Managing shop supplies is a critical part of expense control within a Service Department operation.
Shop supplies should be categorized into three areas:
• Supplies used in the disassembly and assembly of a component
• Supplies used in the rebuilding of a component
• Supplies used in the clean-up of the shop
Supplies used in the disassembly and assembly of a component are critical in rebuild quality of the component. The types of supplies that would fall into this category would be degreaser, paint remover, surface conditioning material such as grinding and buffing disc, and drill bits.
Supplies used in the rebuilding of a component would be considered a requirement in the actual rebuilding of the component. The types of supplies that fall into this category would be liquid gasket material, sealant, paint, and hardware.
Supplies used in the clean-up of the shop that fall into this category would be floor clean, cleaning materials used to clean the shop work benches, mops, brooms and shop towel.
The first two categories should be billed directly onto the work order to the customer. These parts should be purchased through the Parts Department that provides the opportunity for the normal parts mark up and profit margin.
Typically the Service Department will earn a smaller margin when charged as part of a shop supplies markup.
The third category should be billed as the shop supplies on the work order as part of a recovery based on a percent of the overall work order.
Very often Service Departments' apply a shop supply charge for all three categories. This method limits the opportunity for the dealership to earn normal parts margin on parts that would typically be charged as part of any rebuild. When this is done the dealership looses out two ways. First, the dealership has lost parts margin, and secondly the customer will very often critic the invoice and adjustments may be made to the work order to address the customer’s concerns.
The net impact is the dealership has lost the opportunity to recover the shop supplies that are typically used during the component rebuild. This is an unnecessary loss of revenue and profit.
Saturday, March 20, 2010
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Shop supplies management is very important.
ReplyDeleteAn area that gets over looked for supplies is the welding/machining repairs. In these economic times, salvage repairs has gained speed as well as a viable option for customers. The supplies used are not traditional supplies, but can be expensive based on the scope of work and complexity of repair.
ReplyDeleteJ
Capturing these supplies can be challenging to collect as most customers understand this is part of doing business, but necessary do not agree with the price being charged.
ReplyDeleteI have tried both presenting on the invoice in detail and or making these part of the labor rate.
There are truly less challenges making these part of the labor rate in the collection of the invoice. To execute these transactions a solid process and automated billing system must be in place as automation is the key to recovering these $'s. Think of this as a 401K plan, set your percentage and or margins and the system can transfer recoveries in recovering your shop supply expenses.
I have seen a change in the suppliers providing more options relating to quantity packaging. Example: In recent past you could only purchase a 5-6 oz. bottle of loctite, then charged to the customer with only using 1-2 ounces of the product. Today suppliers offer products for smaller repairs, resulting in better pricing for the repair at hand and improved customer acceptance levels with invoicing.
We no longer have large customers with large fleets that are comprised on large equipment. We have customers that specialize in many construction endeavors, which require a full range of both large and small equipment fleets. So in-turn need shop supply options to support a full range of equipment needs.
J