Service KPIs/ Metric calculation-Formulas
Hours Related.
Maurizio Bonacchi Caterpillar Geneve 1
Hours Related.
• General formulas: Technician Productivity- TP% TP% CAT Goal
=>85
Revenue + Interdepartmental +Warranty + CSA
TP%=
Revenue + Interdepartmental +Warranty +CSA + Policy+Redo +Lost Time+Training
Billable Hours/Productive hours Non - Chargeable Hours
Hours Worked
Hours Related.
• General formulas:
• Calculation of %: Labor utilization or Productive Hours, Expenses hours &
Allowed hours e.g.:
Billable or Total hours –[Allowed hours + Rework hours + Policy hours
Productive hours=
+ Lost Time hours + Training hours]
Productive hours
Total Productive hours
or Labor % = Dealer Goal
utilization Total Hours (Potential/Real)
Expenses Total Expense hours
hours = Dealer Goal
% Total Hours (Potential/Real)
Allowed Total Allowed hours
hours = Dealer Goal
% Total Hours (Potential/Real)
Maurizio Bonacchi Caterpillar Geneve 2
Hours Related.
• General formulas:
• Calculation of %: Always the denominator will be Hours worked =
Billable hours + Non Chargeable hours e.g.:
Non Chargeable Total Non-Charg hours
Hours % = CAT Goal =<14%
Hours worked
Technician Total overtime hours
Overtime = Goal depend on
% Hours worked
each country
Travel Total travel hours it depends on the
hours = Hours worked geography of each
% country and the
coverage, <=20% is
recommended
Hours Related.
• Specific formulas:
• Calculation of hours weight %: Always the denominator will be total
specific reference hours and numerator will be an specific hours to
weigh e.g.:
Specific hours Total specific productive hours
weight % =
Total productive hours
External customers (included CSA) >=65% vs.
Interdepartmental customers. In the case of CRC the
hours are interdepartmental because they work for
MARC & TM&R Contracts
Non-Chargeable travel Non Chargeable travel hours Dealer Goal,
Hours weight %= important metric to
Total travel hours be used in the Km or
radius calculation
Maurizio Bonacchi Caterpillar Geneve 3
Hours Related.
• Specific formulas:
• Standard jobs hours deviations: (Forecast vs. Actual)
• Is the deviation between Standard Job Hours, or Hours specified for
the work to be completed, & Hours Work on the Standard or Hours
actually worked on a Standard Job.
Standard Standard job hours – actual hours work on standard
jobs = _____________________________
hours Standard job hours
deviations
Negative result: indication of work hours increment vs. standard
Positive result: indication of work hours reduction vs. standard
Normal deviation +5% and -5%
BUSINESS TOOLS FOR SERVICE MANAGERS
Service Quality Related.
Maurizio Bonacchi Caterpillar Geneve 4
Service Quality Related.
Specific formulas: REDO-Rework-Service after sales labour warranty
Calculation
Cat Goal TOTAL REDO (€)
% REDO vs. Service Sales =
=< 2% TOTAL SERVICE SALES (€)
TOTAL REDO (Hours)
Cat Goal Hours REDO vs. Hours Worked =
=< 2% TOTAL HOURS WORKED
TOTAL UNITS* FAILED
Cat Goal REDO Quality Index =
=< 4% * SAME TYPE TOTAL UNITS* REPAIRED
BUSINESS TOOLS FOR SERVICE MANAGERS
Marketing Related.
Maurizio Bonacchi Caterpillar Geneve 5
Marketing Related.
Cat Goal :
PSTS/SDCAL: All parts through Service Europe >=55%
AME=>33%
Total Dealer Parts
Part/prod hour: Specific parts through Service (@ DN) Dealer Goal
Specific productive hours
BUSINESS TOOLS FOR SERVICE MANAGERS
Warranty Related. Caterpillar
Maurizio Bonacchi Caterpillar Geneve 6
Warranty Related. Caterpillar
• General formulas:
• Calculation % of: Warranty recovered rate % or Warranty performance %
Warranty cost or residual warranty cost & Warranty hours.:
Warranty recovered Total settlement amount or Total Paid CAT Goal
rate or Warranty = 95% to 85%
performance Total expected amount or Total Claim
Dealer
Total settlement amount or Total Paid Bench
Warranty cost % = 100% - 40%
Total warranty cost to
50%
Dealer
Warranty hours Total warranty productive hours (travel excluded) Bench
distribution % = 15%
Total productive or billable hours to
12%
Mix
Warranty cost as Total warranty cost warranty
cost
% of sales =
=<2.5%
Total Sales of Prime Product *
BUSINESS TOOLS FOR SERVICE MANAGERS
Work in Process or Service Inventory Related.
Maurizio Bonacchi Caterpillar Geneve 7
Work in Process or Service Inventory Related.
• Specific formulas:
((P,L,M) cost to be Invoiced for the month– Cash Advance) x 30 days
WIP (Days) =
Total cost of sales (P,L,M) for the month CAT Goal =<15 days
Hours to be invoiced x 365 days CAT Goal
WIP (Days)=
Hours Invoiced last 12 months =<15 days
WIP (Days)= Hours to be invoiced x 30 days CAT Goal
Hours Invoiced =<15 days
Note: Parts will be accounted when they are in the shop, the parts that
are not in stock should not be accounted
Work in Process or Service Inventory Related.
Control Work in Process
Carrying cost
Interest = (Average cost found pending to be invoiced – Cash Adv) x annual rate %
W.O/ Quantity of Work Order open & closed in the month
Admin =
Pers. Quantity of administrative person dedicate to Invoice
W.O/ Quantity of Work Order open & closed in the month
day/Pers.=
Quantity of administrative person dedicate to Invoice X Monthly Working days
Maurizio Bonacchi Caterpillar Geneve 8
BUSINESS TOOLS FOR SERVICE MANAGERS
Service Statement Related (operational calculation) .
Service Statement Related (operational calculation).
• General formulas:
• Gross profit %: Always the denominator will be total service sales
Gross Profit = Total service sales – Cost of sales
Gross Profit Total gross profit
%= Dealer Goal
Total service sales
• Cost of sales/Direct Expense %: Always the denominator will be total service sales
Cost of Total cost of sales
sales % = Dealer Goal
Total service sales
Direct Total direct expenses
Expense % = Dealer Goal
Total service sales
Maurizio Bonacchi Caterpillar Geneve 9
Service Statement Related (operational calculation).
• Specific formulas:
• Calculation of sales weight %: Always the denominator will be total
specific reference sales and numerator an specific sales to weigh
e.g.:
Specific sales Total specific sales
weight % =
Total services sales
External customers (included CSA) >=65% vs.
Interdepartmental customers. In the case of CRC the
hours are interdepartmental because they work for
MARC & TM&R Contracts
Service Statement Related (operational calculation).
• Specific formulas:
• Calculation of All type of Profit:
e.g.:
M.A.E.H = Service Sales – Cost of Sales – Expenses Hours (At labor cost rate)
P.A.D.E = Service Sales – Cost of Sales – Expenses Hours – Direct expenses
M.A.E.H P.A.D.E
M.A.E.H%= P.A.D.E.%=
Service Sales Service Sales
CAT Goal
=>15%
Maurizio Bonacchi Caterpillar Geneve 10
Service Statement Related (operational calculation).
• Specific formulas:
• Average labor and cost rate per hour: Always the denominator will be
total specific referenced hours and numerator will be total specific sales.
Average Total specific sales
specific rate/hour =
Total specific productive hours
Average
Specific rate cost/hour =
Total specific cost of sales
Total specific productive hours
Service Statement Related (operational calculation).
• Specific formulas:
• Calculation of labor sales & cost variance %:
e.g.:
Labor rate sales Realized labor sales rate – Published Av. labor sales rate
variance % =
Published Av. labor rate
Labor cost rate Published Av.labor cost rate – realized labor cost rate
variance % =
Published Av. labor cost rate
Maurizio Bonacchi Caterpillar Geneve 11
Service Statement Related (operational calculation).
Specific formulas: 1 Technician labor cost rate/h. and 2 Technician
standard labor cost rate/h.
Labor Annual salary costs for a group technicians
cost = _________________________________________
1
rate/h Total annual service hours for a group technicians
Labor Annual salary costs for a group technicians + Specific cost of supplies
cost = ___________________________________________
rate/h 2 Total annual service hours for a group technicians
Service Statement Related (operational calculation).
Specific formulas: Technician labor cost rate/h. and Technician standard
labor cost rate/h. Price calculation
Labor Labor group cost rate/h
sales =
rate/h (1- % of margin per hour )
100
This% additionally it should contain the discount % (if this policy exist).
Maurizio Bonacchi Caterpillar Geneve 12
Service Statement Related (operational calculation).
•Specific formulas: Total Labor cost or Break even rate per hour. (Forecasted)
Break Total Service cost after indirect expenses and before interest and taxes
Even = _________________________________________
rate/h Total productive or Billable service hours
Billable = Total Hours– Hours of (Allowed +Redo +Lost Time + Training+Policy)
hours (Potential/Real)
Dealer % 2% 8% 4% 1%
Labor Break even rate rate/h This additionally
sales = % it should
rate/h (1- % of profit per hour ) contain the
100 discount % (if
this policy exist).
Service Statement Related (operational calculation).
Specific formulas: Realized Total Service labor cost/h or Break Even rate/h
Break 3
Total Service cost after indirect expenses and before interest and taxes
Even = _________________________________________
rate/h Total productive or Billable service hours
Break Total technicians' wages cost (dealer cost)
_________________________ 3 = A + B + C
Even =
rate/h A Total productive or Billable service hours
Break Service direct expenses (without technicians expenses) A Constant Value
Even = _________________________
rate/h B Total productive or Billable service hours B Variable Value
Break Service indirect or allocated expenses C Variable Value
Even = _________________________
rate/h C
Total productive or Billable service hours
Maurizio Bonacchi Caterpillar Geneve 13
Service Statement Related (operational calculation).
Specific formulas: Standard cost of sales deviations or cost of sales variance
Standard Standard cost of sales – actual cost of sales
cost = _____________________________
of sales Standard cost of sales
deviations
Negative result: indication of cost of sales increment vs. standard cost of sales
Positive result: indication of cost of sales reduction vs. standard cost of sales
Normal deviation +5% and -5%
BUSINESS TOOLS FOR SERVICE MANAGERS
Service Capacity or Manpower Related.
Maurizio Bonacchi Caterpillar Geneve 14
Service Capacity or Manpower Related.
• General formulas:
• Calculation technicians (Capacity)
Quantity of Productive hours increment or opportunity hours
technicians =
[(Regular Productive hours/Tec + Overtime
Productive hours/Tec) +/- % of YOY expenses
hours change]
Note: the +/- % of YOY expenses hours change is the annual variation of
the exp hours that affect the productive hours. it is recommendable to
calculate the CAGR% of the last 5 years
Service Capacity or Manpower Related.
• General formulas (cont.): Method 1
• Calculation technicians (Capacity)
Total specific parts sold through service
Specific Parts /=
hour [Total annual specific productive or Billable hours]
Specific parts opportunity through service or Part growth
Billable hours =
[Specific Parts / hour ]
Quantity of Productive hours increment or opportunity hours
technicians =
[(Regular Productive hours/Tec + Overtime
Productive hours/Tec) +/- % of YOY expenses
hours change]
Maurizio Bonacchi Caterpillar Geneve 15
Service Capacity or Manpower Related.
• General formulas (cont.): Method 2
• Calculation technicians (Capacity)
Total annual hours Annual Billable hours increment or opportunity hours
opportunity =
Annual Labor utilization %
Quantity of Total hours opportunity X Actual technicians
technicians =
[Actual total service hours]
Service Capacity or Manpower Related.
Method 3
Conversion of Flat Rates sales into hours. (only labor)
Flat Rate sales - Flat Rate sales x Flat Rate Gross 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 Gross Profit %
Billable hours (TM)=
[T&M Realized labor cost rate/ hour ]
Maurizio Bonacchi Caterpillar Geneve 16
Service Capacity or Manpower Related.
Method 3 (cont...)
Conversion of CSA sales into 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 Gross Profit %
Billable hours (SP)=
[SP Realized labor cost rate/ hour ]
Service Capacity or Manpower Related.
Method 3 (cont...)
Total Billable hours from sales = Σ hours of FR + T&M+ CSA + SP + etc
Method 1 (Standard)
Quantity of Productive hours increment or opportunity hours
technicians =
[(Regular Productive hours/Tec + Overtime
Productive hours/Tec) +/- % of YOY expenses
hours change]
Maurizio Bonacchi Caterpillar Geneve 17
