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November 24, 2003 01:00 AM

Low parts prices not your salvation

Dan Marinucci
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    AKRON (Nov. 24, 2003)— Lower parts prices are not, never have been and never will be an antidote for an un-productive, inefficient automotive service department.

    Tire dealers and service shop operators who believe lower parts prices are the salvation of their businesses are sadly mistaken.

    First of all, there's a big difference between buying smart and getting the lowest price. With precious few exceptions, “the lowest price” means getting the cheapest quality parts. Any owner or manager at a thriving business that's been healthy over the long haul will tell you that the cheapest quality parts generate comebacks instead of repeat business. And comebacks always cost the business at least twice what you think they do.

    Second, this mantra of “lower prices, lower prices, lower prices,” seems to be indelibly etched in the brains of many people—including countless owners and managers I've worked with the past 25 years. Time and again, I've seen them squeezing their suppliers for all the discounts they can get. Unfortunately, they're so busy ruthlessly chasing the lowest price that they don't see all the places where their businesses are hemorrhaging money.

    The toughest lesson for these bosses is that the perceived advantage of buying cheap never staunches this bleeding. I'm convinced that poor productivity and efficiency are the two most common and most serious “wounds” bosses overlook. For many people in the auto repair business, it's infinitely simpler to beat up parts suppliers than it is to understand the essential and fundamental concepts of productivity and efficiency.

    Productivity is the relationship between available labor hours and the labor hours your store actually sells. Let me cite simple numbers here. Suppose your shop has three technicians and the business is open 60 hours weekly. That means a total of 180 hours (60 hours per tech) are available every week. If you actually sell or invoice 180 hours of labor weekly, the business is 100-percent efficient.

    Automotive repair consultants I know who evaluate these numbers said the typical business they analyze is only 50- to 55-percent productive!

    Meanwhile, efficiency basically measures the tech's knowledge and ability. Efficiency is the relationship between the time actually spent fixing the car and the labor charged for fixing it. If the tech spends an hour fixing a car and you invoice the customer for an hour's labor, the tech is 100-percent efficient. Ideally, a tech should be at least 100-percent efficient on every repair job.

    Now let's apply this to the boss who believes that paying the lowest price for parts is the sine qua non (Latin for “that without which”) for a successful business. Lowest-price parts always take priority over all other issues. Consider the tech who misdiagnoses a job and needlessly replaces a starter. Because the starter is difficult to reach, the job takes two hours. However, replacing the starter doesn't fix the car.

    OK, both productivity and efficiency are presently a big, fat zero because you can't charge for a car that still doesn't start. Plain old ignorance caused the misdiagnosis. The boss is too obsessed with rock-bottom parts prices to see the need for good equipment and ongoing training.

    Next, consider the all-too-common scenario where ignorance prompts the service department to try another starter. The tech spends another two hours wrenchin' away, but the second starter doesn't fix the car. Did this fiasco cost him and the store two hours? No, it cost them FOUR hours—twice what they suspected.

    The true penalty was four hours because it actually took two hours of wrenchin' to change the part. But that time also represents two hours he should have been spending on another, profit-earning job. Remember that your business has a limited amount of hours it can sell every week. Profitable businesses maximize that time.

    So replacing a part in vain penalized you four hours of productivity efficiency this time. Take a legal pad and a calculator and closely track how much time your service department is “bleeding” per week. If you have the fortitude to study it, the numbers are really scary once you see them on paper, aren't they?

    Maybe it's time you stop battling your suppliers to get $9 brake pads and $22 starters. Instead, concentrate on the smart shop layout, modern equipment and training that boost and maintain productivity and efficiency—and maintain it over the long haul. Stop the bleeding and tell me if it feels better.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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