BUSINESS TOOLS FOR SERVICE MANAGERS
Service Servi ce Forecast & Budget & Techni Technicians cians forecastin forecasting g
Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget • Service Forecast & Budget • Service has several types of forecasts. •
Annual Service business Forecast & Budget. Billable & Expenses hours , Sales, Costs, Expenses, and Profit.
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Long term Service Capacity & Capability forecast. Technicians Forecast (4 to 6 years). Shop & Field Capability.
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Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget CALENDAR CALENDAR
LABOR LABOR BUDGET BUDGET DATA DATA
PRELIMINARY PRELIMINARY HOURS HOURS
PRELIMINARY PRELIMINARY STATEMENT STATEMENT
PRELIMINARY PRELIMINARY BUDGET BUDGET
RECOMMENDATIONS RECOMMENDATIONS
Analysis Analysis Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget
73 73 % % of of labor labor Utilization Utilization 1,666 1,666 Hours Hours 89 89 % % External External €18.50 € 18.50 xx Hour €18.50 Hour 1,483 1,483 Hours Hours Revenue Revenue Rev enue €27,431 € 27,431 €27,431 11 11 % % Internal Internal €18.50 € 18.50 xx Hour €18.50 Hour 183 183 Hours Hours Revenue Revenue €3,390 € 3,390 €3,390 TOTAL TOTAL LABOR LABOR SERVICE SERVICE SALES SALES €30,821 € 30,821 €30,821
SERVICE SALES
1 1 Technician Technician 8 8 HOURS HOURS xx DAY DAY 248 248 DAYS DAYS xx YEAR YEAR 15 15 % % OVERTIME OVERTIME Total Total = = 2,282 2,282 Hours Hours Available Available
TOTAL TOTAL HOURS HOURS €6,50 € 6,50 xx Hour €6,50 Hour 1,666 1,666 Hours Hours TOTAL TOTAL LABOR LABOR COST COST OF OF SALES SALES €10,829 € 10,829 €10,829
27 27 % % Expense Expense 616 616 Hours Hours
Training Training 7.2% 7.2% 164 x €6.5 € 6.5 164 Hours Hours x € €6.5 €1,068 € 1,068 €1,068
Allowed Allowed Time Time 5% 5% 114 xx €6.5 € 6.5 114 Hours Hours x € €6.5 € € 742 742
Lost Lost Time Time 8.1 8.1 % % 185 x €6.5 € 6.5 185 Hours Hours x € €6.5 €1201 € 1201 €1201
Policy Policy 3.2 3.2 % % 73 xx €6.5 € 6.5 73 Hours Hours x € €6.5 €475 € 475 €475 REDO REDO 3.5 3.5 % % 80 Hours x € 6.5 80 Hours x Hours x € x €6.5 €6.5 €519 € 519 = €519 = 1.7% 1.7%
Maurizio Bonacchi Caterpillar Geneva COST COSTOF OFSALES SALES DIRECT EXPENSES
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Service Forecast & Budget
Other Other Direct Direct Expense Expense
1 1 Technician Technician 8 8 HOURS HOURS xx DAY DAY 248 248 DAYS DAYS xx YEAR YEAR 15 15 % % OVERTIME OVERTIME Total Total = = 2,282 2,282 Hours Hours Available Available
Salaries Salaries and and commissions commissions Vehicle Vehicleowning owning//operating operatingcosts costs Advertising Advertisingand andpromotion promotion Warranty Warranty Process Process & & Administration Administration Others Others Services Services Expenses Expenses Service Service charge charge -- emergency emergency parts parts Miscellaneous Miscellaneous Employee Employee benefits benefits Travel entertainme nt Traveland and entertainment entertainment entertainme nt Other Other equipment equipment and and tools tools Communications Communications Data Data processing processing Parts Parts for for Service Service rework rework Supplies Supplies
27 27 % % Expense Expense 616 616 Hours Hours
Training Training 7.2% 7.2% 164 x €6.5 € 6.5 164 Hours Hours x € €6.5 €1,068 € 1,068 €1,068
Allowed Allowed Time Time 5% 5% 114 xx €6.5 € 6.5 114 Hours Hours x € €6.5 €742 € 742 €742
Lost Lost Time Time 8.1 8.1 % % 185 x €6.5 € 6.5 185 Hours Hours x € €6.5 €1201 € 1201 €1201
Policy Policy 3.2 3.2 % % 73 xx €6.5 € 6.5 73 Hours Hours x € €6.5 €475 € 475 €475 REDO REDO 3.5 3.5 % % 80 Hours x € 6.5 80 Hours x Hours x € x €6.5 €6.5 €519 € 519 = €519 = 1.7% 1.7%
Maurizio Bonacchi Caterpillar Geneva DIRECT EXPENSES (referred a hours) DIRECT EXPENSES EXPENSE S not referred COST a hours OF SALES EXPENSES
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Service Forecast & Budget • Service Manpower Capacity
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Long term Service Capacity & Capability forecast. Technicians Forecast (4 to 6 years). Shop & Field Capability.
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Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget • General formulas (cont.): • Calculation technicians (Capacity)
Quantity of Productive hours increment or opportunity hours technicians = [(Regular Productive hours/Tec + Overtime Productive hours/Tec) hours/Tec) +/- % of YOY expenses expenses hours change]
Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget • General formulas (cont.): Annual RT billable hours/Tec
1,500
Annual % of OT billable hours of RT
10 %
Total Billable/Tec
1,667
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Expense hours/Tec
500
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Total hours/Tec
2,167
Year Over Year ex expense hours change % (+/-)
5%
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Billable hours opportunity
100,000
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Technicians needed
63
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Quantity of technicians =
100,000 [(1,500/0.9) +/- 0.05 X 1,500/0.9) ] Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget � General formulas (cont.): Method 1 � Calculation technicians (Capacity) Total parts sold through service (SDCAL) Parts / hour =
[Total annual Billable hours]
Opportunity of parts sold through service service or Part growth Billable hours = [Parts / hour ]
Quantity of Productive hours increment or opportunity hours technicians = [(Regular Productive hours/Tec + Overtime Productive hours/Tec) hours/Tec) +/- % of YOY expenses expenses hours change]
Service Forecast & Budget � General formulas (cont.): Method 1 � Calculation technicians (Capacity) �Parts sold through service
$ 15,000,000
�Annual billable hours
100,000
�Parts (@ DN/h)
15$/h
�Annual Parts sold through service grow % �Annual Parts sold through service grow �Hours from parts/h
10% 1,500,000 100,000
�Billable hours/Tec(RT+OT)
1,667
expense hours change % (+/-) �Year Over Year ex �Billable hours opportunity
5% 100,000
�Technicians needed
63 Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget • General formulas formulas (cont.): (cont.): Method Method 2 • Calculation technicians (Capacity)
Total annual hours Annual Billable hours hours increment increment or opportunity hours opportunity = Annual Labor utilization utilization %
Quantity of technicians =
Total hours opportunity X Actual technicians [Actual total service hours]
Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget • General formulas (cont.): • Example. (Capacity)
Annual Service hours
1,021,616
Labor utilization %
64.8%
Billable hours opportunity
100,000
Total hours opportunity
154,320
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Actual technicians
415
Technicians needed
63
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Quantity of technicians =
100,000 X 415 64.8% X 1,021,616 Maurizio Bonacchi Caterpillar Geneva
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Meth Me thod od 3 •
Service Forecast & Budget
Service Sales Forecast n
Flat Rate Based Sales. n
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Time & Material Sales (Based in hours). n
n
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Special programmes. n
n
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CSA Contracts Based Sales. n
n
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Miscellaneous Sales (external providers) n
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Method Meth od 3 (cont... (cont...))
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Service Forecast & Budget
Convers Conversion ion of Flat Rates Rates sales sales into hours. hours.
(only labor)
Flat Rate sales - Flat Rate sales x Flat Flat Rate Gross Profit Profit % Billable hours (FR)= [Flat Rate Realized labor cost rate/ hour ]
Conversion of Time & Material sales into hours.
(only labor)
T&M sales - T&M sales x T&M sales sales Gross Profit % Billable hours (TM)= [T&M Realized labor cost rate/ hour ]
Maurizio Bonacchi Caterpillar Geneva
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Method Meth od 3 (cont... (cont...))
Service Forecast & Budget
Convers Conversion ion of CSA sales sales into into hours. hours.
(only labor)
CSA labor sales � CSA labor sales x CSA Labor G. Profit % Billable hours (CSA)= [CSA Realized labor cost rate/ hour ]
Conversion of Special Program sales into hours .
(only labor)
SP sales - SP sales x SP sales sales Gross Profit % Billable hours (SP)= [SP Realized labor cost rate/ hour ]
Maurizio Bonacchi Caterpillar Geneva
Method Meth od 3 (cont... (cont...))
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Service Forecast & Budget
Total Billable hours from sales = Σ hours of FR + T&M+ CSA + SP + etc
Method Meth od 1 (Standard (Standard)) Quantity of Productive hours increment or opportunity hours technicians = [(Regular Productive hours/Tec + Overtime Productive hours/Tec) hours/Tec) +/- % of YOY expenses expenses hours change]
Maurizio Bonacchi Caterpillar Geneva
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Service Forecast & Budget Both methods are similar and the results are almost the same, anyway….. The key question is “Where service finds finds the opportunity opportunity hours?” Normal possible sources: •Builder: it is a good source of the hours average for repairs before failure. •PTOS: Be careful with the parameters of calculations & Machine population explained in module 1 •SDCAL increment: It is necessary to use parts/h logic explained
•Machine SMU: based in Machine SMU and the necessary hours to repair components before failure.
•CSA: PM’s, TMR, MARC, etc. •New business: Hydraulic shop, Exchange component program. Maurizio Bonacchi Caterpillar Geneva
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BUSINESS TOOLS FOR SERVICE MANAGERS
Improving Forecast/Budget
Maurizio Bonacchi Caterpillar Geneva
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Improving Forecast/Budget
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Main areas to address n
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Gross Profit
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Labor Sales hours Forecast & Budget vs. Labor Expense hours Monthly Labor reports Labor sales Offense, Increase labor selling rate (external) Improve efficiency, reduce cost of sale Defense, Reduce expenses (internal)
Maurizio Bonacchi Caterpillar Geneva
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