# KPI Guide - Service Department

### Sales Mix %

Calculation: Total Sales of Type ÷ Total Service Labour Sales

What does it measure: The contribution of each sales type towards the total labour sales of the service department.

Why is it important: Indicates where the department sales are coming from. The service department should be primarily retail focussed.

### Relative Service Size

Calculation: Retail labour Sales ÷ No. of New Retail Units Sold incl. Fleet

What does it measure: It is a useful starting indication of customer retention at the dealership as it measures service operations relative to vehicle volume.

### Unapplied Time (% Labour Cost of Sales)

Calculation: Unapplied Time ÷ (Labour Sales - Labour Gross Profit1)

What does it measure: Measures the direct cost of unapplied time as a percentage of the total cost of labour. It is inversely proportional to labour gross sales results.

Why is it important: It is useful in reflecting workshop loading, utilisation and customer retention.

### Chargeable to Non-Chargeable Ratio

Calculation: No. of Chargeable Employees2 ÷ No. of Non-Chargeable Employees3

What does it measure: Indicates the mix between chargeable and non-chargeable employees in the department.

Why is it important: If this figure is low (say compared to benchmark), it may indicate that there is more opportunity to bring on chargeable service employees.

### Labour Sales per Chargeable Employee

Calculation: Total Labour Sales ÷ No. of Chargeable Employees

What does it measure: The amount of labour sales revenue generated on average for each chargeable employee employed by the department.

Why is it important: Indicates how effective the service advisor is at generating sales for the workshop given the level of staff available to complete repair orders.

### Labour Gross Profit per Chargeable Employee

Calculation: Total Labour Gross Profit1 ÷ No. of Chargeable Employees

What does it measure: The amount of labour gross profit generated on average for each chargeable employee employed by the department.

Why is it important: A starting point for indicating productivity, efficiency, booking correctly, mix of work, prime cost and labour rate. For example, if this KPI is low, a service advisor should investigate if technicians are being booked onto the repair orders appropriate to their level of skill or training. Low values for this KPI indicates that the department may be unproductive and/or inefficient and will struggle to remain profitable.

### Parts to Labour Ratio

Calculation: Total Workshop (Service Retail) Parts Sales ÷ Total Retail Labour Sales

What does it measure: The ratio of workshop parts revenue to retail labour sales i.e. for every dollar of retail labour generated, how much parts revenue was also generated.

Why is it important: Indicates how efficient the service advisors are at selling parts. It also provides an indication of the level of cooperation between the parts and service department.

### Parts and Service Absorption

Calculation: (Parts Department Gross Profit + Service Department Gross Profit) ÷ Total Dealership Expenses*
*Excluding variable expenses in the new and used vehicle departments.

What does it measure: The contribution of the parts and service operations to negating the fixed costs of the dealership, providing stability during fluctuating sales demand

Why is it important: It depicts how vulnerable the dealership is to fluctuating demand for car sales. That is to say, to what extent does the income from the back end cover the fixed expenses of the dealership should there be no vehicle sales in a month. The higher the absorption rate, the easier it is for the dealership to trade profitably during periods of weak vehicle demand.

### Productivity

Calculation: Hours Clocked ÷ Hours Available

What does it measure: The amount of technician time that has been clocked onto a job as a percentage of the total available technician time.

Why is it important: If low, this could mean:

• There is not enough work in the service department
• The process of booking repair orders may not be effective
• Are there issues with clocking and potentially billing?

### Efficiency

Calculation: Hours Sold ÷ Hours Clocked

What does it measure: The amount of technician time that was able to be billed to a customer as a percentage of the total time they were clocked onto jobs.

Why is it important: If low, this could mean:

• Are the right technicians getting the right work to their skill level?
• Are there issues with discounting or costing at the front counter?
• Are there diagnostic issue in the service operations?
• Are the technicians and workshop staff motivated?

1Labour Gross Profit includes unapplied time.
2Chargeable employees are qualified technicians and apprentices. In ProfitFocus reports, apprentices are apportioned at 25%, 50%, 75%, 100% of a headcount for 1st, 2nd, 3rd and 4th year apprentices respectively.
3Non-chargeable employees include service managers, foreman, service advisors, non-chargeables.