Motor Industry KPI and best practice provided by Jeff Smith

A Sprat to catch a Mackerel

Jeff, I’ve written a little Bodyshop snippet for inclusion in Profit Builder, it could become a short series of articles if you and the readers are interested? Here it is.

Regards, RAB.

“Commercial Gain in the Workplace”, is this always about cutting ‘the best deal possible’, screwing ‘them’ for every last cent or can there be scope to give something away?

Think for a moment about your work providers. Do you prefer dealing with the Provider where every nut, washer or bulb is menu priced and the invoice is bounced back at you for a mistake costing less than the postage? Or perhaps you deal with an organisation with a reasonable set of operating standards. Ok, if you step out of line you get your knuckles rapped- but that’s reasonable isn’t it?

Which is it to be then? I’m sure most would prefer the second option.

Who is likely to be given the last available courtesy car when there has to be a choice, the ‘good’ customer or the s.o.a.b.? So why should your suppliers react any differently to you and what can you do positively to influence this relationship?

One major tool in your bag is discount. This has a direct affect on your supplier’s gross profit, a matter dear to their heart!

What if you offered to take half the discount they currently give you!

You’re not a complete commercial suicidal however; you have demands for this giveaway! Conditions, however, that are logical, not over demanding and actually add little if any cost to the transaction.

For example; the supplier will check the condition (particular colour, whether left or right hand, undamaged etc) of all parts, including boxed parts, before delivery.

They will only deliver a complete order unless prior agreement is made with your manager reference any outstanding part. In other words if the missing ‘bit’ stops the job you don’t want to start it, and what’s more you don’t want to pay for a load of parts sitting in your Bodyshop as opposed to their stores!

All parts will be labelled with your job number and reference. Parts will be binned, by their driver, in the correct place on delivery. The list goes on, but not and on!

In other words you will create a parts supply policy in which you have a say and teeth. As with the example of your work provider, if anything strays out of this policy you will put it right, with all reasonable costs being borne by the supplier.

Why does the discount sacrifice make sense?

Firstly somewhat like yourself and the last courtesy car, who is going to get the better service from a parts supplier? In reality, really only doing their job properly, for a much healthier margin? This in turn will pay them dividends, why deliver a broken headlight?

Where does your profit come from?

Over 63% of your gross profit comes from labour sales while being 40% of your whole turnover. Parts contribute around 18% of your gross profit again at around 40% of turnover. So what do we want to sell more of?

If we have set up a situation where our parts supply is reliable and right first time, we will considerably enhance our labour sale. In technical terms your labour utilisation will increase, you will sell more in less time, as a consequence your costs as a percentage of sales will fall and you will make more net profit!

How many times is a parts problem simply a showstopper that everyone accepts and rolls over? This way you can make the problem belong to your competition that didn’t get the last good quality part in the country!

If you would like to know more about this and other similar ideas please let me know.

Any feedback on this idea will be most welcome

Regards,

RAB Lee.

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This entry was posted on Sunday, April 6th, 2008 at 3:35 pm and is filed under Bodyshop.