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FRANCHISED dealers need to recruit more technicians, target increased retail work and address poor workshop utilisation to stop the erosion of overhead absorption.

Coachworks Consulting said a continued failure to address overhead absorption is causing long term financial damage to many businesses.

Managing director Karl Davis said: “There is an institutionalised acceptance of low overhead absorption. At a time when car sales margins are under such pressure, profits from aftersales are being eroded by poorly managed workshops.”

Davis said dealers are typically achieving absorption levels between 50-60%; well below the 80% benchmark set by most car brands and networks.

“Across far too many groups we are seeing aftersales gross profit being compromised by a weakening of the mix of work towards internal and warranty, when increased capacity and efficiency needs to be created around optimising retail work.” 

A site’s ability to achieve higher overhead absorption can often be addressed by recruiting an extra technician.

Davis added: “Too many dealers under-resource their workshops and fail to capitalise on the potential offered by their local car parc.

“Our experience of working with many different car brands and dealer networks, shows an extra technician only has to work 20% of their time on productive matters to cover their cost; everything over that is profit.

“Although this is widely known and understood by dealer managers, many are still failing to make this investment”

Sytner Group’s Mission 100, to target 100% absorption across its business within the next two years, is a process which will see an increase in technician numbers.

Davis said: “Sytner’s target is bold and backed with investment in people, when other groups are cutting headcount whilst ignoring untapped opportunities to sell more retail hours.

“The group’s commitment to attracting the best people, developing them and reducing staff churn should be considered as a benchmark for others to follow.

“So much more can be done to keep technicians focussed on productive work. They should not be expected to jockey cars around, queue for spare parts or get bogged down in administration.

“Targeting improved workshop loading with a greater retail content and vehicle health check optimisation should be a priority for every leadership team and will help break our sector’s institutionalised acceptance of low overhead absorption.”

 

 

 

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