Greenwood: The Shop Labor Mix

How the evolution of vehicle technology will change our current method of measurement.

The advancement of vehicle technology will make a dramatic difference in measuring a typical service shop business, and the aftermarket must relearn its measurements.

In previous articles, I’ve written that a typical shop owner will require six to eight days of management training per year moving forward. This measurement of labor is just one of the changes that will have to take place because the old way will leave money on the table.

As commodity margins decline and vehicle software expands, everyone must understand where a shop’s managerial attention should be directed. And a redefined labor measurement will take place within the next one to three years.

Over that period, the maintenance-labor category will be pure maintenance work based on the manufacturers’ recommended service intervals and repairs of worn-out or broken parts.

Diagnostic labor will consist solely of analyzing a situation or interpretation of information, e.g. what is the problem, what caused it and what is the solution?

Calibration labor will emerge as a new category, because lining up the sensors after a repair will become an additional specialty skill.

Also, it will be even more important to understand software platforms. Going from 100 million lines of software to 500 million lines in an average vehicle represents a dramatic change, and as the amount of software increases, understanding it will be the new normal.

The key question will become: “What will the mix of each labor category be within the shop?” This fact reinforces the importance of key efficiency measurements for each category, as they will require specific training. As will making sure the shop has the correct team skill sets to ensure professional execution of client services.

The efficiency measurement also will help establish the billed hours per repair order and the required “vehicle count” that the shop needs. Gauging the “effective” rate will be critical in the labor-mix measurement. How much labor should you get from each labor category to justify the staffing level?

Another change will be how we set labor rates for each category. Labor rate multiples will shift from what they are now – based on the technicians’ hourly wage – to working with the individual shops’ actual total cost per billed hour.

Better job-quoting techniques will have to account for a new knowledge of how a job must be accomplished and what sort of labor is involved to complete the job. Personnel development and business measurement will become more intertwined because all these factors will affect the business’s net profit.

Industry changes will require a more highly developed competency among technicians to fix and maintain a vehicle properly. And imagine the client re-education that will be needed so they’ll understand what’s required to fix it. This will be a skill set all its own.

So what will happen to the shops that don’t have a learning culture? Time will not be on their side. As a professional shop you must stay ahead of the curve by seeking out the knowledge you’ll need to keep the business moving forward.

Hold on for the ride over the next three years. It will be a great one for the shops that get it.