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There are only 10 ways to improve Service Department profitability.
Labor Sales and Net Profit are not an element, but a result. To improve these results, we must look upstream at the elements that control change.
These ten ways to improve service department profitability have been divided into two parts, or “Fundamentals,” for a reason.
In the Service Department, we sell labor hours! “Nothing happens until a technician picks up a wrench!”
Fundamental #1 is Production Capacity. Labor rates and gross profits mean nothing until labor hours are produced. Fundamental #1 is about all of the components that cause billable labor hours. This fundamental includes 5 Production Elements, that cause labor hours to happen. These 5 elements are the stepping stones that produce, sellable, flat-rate-hours
Fundamental #2 is Production Conversion. In Fundamental #1, we calculate and determine the number of production hours (inventory) that are likely to be sold from the daily labor time-bank inventory. While production hours are the lifeblood of the service department, we cannot spend production hours.
Fundamental #2 includes the five Conversion Elements that determine, or cause, these production hours to become sales dollars, gross profit dollars, and ultimately net profit dollars
