Top Metrics To Watch
Knowing how well your service department is performing in terms of issuing invoices for the work done is a critical success factor for the department.
Knowing your monthly Work in Process (WIP) or KPI score is a great gauge of the team’s performance. You must be careful, however, not to over-manage your Work in Process score, as it can lead to some terrible business decisions.
So why is WIP so important? Firstly, it is an excellent indicator of how well the service department is doing in getting work through your shop and invoicing it to your customers. If jobs are getting “stuck” in the shop too often and not being completed, you tend to see the WIP climb. Whether it is parts issues, poor communication with customers to obtain approvals, or simply a lack of a plan to get work done, this is not only detrimental to the business but also for your customers. For the business, high WIP can also mean less cash flow. You have paid the wages for the techs and purchased the parts; now, we need to get the work invoiced and payment made. Having a strong team approach to managing WIP builds a great service team.
I have seen and heard many bad stories, however, where a strong focus on a Work in Process number has created some nasty habits. A smart… sorry, a clever Service Writer can find some very creative ways to make a WIP number look better then it is, and there is nothing smart about it. I have seen service admin people remove parts at month-end to lower a WIP score. I have seen them send out partial invoices to customers even though the work is not done. I have seen them even reduce the labor rate on work orders at the end of a month to lower the WIP number, only to change it back on the first day of the following month. Although these are uncommon, you need to be watching. The most common mistake made, however, is that service rushes and makes bad decisions at the end of the month.
Almost all Service Managers have a “bad work order” pile on their desk. These are the situations in which they know the customer will be unhappy or that they have to write off a large amount of time or parts. They tend to sit way too long to avoid the uncomfortable discussion. Deal with these problem invoices quickly; they don’t get easier, and the customer is going to be more upset the longer you wait. Address the problems promptly and talk to your customer before issuing an invoice. The longer you wait, the more you will end up losing in these situations.
The second mistake made is that the service team rushes to get things invoiced and doesn’t take the time to review the work order properly. The work order is your value statement to the customer and can be where the most efficiency and money is lost when not managed properly. An invoice sent out without a a clear explanation of the work performed can lead to an upset customer. Remember, a thousand dollar repair deserves a thousand-dollar story. By rushing, key details can be missed that caused a repair to take longer than quoted but could have been charged for as the extra time was necessary. A great example is the time it takes to extract a broken bolt. Even little details, such as shop supply charges or parts that are missed in invoicing, can be caught if the time is taken to review a work order properly. So, don’t rush to close work orders just to get a good WIP score, do the job right.
If your Work in Process is high, that can be a great thing. Old or aged work orders are the real problem in a service department. Focus on work orders older than 30, 60, and especially 90 days. Take the
time to manage the work order properly and send out a clear invoice to your customers.
There is so much value in a properly managed work order. Take the time to do it right.
Article Written By: Scott Brigden
SCOTT BRIGDEN is a trainer with NAEDA’s Dealer Institute. Prior to joining DI as an aftermarket specialist and trainer, Scott held various training leadership positions across several dealerships in Canada, and he currently manages a truck repair shop. He looks forward to helping dealers succeed by improving their parts and service operations.
TOP METRICS TO WATCH is an ongoing feature brought to you by the association’s Dealer Institute to help dealers better understand key performance indicators and industry metrics to effectively manage their businesses.
