In-house Workshops
Why are the majority of in-house workshops not financially viable? Some organisations will of course argue that they have a remote business or have a volume of vehicles being serviced and repaired in a well-resourced facility with technology and skills. In which case, this article will not challenge your commitment to your in-house facility.
You are in the minority and we must address why most in-house workshops are not viable. The reasons are many;
- Lack of volume
- Lack of complete job costing and a market related comparison.
- New vehicle technology and warranty requirements
- Investment needs in terms of tools, equipment and training.
- Internal administrative processes reduce vehicle availability
Let’s use the external dealer workshops as a benchmark to evaluate viability. They provide same day service and apply job cost standards for service and repair billing. The counter argument, which should be tested, is that they are too expensive when compared to in-house.
- Dealers apply job cost standards which define the billable labour hours, whereas the in-house facility will measure actual time taken. This will generally far exceed the job cost standard.
- A dealer’s labour rate is inclusive of all labour and facility costs (buildings, phones, security, and municipal services, etc.) where as an in-house facility will generally only cost labour and exclude the facility costs.
- The lack of complete costing does not facilitate a true comparison or substantiate the argument that an external dealer is far too expensive
The biggest problem facing in house workshops is the lack of volume and subsequent lack of income or expense recovery. This is compounded by outsourcing work to meet the warranty requirements of newer vehicles and specialised major mechanical repairs. In effect this can reduce workshop activity to minor repairs and the servicing of older vehicles.
In the public sector the tender process and delayed replacement timing creates an unreasonably mixed fleet in terms of age and makes. This places pressure on spares, tools, equipment, training and ultimately vehicle availability.
Vehicles with newer technologies require the use of specialised tools and equipment and the training of technicians. This investment can be significant and not cost justified. Modern workplace health and safety requirements may require further investment.
Whereas we expect and receive same day service, for all except major repairs, from dealers this is seldom the case with in-house workshops. The unavailability of parts ex stores is often a problem as they have to be ordered in. This often requires a lengthy administrative process which significantly extends turnaround times, leading to poor vehicle availability. This also applies to all outsourced work such as major mechanical repair and even tyres.
Poor vehicle utilisation is exceptionally costly as it results in an unnecessarily large fleet or vehicles not achieving service delivery requirements.
What then are the options to in house workshops?
The use of franchise dealers or specialised repairers is the best option. Labour and spares pricing can be negotiated and subject to tender requirements. The use of an independent Managed Maintenance service will strictly manage pricing and minimise the administrative process. Improved turnaround times will have significant operational and cost benefits.
There is the question of redundant staff but workshop personnel have a needed skill set in terms of vehicle operation and utilisation and can be utilised in fleet operations.
Investigate the viability of your internal workshop it may pay dividends.
Have a question?
Contact Nigel Webb - Latitude Fleet Services - nigelw@latitudefleet.co.za