Impact Analysis 1:
Overall System Impact & Cost Justification
This page contains a detailed worksheet which analyzes the
economic impact of deploying ServiceShop into a shop where no
other shop management system is currently in place, or a shop
management system is in place which lacks core ServiceShop
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, ServiceShop "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 ServiceShop 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 ServiceShop
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 |
|
