Fixing the Dysfunctional Service Team - Part 2

Let's look at some more key areas to improve service team performance.

Quoting

Effective quoting is vital to an efficient service team. Three things are critical here. You must have

1. Up-to-date supplier pricing in your inventory system
2. Accurate diagnosis and fault assessment
3. Clear communication with the customer

Keeping your supplier's parts pricing up-to-date means quotes can be done quickly and the job can be priced immediately based on pricing rules as each line item is pulled into the quote. All pricing should be automated and based on internal policy set by management.

When an accurate fault assessment is completed, estimated time taken to complete the job can be entered into the quote. It's recommended that the quote is assessed for value-for- money.And if not, a discussion could take place with the sales team as to whether or not this is an opportunity to upsell rather than repair only.

Informing the customer in a timely manner of the quotation details allows for a quick decision to be made so your time can be recovered sooner. This is also important in meeting your customer service standards and should be measured against a quote turnaround metric.

CLICK HERE TO VIEW A SHORT VID ON OSTENDO'S JOB QUOTING FEATURE (3 mins)

Planning and Resource Allocation

Job Scheduling boards are a great tool that allows service coordinators to allocate jobs to resources (technicians). Simple drag and drop functionality is common in a good scheduling systems which provides visibility to the service coordinator enabling them to swap out and juggle jobs where competing priorities exist.

Resource Loading boards are a more complex planning tool for larger service teams. Capacity Loading boards provide the ability to forecast labour capacity loading across the service team. This is often referred to as Constraint Scheduling.

When looking at labour resource, we often consider this resource to have infinite capacity. This is because we can typically ask employees to work overtime or obtain casual labour to increase capacity in the short term to meet a job's required date.

Specialised equipment such as a machine used to test or diagnose would have a finite capacity, meaning it can only do one job at a time and is likely to be constrained by normal work hours in a day.

Cost Recovery

Understanding your real costs is paramount to a profitable service division. Where Management are utilising spread sheets to determine the real cost of a job, the information is often out of date or difficult to ascertain as the data required is not available.

Keeping your stock of spare parts up- to-date with current supplier pricing is paramount to maintain job profitability. Putting pricing rules in place that automatically mark up the cost price based on the receipt cost ensure parts allocated to jobs are accurately priced and achieve minimum gross margin.

Consideration should be given as to whether or not you have an Inspection Fee or you absorb the cost within your charge rate. If you decide to absorb the costs then your overhead recovery cost per hour needs to include the cost of lost quotes, not just the quotes you expect to win. For example if you expect to do 1500 quotes a year (Avg 6 per working day) and each inspection / quote takes an average of 30 min then you need to build into your technician(s) standard cost to recover 750 hours of quote time, i.e. all quotes, not just the ones you win.

Let's look at an example of this in detail:

Technicians:     4
Direct Cost:     $30 per hour

Quoting is performed by two of the technicians and the cost is allocated to a non-charge timesheet code with a direct and variable cost recovery only. (i.e. 30*1.36)
Variable Cost: 36% (Leave, Leave Loading, Super, Payroll Tax, Workers Compensation)
Recoverable hours based on 90% productivity:((52weeks-4weeks)*40hrs*90%*4 staff)-750hrs quote time = 6,162 ChargeableService Hrs
O/H recovery: ((30*1.36)*750)/6,162 = $4.97 per hour
Standard Labour cost for Service Labour: 30+36%+4.97 = 45.77 Standard Cost per hour

Based on an ex GST $95 service charge hourly rate you would expect a gross margin of 51.8% per hour. Note this does not take into account other overhead recoveries such as the cost of specialised equipment and other direct costs you may be able to recover.

It is important to review your labour standard costs annually and assess them inline with your current charge rates. Market forces may dictate whether or not you can increase charge rates to maintain margins as wage costs increase.