A lot of shop managers, shop foremen or garage managers want to rely on a computer system to lower their costs. A computer system alone does not lower your costs. For some reason there is a magical belief that once you install the software, if the project gets competed it just fixes everything, lowers costs and you now become the master of your domain.
You know it’s easy, right? Long before the costs hit the reports, it is right in front of your face if you are looking. A computer system tracks the makeup of costs, labor applied and parts or consumables used.
In a real world situation, a client had a Cadillac software system and three guys managing the data. We refocused them, assigned them to vehicle repairs, simplified the system (still Cadillac), and cut out a million dollars in real GL dollars in 18 months.
What is the real importance of software program?
There are a number of functions of the software and lowering costs is really a byproduct of the system’s data. Here are the most important functions despite what the salesman, your boss or a corporate data freak may tell you:
1. The first and most important item is to track and schedule PM (preventive maintenance). Make sure you are tracking and performing the most important fleet maintenance tasks and that you are tracking and in compliance with Annual Inspections and what ever other periodic schedule events you deem necessary to manage maintenance. By the way, depending on the size of your fleet, a spreadsheet program works well and if nothing else, this should be used – not a “white board” on the wall.
2. The next area and most demanding function involves parts – the management of the inventory. This is where the system will no doubt pay for itself. But this is the area that needs the most discipline. Parts are 50% of vehicle costs, but without a good stocking inventory, labor becomes idle.
The most important data information to collect and maintain is:
1. Parts inventory maximum and minimums quantities for replenishment.
2. Parts usage, quantity of each part used and on what vehicle.
3. Parts purchased and who from, at what price and when.
4. Parts cost history, the ability to purchase and acquire parts and supplies at reasonable and fair pricing.
5. Vendor controls, providing you don’t abuse this power. After all, your name is associated with your power of purchase.
6. Bin locations by each part should be presorted by VMRS codes.
7. Inventories shrinkage … sometimes called theft. I call it non-reportable.
8. Ability to bar code and label each part. This is valuable for receiving: 12 labels printed from receiving, so you should have 12 parts to put them on – oops … only 11 delivered in the box.
9. VMRS coding for additional sorting data.
10. Parts inventory. Taking inventory can be a grueling task and normally was really a guess that you could get away with. Those days are coming to and end.
11. Parts warranty drilled down to each part each vehicle, whatever sorting so desired.
12. Parts purchased vs parts on repair orders … 96% is a good goal.
13. Inventory turns … Obsolete parts management.
14. Purchase orders … In my opinion, the one least important is the PO piece. I am not an advocated of overcomplicating the system, burdening a shop person with additional paperwork. I do, however, believe that some sort of control for purchases needs to exist, but in the simplest way possible. This is determined by the size of the fleet and the volume of parts activity. It should be simple: Complexity never lowers cost, simplicity does.
This is where sophisticated software shines, but depending on the fleet size, a well-organized parts room can operate reasonably efficient with just good shelves and boxed parts, sort of like supermarket.
Well, with a computer I can control my labor!
False, a computer never controlled any labor, only track the hours if reported. Does it put some dictator type pressure on labor? Yes and sometimes that’s needed depending on how you manage your operation.
How do you track you labor? Here are a few questions to ask yourself about your operation:
1. Do you capture 100% of your labor hours?
Payroll hours vs. repair order hours. You may be quite surprised.
2. Do you measure direct vs. indirect hours; do you even track indirect hours of labor?
Direct hours are those directly applied to working on a vehicle, piece of equipment … whatever you choose.
Indirect labors … most consider this wasted time, but that is not the case. This is labor hours applied to duties that are not directly applied to an asset. This could be cleaning the yard, fueling, mowing the grass … fixing the owner’s boat. By the way, his company, his labor! Better learn this one early in you career. Just track it. Give it a unit number, GOV1.
3. Can you compute this easily? There are manual ways to do this simply without overcomplicating the system.
4. How do you charge your labor -- burdened, hourly rate, with fringe, without fringe? In a previous article, I talked about labor, SRTs, benchmarks and comparing to someone else’s costs.
If you do not capture 100% of your labor charged at whatever you analytically choose, some percentage of your costs are off by that percentage. When you do capture the labor hours by collecting the data, software has the ability to distribute that in difference VMRS categories, providing more good data to manage. Some of those are:
- Labor costs per vehicle
- Labor cost by VMRS, brakes, cooling, engine, electrical…and so on.
- Warranty labor information
- Just plain labor distribution in any sorted area needed.
What should I consider?
The end result – the water coming out of the pipe – is a CPM (cost per mile), CPC (cost per case), CPH (cost per hour), cost per something. Despite what may be interpreted as “I said, you said,” you do not need a computer program to lower costs. It is a tool just like a torque wrench. Wheels have has been installed for years with a tire gun … most stayed on and some came off. Today an effective low cost operation verifies with a torque wrench.
It all depends of the size of the fleet and staff to assist in data management. For an average-sized fleet with little staff, you can accomplish lower costs by simply minding the store with a paper system or computer, plus MBWA (Managing By Walking Around). A large fleet with multiple locations and lots a vehicles cannot in today’s world manage the assets without a solid data strategy. After all we are not in the maintenance business, we are in the assets management business. We just turn wrenches and change oil as part of the path.
You can have a simple paper system, capturing all of the data; you can have a Chevy or Cadillac software program. These different paths all require the same thing to be the most efficient low-cost provider: Commitment to the end results.
My simple formula for lowering costs: a shop that operates like supermarket, cleanliness, decisions made like chapter 11 is on the horizon, and the simplest methods practical..