Managing Capacity

Summer is in full swing, and most shop owners have been experiencing steep surges in customer traffic. However, if not prepared-for and controlled, this increased business may not actually help the profitability of the shop. Being busy is not as important as how you are being busy.

Increased customer traffic that comes as a result of seasonal changes often leads to shops experiencing a disruption in the routine processes in the flow of their work. That may result in overworking of staff, reduction of shop efficiency, and less customer satisfaction.

In addition, while the shop could experience an increase in sales, it could see a decrease in profits, a decline in shop morale, and a sharp drop in business over subsequent months. That sharp decline is often attributed to the shop’s inability to maintain its routine inspection process and follow-up procedures.

So where do these capacity management problems stem from?

When you try to exceed shop capacity, the problems begin. Shop capacity is not defined as the number of vehicles you can process in a day. It is the total number of billable hours that your shop can consistently produce in that day.

For example, if you have three technicians each capable of billing nine hours a day, your capacity becomes 27 hours per day.

That level of production will vary depending on many variables; however, for purposes of this example, we will use 27 hours. That 27 hours should be spread out over many vehicles, and our objective is to average 3.0 hours per vehicle.

Using that benchmark, the service advisor in a fairly efficient shop would take in nine vehicles. If the overload caused by predictable season changes brought the number of vehicles up to 18, the hours-per-vehicle would drop to 1.5. That means the service advisor and technical team would have to handle twice as many vehicles to achieve the same capacity.

In essence, the more vehicles, the less time we have to devote to each customer and to each vehicle, thereby quickly reducing our efficiency, profitability, employee satisfaction, and customer satisfaction.

Ultimately, an excessive number of vehicles will actually cause so much inefficiency that the shop’s capacity will be reduced. Imagine what the shop would be like if the team took in 27 vehicles. We refer to those types of shops as a zoo.

Come back next time to find out how to best manage these busy times, and turn them into a smooth flow of profitable business revenues.

Written by RLO Training