiency/Day .75
Average Hours Billed/Ticket/Day 1.2
Average Hours Worked/Ticket/Day 1.6
Average Sales$/Ticket $94
Average Labor Sales$/Ticket $54
Average Parts Sales$/Ticket * $40
Average Cost of Labor/Ticket $29
Average Cost of Parts/ Ticket $26
Average Accounts Receivables * $5000
Available Bus. Days Per Year * 240
Average Tickets/Day/Tech * 5
Total On-Hand Inventory Value * $30,000
Average Labor GP$/Billable Hour $27
Average Parts GP%/Ticket * 35%
Average Parts GP$/Ticket $14
Average Parts GP$/Tech/Day $70
Parts-To-Labor Ratio/Ticket 74%
Total Labor Sales/Tech/Day $270
Total Parts Sales/Tech/Day $200
Average Total GP$/Ticket $39
Average Total GP$/Tech/Day $196
Total Sales/Day/Tech $470
Total Sales/Week/Tech $2,350
Total Sales/Month/Tech $9,400
Total Sales/Year/Tech $112,800
Recoverable Labor @ 1.0 Eff/Day $90
Recoverable Labor @ 1.0 Eff/Year $21,600

 
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