Dealer Performance Indicators Guide ENG ID Version2

Dealer
Performance
indicators
ID reference guide
Version 2
Date: 10 February 2016
Changes since last version (i.e. version 1.1a)
Changes Pages
Table of contents 3
- page numbers have changed
Balanced Scorecard 4
- new
Guiding Objectives for the Key Performance Indicators 6

- updated
Delivery precision – new vehicles 15

- updated
Dealer Operating Standard (DOS) 24

- updated
ID’s Dealer Performance Indicators 2

Reference Guide
Version 2
10 February 2016
Table of contents
General Information
Introduction 4
Balanced Scorecard 5
Guiding objectives for the Key Performance Indicators 6
Glossary of terms 7-9
Customer/Market
Customer Satisfaction Index (CSI) 10
Loyalty Index (LI) 11
Market share new vehicles (%) 12
Our Employees
Employee Satisfaction Index (ESI) 13
Competence fulfilment (%) 14
Operational Performance
Delivery precision – new vehicles 15
Stock turnover rate – used vehicles (days) 16
Stock turnover rate – new vehicles (days) 17
Labour utilisation (%) 18
Labour efficiency (%) 19
Work in progress (days) 20
Workshop hours sold 21
Stock turnover rate – parts (times) 22
Service index – parts 23
DOS assessment 24
Financial
Operating income in % of sales 25
GP total truck sales (%) 26
GP workshop (%) 27
GP parts (%) 28
Aftersales receivable days 29
Return on operating capital ROC (%) 30
Sales and Administration (S & A) in % of turnover 31
Cash flow 32
Total sales revenue (against budget) [Skip this measurement] 33
Aftermarket absorption (%) 34
Other Indicators
Workshop, Parts and Sales 35-36

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Introduction
Dealer Performance Management Process
What is Performance Management?
Performance management is the activity of tracing performance against targets and

identifying opportunities for improvement of performance. The focus of performance
management is the future – what you need to be able to do and how you manage the
results. Performance-based management at any key level in the organisation ought to
demonstrate that:
 You know what you are aiming for

 You know what you have to do to meet your objectives
 You know how to measure progress towards your objectives
 You can detect performance problems and remedy them
Why is it important?
The company agenda sets challenging new performance objectives for the organisation,
from the delivery of service & results to customer & stakeholders to doing more within the
constraints of available resources through continuous improvement. Performance
management strengthens the operations and processes through proactive activities to
achieve performance improvement.
The effective performance of your organisation depends on the contributions of activities at

all levels, from top management operations to the bottom.
Critical factors for success
 Focusing on outcome that meet business objectives rather than output

 Managing performance by cascading from top and building from bottom up
 Defining and using measures that evolve over time
 Using a mix of short and long term measures
 Measuring effectiveness (doing the right things) and efficiency (doing things right)
 Acknowledging achievements of outcome
 Plan and implement strategies that can bring positive results
Who is involved?
Business and operation managers are responsible to establish objectives and Key
Performance Indicators (KPIs), set targets and manage the performance against the targets.
Frequency of measurements and reporting
Monthly and following the financial closing of the dealers.

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Balanced Scorecard
The Balanced Scorecard was established to cover Key Performance Indicators from:
 Customer / Market
 Our Employees
 Operational Performance
 Financial
Customer/Market Operational Performance

Customer Satisfaction Index (CSI) Delivery precision – new vehicle
Loyalty Index (LI) Stock turnover rate – used vehicles (days)
Market share new vehicles (%) Stock turnover rate – new vehicles (days)
Labour utilisation %
Labour efficiency %
Work in progress (days)
Workshop hours sold (total)
Stock turnover rate – parts (times)
Service index – parts
DOS assessment
Our Employee Financial

Employee Satisfaction Index (ESI) Operating income in % of sales
Competence fulfillment (%) GP total truck sales %
GP workshop %
GP parts %
Aftersales Receivable days
Return on Operating Capital ROC (%)
Sales & Administration (S&A) % of turnover
Cash flow
Total sales revenue (against budget)
Aftermarket absorption (%)

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Guiding Objectives
Purpose
To serve as early warnings to all the KPIs listed on the Balanced Scorecard. The
performance value is as follows:
 Low
Below the acceptable range of performance.
Attention is needed e.g. activities to improve need to be planned and put in to action
 Medium
Within the acceptable range of performance.
Preventive actions to be taken to improve the performance.
 High
On and above expected performance.
Needs to be maintained.
Performance Range Low Medium High
Customer / Market
Customer Satisfaction Index (CSI) <70% 70-80% >80%
Loyalty Index (LI) <70% 70-80% >80%
Market share new vehicles (%) <5% 5-10% >10%
Our Employees
Employee Satisfaction Index (ESI) <45% 46-85% >85%
Competence fulfilment % <50% 50-79% >79%
Operational Performance
Delivery precision - new vehicles <80% 80-90% >90%
Stock turnover rate - used vehicles (days) >40 23 to 40 <23
Stock turnover rate - new vehicles (days) >120 60 to 120 <60
Labour utilisation % <80% 80-90% >90%
Labour efficiency % <100% 100-115% >115%
Work in progress (days) >5 3 to 5 <3
Workshop hours sold No performance range
Stock turnover rate - parts (times) <4 4 to 5 >5
Service index - parts <85% 85-92% >92%
DOS assessment <1.5 1.6-2.5 >2.5
Financial
Operating income in % of sales <2% 2-5% >5%
GP total truck sales (%) <3% 3-5% >5%
GP workshop (%) <50% 50-60% >60%
GP parts (%) <23% 23-28% >28%
Aftersales receivables days >35 days 25-35 days <25 days
Return on Operating Capital ROC (%) <15% 15-25% >25%
Sales and Administration (S & A) in % of turnover >16% 13-16% <13%
Cash flow No performance range
Total sales revenue (against budget) Skip thi s measurement
Aftermarket absorption (%) <100% 100-120% >120%

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Glossary of terms
Financial terms
Aftermarket Absorption The extent to which the contribution of both

workshop and parts departments are able to cover
the indirect expenses which are administrative and
structural expenses of the company.
Administrative = back office expense
Structural = rental, electricity, phone bills and etc.
Contribution The profit contributed by an operating department.
Contribution Margin The contribution of a department expressed as a

percentage of total sales of the department.
Depreciation Amounts provided by the company to reflect the

reducing balance of Fixed Assets used in the
business. These costs do not involve Cash and
should be charged to the department using the
Asset.
Direct Expenses Expenses directly incurred by an operating

department e.g. personnel costs and vehicle
operating costs
External Sales Sales made to customers, which are not part of the
company.
Gross Profit The net sales value of a product or service sold

less the cost of purchase (also expressed as cost
of goods or cost of sales)
Gross Profit Margin The Gross Profit expressed as a percentage of the

Net Sales Value.
Indirect Expenses The business expenses which cannot be directly

charged to any operation department. E.g.
property costs, accounting and utilities

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Net Sales The retail sales value less any discounts given to
achieve the sale.
Operating Profit Trading profit from all sources after deduction of

Indirect Expenses but before deduction of Interest
and adjustment for Extraordinary Income or
Expenditure.
Total Sales The sum of all the External and Internal Sales
made by a dealer or department of a dealer.
Workshop operation
Actual time taken for The number of hours that the mechanics are
productive work (clocked clocked-in for a job or jobs. These are the number
hours/time) of hours considered as utilised for productive work.
Suggested tools: GDS, LDS and workshop time clock

machine
Allocated time for productive The standard time required to complete a repair or
work (i.e. VST and DAT) service operation.
Available guidelines: Volvo Standard Time from IMPACT

and Dealer Allocated Time (local input)
Available hours for The number of hours that the mechanics are
productive work available for productive work. These are the hours
when the mechanics are physically present in the
workshop.
Suggested tools: Employee punch card system, access

card swiping machine or the like. To have these hours
defaulted or updated when required to the dealer’s
management system
Invoiced Hours / Sold hours The number of hours that were invoiced to internal
and/or external customers. Invoiced hours would
usually follow the Standard Time e.g. Volvo
Standard Time (VST). Other times used for
invoicing can be Dealer Allocated Time (only when
VST is not available and Straight Time (usually
applicable for service work done as field service)
Suggested tools: GDS, LDS or any dealer management

system that opens, updates and invoices repair & parts
orders

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Mechanic’s Paid hours The number of hours that the mechanic is actually
paid. This includes time spent on training, sick
leave and vacation.
Source of information: Dealer’s income statement for

workshop operation and usually mentioned as cost of
sales
Cost of Sales (COS) When calculating the workshop’s gross profit, the
cost of sales is the mechanic’s salary for productive
time (no social costs involved).
Additional notes
These are three key performance indicators normally reviewed in a workshop operation.
The dealer management system would most likely be able to calculate all three indicators.
The use of these performance figures ensure that the workshop is utilised in an efficient
way that improves the overall operating profitability. Suggested frequency to check these
figures would depend on the line manager’s management routines.
Labour Productivity Labour Utilisation Labour Efficiency
Actual time taken Allocated time for

Invoiced/Sold hours (clocked time) productive work
Available hours for Available hours for Actual time taken
productive work productive work (clocked time)

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Customer Satisfaction Index (CSI)
Meaning
A comprehensive study conducted annually to capture a dealer’s fulfilment with customer

expectation. The CSI is based on indexes from New Truck Survey (NTS) and Truck
Aftersales Survey (TAS).
The NTS target group is a customer who has bought our vehicle within the past 2 years.
The TAS target group is a customer who has been to our workshop during the past 12
months. (Some markets use random sampling.)
Some Areas are conducting a monthly survey at dealers which is a proactive action to
improve CSI.
Source:
GFK the appointed survey consultant for International Division.
Calculation
System generated from the consultant after completion of telephone surveys with the
customers
Dealers need to ensure that the submission of customer data has accurate information
Standard
A 5-point scale is used to measure customer satisfaction. It is from completely dissatisfied,

fairly dissatisfied, fairly satisfied, very satisfied to completely satisfied.
To be number 1 in customer satisfaction, the recommendation is to reach an index of >80%

satisfaction level. The CSI level is the measurement from these scores which are “very
satisfied” and “completely satisfies scores”.
Possible actions
1. Sharing the customer satisfaction result with all dealer staff members
2. Discussing and acting on improvement plans
3. Empowering dealer staff members to be involved
4. Area/Market and Private Importers to support with coaching where required
5. Feedback & acknowledge the improvements

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Loyalty Index (LI)
Meaning
Loyalty index is part of the total customer satisfaction study from the section on New Truck
Sales (NTS). It measures the loyalty of the customers toward our new vehicle sales.
The target group for this survey is a customer who has brought our vehicle within the past 2
years.
Source:
GFK the appointed survey consultant for International Division.
Calculation
System generated from the consultant after completion of telephone surveys with the
customers
Dealers need to ensure that the submission of customer data has accurate information
Standard
Customer loyalty creates repurchases, revisits and recommendations.
The suggestion of >80% in Loyalty Index would secure a positive outcome for the company.
It is good to review this index annually.
Possible actions
1. Inform and spread the awareness of customer loyalty to all dealer staff members
2. Involve everyone to do all things right the first time all the time
3. Be proactive and responsive to customers needs and expectations
4. Be actively involved with activities that enhances customer loyalty
5. Establish a process that is consistent on focused on customer satisfaction

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Market share new vehicles (%)
Meaning
This is the indicator that shows the number of our vehicles sold in proportion to the total
number of vehicle sold in a market.
Source:
Report generated from Market Intelligence department.
Calculation
Number of our vehicles sold

Total number vehicles sold in the market
The period is 12 months and type is GVW which is > 16´tons
Standard
Aspire to be >10%
Recommended to benchmark with the high image competitors e.g. Mercedes and Scania
Possible actions
1. Maintain and ensure a good way of working that focuses on customer satisfaction
2. Secure a high level of customer loyalty

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Employee Satisfaction Index (ESI)
Meaning
This is an annual survey in which an employee has the opportunity to express his/her
opinion on a wide range of issues affecting his/her working life.
The result is an input to improve and develop Volvo Group’s working climate.
The tool is Volvo Group Attitude Survey (VGAS) and is available for Volvo’s wholly owned
dealers. There are similar tool available in the market for Volvo’s private dealers.
Calculation
Employee Satisfaction Index (ESI) is a figure for the working climate in each working
group/team.
ESI is based on the eleven core (C) questions. It shows, in percent how many of these
questions are on or above the norm.
Standard
ID markets: Expected percent is at least 85%
Possible actions
1. Involve the employees in improving the working climate. There is a proven link
between improved working climate and improved profitability
2. The survey report leads to a feedback session where employees discuss
improvements ideas and create action plans to make things happen
3. Implement “The Volvo Way” which is a global guide for the behaviour of leaders and
team members within our company

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Competence Fulfillment (%)
Meaning
The fulfilment of competencies required from a dealer’s total staff members so as to

maximise the potential to run the business and operation effectively and profitably.
The staff members included is dealer management (including IT & HR), vehicle sales and
service & parts operations (including tyres).
Source:
The competence portal is made available to both Volvo wholly owned and private dealers
Calculation
Competence Portal
The % is system generated through data input & updates following the Competence Platform process
Standard
The ideal fulfilment is 100%.

The current suggested fulfilment percentage is at least 79%
Some Areas have set a different standard to ID’s minimum of 79% fulfilment.
Frequency to report:
Every 12 months
Possible actions
1. Individual and group competence development and improvements through:

 On the job training (OJT)
 Self studies
 Classroom training
2. Ensure that the current job allocation or assignment matches the competencies required,
otherwise to review the possibilities of organisational change.
3. Ensure that recruitment of new staff has the basic level of competencies as outlined in
the master list of job roles.

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Delivery precision – new vehicles
Meaning
This is a measure of how well we keep the promises made to the customers with regard to
the specification of their new vehicle and the delivery time
It is vital that the customer experience on receiving their new vehicle is as positive as it can
be, and ensuring we deliver the right vehicle, on the date promised is the key component of
this.
It should be noted that sometimes this could be outside of the dealers’ control, due to
changes in the production schedules.
Calculation
The number of new vehicles delivered on time or to specification

The total number of new vehicles delivered
This will probably need to be calculated manually
Standard
The guiding objectives states >90% as high with performance.
We should aim for 100% but also accept that due to changes in the production schedules,
transportation issues, customs issues etc this may not always be possible.
As a minimum we must aim for no errors on issues within the dealers control such as
ordering errors, delays in PDI etc
Possible actions
1. Control the order pipeline – monitor the vehicle at each stage in the process
2. Ensure realistic promises are given at the time of sale.
3. Involve all relevant people as early as realistic in the process – ordering parts, booking
workshop time etc
4. Ensure someone has responsibility for ensuring the promises are met.
5. Develop professional relationships with body builders, paint shops etc if you are using
suppliers for this work.
6. Ensure all sales people can use the relevant truck order system correctly.
7. Encourage sales people to double check with the customer before finally placing the
order.
8. At the very least, if something does go wrong communicate this immediately to the
customer.

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Stock turnover rate – used vehicles (days)
Meaning
It reports the average number of days for which a vehicle is in stock on your premises before
being sold.
In cases where there is a consistent increase to this figure, reviews need to be taken to
check whether the costs of keeping the vehicles in stock are in relation to the profit
eventually achieved on the sale of these vehicles.
Note: Vehicle stock turn can also be calculated by using vehicle units where the result does
not reflect on the inventory value.
Calculation
Last three months cost of sales x 4

Stock value at month end
Convert the result to days => 360 divided by the above result
Standard
The guiding objectives states <23 days as the benchmark
The exact value is dependent on the dealer’s policy.

The longer the trucks are kept in stock, the higher is the short term funding to cover interest
rates, maintenance, storage cost and etc.
These costs will have an impact on the balance sheet.
Possible actions
1. Rationalise stocks by disposing of vehicles which are difficult to sell, accepting if

necessary a lower margin or maybe a slight loss.
2. Review the period for placing orders and better planning for trade-in vehicles.
3. Motivate the sales staff by awarding special bonuses for sales of ageing stock vehicles.
4. Intensify sales and promotions on vehicles in stock.
5. Review alternative sales solutions that are within the local legislation.

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Stock turnover rate – new vehicles (days)
Meaning
It reports the average number of days for which a vehicle is in stock on your premises before
being sold.
In cases where there is a consistent increase to this figure, reviews need to be taken to
check whether the costs of keeping the vehicles in stock are in relation to the profit
eventually achieved on the sale of these vehicles.
Note: Vehicle stock turn can also be calculated by using vehicle units where the result does
not reflect on the inventory value.
Calculation

Convert the result to days => 360 divided by the above result
Standard
The guiding objectives states <60 days as meeting the performance range.
The target can be dependent on the dealer’s policy.

Value is used in this calculation because it would show that the longer the trucks are kept in
stock, the higher is the short term funding to cover interest rates, maintenance, storage cost
and etc.
These costs will have an impact on the balance sheet.
Possible actions
1. Rationalise stocks by disposing of vehicles which are difficult to sell, accepting if

necessary a lower margin or maybe a slight loss.
2. Review the period for placing orders.
3. Motivate the sales staff by awarding special bonuses for sales of ageing stock vehicles.
4. Intensify sales and promotions on vehicles in stock.
5. Review alternative sales solutions that are within the local legislation.

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Labour Utilisation %
Meaning
This indicator shows how much of the mechanics available hours for work in the workshop
are used on productive work. Productive work can be invoiced which becomes income to the
workshop department.
The missing proportion of these hours represents the ‘non-productive’ hours.
Calculation
Actual time taken (clocked time)

Available hours for productive work
Convert result to %
Standard
A level of 90% is suggested as there will always be a loss of at least 5 to 10% from time
taken to locate the vehicle at the parking lot, wait for available work-bay, toilet breaks,
smoke breaks and etc.
Possible actions
1. Better pre-planning of parts availability, work-bays availability and mechanics.

2. Maximise workshop loading through efficient workshop planning
3. Ensure that customers are reminded of their booked service or repair
4. Increase market share for workshop

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Labour Efficiency %
Meaning
This measures the ability of the mechanics to complete work within the allocated time. The
allocated time could come from the Volvo Standard Time (VST), local/regional time or dealer
standard time.
It is useful to calculate this indicator on a mechanic-by-mechanic basis in order to check who
works more or less efficiently. This analysis should extend to the type of productive work
e.g. a mechanic can usually have a better efficiency level on maintenance work as
compared to an electronic work.
Calculation
Allocated time for productive work

Actual time taken (clocked time)
Convert result to %
Standard
The minimum is 100%
Labour efficiency can easily be raised to at least 115% given today’s focus on competence
development, improved workshop tools & equipment and parts ordering.
Possible actions
1. Ensure that correct allocation of jobs to mechanics i.e. competence based job allocation.
2. Mechanics to have their own tool-box and work-bay.
3. Easy accessibility to special tools when required.
4. Parts runner/”waiter” for a large workshop or at least observe that parts support to the
workshop is measured through order fulfilment and delivery precision.
5. Use of Volvo Standard Time (VST) on repair orders (mechanics can benchmark their
actual time with the allocated time).
6. Observe clocking in and out of jobs to ensure accuracy of measurement.
7. Proper information on repair order e.g. correct operation numbers symptom
description/code used by service reception

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Work in Progress (days)
Meaning
This shows the number of productive work hours completed by mechanics but not invoiced
to customers due to repair orders still opened from situations like:
1. Additional work required, waiting for parts, complication with the repair or approval
for work not received.
2. Delay or lack of sufficient documents to confirm a customer invoice.
Calculation
Number of hours from work in progress

Average number of hours worked per day (all shifts)
Standard
An efficient and well maintained operation suggests <3 days.
That means that the work in progress is equivalent to 3 full days of work with the whole
workshop capacity. Consider its impact on cash flow.
If at all possible, the objective would be to invoice all completed jobs on the day of
completion.
Possible actions
1. A good process with the flow of the repair order i.e. once it is created till all the jobs
completed on it.
2. Roles and responsibilities of (a) service advisor to follow up on all repair orders created
by him/her (b) foreman or team leader to ensure that the mechanic is managing to do the
job right and complete it on time (c) parts personnel to support with parts availability
3. Service advisor to provide repair status information with the customer regularly during the
period of repair.
4. Service advisor to ensure that all required documents from the customer are in order so
that delay to invoice is avoided.
5. Parts department’s timely update on dealer management system on parts taken for the
repair.
6. Foreman/team leader to ensure that quality of work is done
7. Streamline the invoicing process e.g. invoicing by service advisor who is the contact
person with the customer and foreman.

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Workshop hours sold
Meaning
This figure shows the total number of hours sold from productive work completed by the
mechanics in a given period. Invoicing the work done (hours) and minimising work-in-
progress (days & value) would be the main activities to ensure a high level of total workshop
hours sold.
It is important to ensure that we record the hours sold as well as the value on the invoices.
Calculation
Total workshop hours sold or invoiced
Standard
The standard is not set.

It is dependant on size and volume of the workshop operation.
It can be useful to reflect workshop hours as % of total available hours (in order words,
labour productivity %). In this case, the KPI will show if we are selling a sufficient % of hours
we buy.
Possible actions
The main objective is to maximise the sales of labour hours in a workshop.
Has a direct relation to improving

1. Labour productivity
2. Labour utilisation
3. Labour efficiency

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Stock turnover rate – parts (times)
Meaning
This indicator shows the number of times the stock will turn in a year.
The average number of turns reflects the effectiveness of the parts ordering and delivery
process established between the dealer and the supplier.
Good stock management has a positive impact to the stock turn.
Calculation

Standard
The suggestion is at least 5 turns in a year.
This is not enough to analyse the parts service level to the customer. Other performance
indicators to review are parts availability through first pick availability and the average
purchase discount.
Possible actions
1. Manage the purchase quantities and the maximum/minimum stock levels to maintain for
an optimal stock balance
2. Ensure that stocking policies are observed
3. Review and manage emergency orders
4. Improve stock management in areas such as
▪ Fast moving parts
▪ Level of buffer stocks
▪ Level of slow moving parts
▪ Review and manage Back Orders
5. Pre-plan with the workshop to ensure that parts required are available.

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Service index - parts
Meaning
This ratio indicates the extent to which the customer demands are met immediately from
stock. It can be difficult to measure as manual records of non-available parts are required.
Using a periodic sample may be the best solution.
This indicator can be measured for workshop and counter demands.
The index for the workshop is interesting as a good percentage indicates planning,
communication, teamwork and interest with customer satisfaction.
Calculation
Number of repair orders
with stocks fulfilled Number of lines supplied
Total number of repair orders Total lines ordered
Convert to % Convert to %
Standard
The ambition to achieve >92%.
Note:
This is an external data. The source is from the Local Parts Agreement (LPA)
Possible actions
1. Ensure optimal pre-communication between reception and shop.

2. Regular consultation between workshop manager, receptionist and shop manager in
order to detect any trends in stock shortages.
3. Make an ongoing check as to which parts are regularly out of stock.
4. Ensure knowledge of the customer base and vehicle park, as well as careful analysis of
customer buying patterns.
5. Initiate pro-active customer contact to ascertain future demands.
6. Also consider
▪ Parts Stock Return
▪ Average Purchase Discount

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DOS assessment
Meaning
Dealer Operating Standards (DOS) is a document covering assessments at a dealer and

based on a set of guidelines expressed under these sections:
Section 1: General Management
Section 2: Dealer Premises
Section 3: Corporate Identity
Section 4: Sales
Section 5: Workshop
Section 6: Parts
Section 7: Environment
Calculation
DOS tool
(The score is system generated through data input & updates following the DOS assessment process)
Standard
Scores of:
3 = according to standard
2 = passable
1 = minor non conformity
0 = major non conformity
Frequency of assessment:
Once every 2 years
Possible actions
1. Observe Volvo’s policy on Corporate Identity, environmental care and operational

standards.
2. Prioritised items from each assessment group and create improvement activities to
improve the scores.
3. Ensure that job roles and responsibilities are in place. It is necessary to have staff
involvement with the improvement activities.
4. Follow the improvement process with the Plan, Do, Check, Act (PDCA) methodology.

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Operating Income in % of sales
Meaning
The Operating Income shows the profit which has been achieved in relation to sales. It is an
overall indicator of the balance between sales, margin and costs.
The calculation takes into account both the internal and external sales e.g. sales invoiced to
other departments (except parts sold to the workshop) are taken into account because the
realised profit comes from both internal and external activities.
The operating income is an early warning if sales or parts or service is experiencing a

slowdown in performance.
Calculation
Operating income
Total net sales
Convert result to %
Standard
The suggestion for International Division is >5%.
Possible actions
1. Improve profits with the following means:

▪ Increase sales volumes
▪ Control costs
▪ Improve margin by a more effective purchasing policy
▪ Improve margin by a more effective selling policy
2. Also look at:
▪ The indirect costs compared to the net sales (internal & external)
▪ Total expenses compared to the net sales (internal & external)

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GP total truck sales %
Meaning
The Gross Profit takes account of discounts and costs of the vehicle. It is what remains
before the deduction on wages, salaries and other direct costs.
This indicator can be analysed separately for new and used trucks.
Calculation
(Net sales on new and/or used units) – Cost of sales

Net sales on new and used units
Convert result to %
Standard
The suggestion is > 5 %
Possible actions
1. Avoid or minimise discounts.

2. Improve on stock turn rate
3. Periodic price review

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GP workshop (%)
Meaning
The percentage indicates the workshop’s profit position. Sales figures included in this
indicator are services & repairs, sub-contract work, oils, lubrications and other items. All
work needs to be completed and invoiced.
The cost of sales is the mechanic’s salary for productive time (no social costs involved).
Calculation
(Net workshop labour sales – Cost of sales)

Net workshop labour sales
Convert result to %
Standard
The suggestion is >60%
Possible actions
1. Increase margin for the different sales groups

▪ Sub-contracted work – try another supplier or reclaim the work for own workshop
▪ Work productivity – hours invoiced divided by available hours
▪ Hourly rate – differentiated according to the category of work
2. Reduce costs
▪ Overtime
▪ Service vehicle – may perhaps be used also for other purposes

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GP Parts (%)
Meaning
The percentage indicates the profit position of the parts department. It can be used to give
more insight to the Aftermarket Absorption.
Both counter-sales and sales to workshop are included in this calculation.
Calculation
(Net parts sales – Cost of sales)

Net parts sales
Convert result to %
Standard
The guideline is >28%.
In most cases, the dealer net is dependant on what the Market Company has set.
Possible actions
1. Increase the profit margin from different groups of sales channel (payment codes)
▪ Increase the parts sales per labour hour sold
▪ Revise or improve the discount policy for counter-sales
▪ Improve the Average Purchase Margin i.e. to observe the order classes during
procurement
▪ Have a good procurement routine that optimises stock order rather than daily orders.

Reference Guide
Version 2
10 February 2016
Aftersales Receivables Days
Meaning
This indicator shows the average length of time taken to collect payment from customers.
Not collecting payment promptly is one of the reasons that the company needs to increase
short term borrowings. Such loans are usually higher with interest rates therefore cost.
Within VTC, receivable days are calculated on a 6-month average
Calculation
6-month average Aftersales accounts receivable

6-month sales Aftersales non-group companies
Multiply calculation by 180 days
Standard
We recommend <25 days for the customers to the settle parts and service invoices.
Observe the guiding objectives range to either take preventive actions or to maintain the
performance.
Possible actions
1. Communicate the payment terms and conditions to the customer all the time.
2. Avoid invoice dispute through quality of information on the parts and workshop invoices.
3. Monitor the debtors ageing list monthly.
4. Review customer’s credit limits

Reference Guide
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10 February 2016
Return on Operating Capital ROC (%)
Meaning
This is the indicator on the profit that the company can succeed in realising per 100 USD of
capital invested in the business.
It reflects the return on investments made.
When this ratio is low we are less likely to be able to attract new investment.
Within VTC, the ROC is calculated on a 12-month rolling/annualises average
Calculation
12-month rolling average operating income

12-month rolling average operating capital
Multiply calculation by 12 and convert result to %
Standard
The general rule is 3x higher than the average interest rate payable on short term debts.
Possible actions
1. Improve asset management e.g.

▪ Reduce working capital
▪ Improve asset turn over
▪ Dispose of surplus assets
▪ Increase creditors’ assets
2. Improve profits by the following means:
▪ Increase sales
▪ Improve cost control
▪ Improve margins by a more effective purchasing policy
▪ Improve margins by a more effective selling

Reference Guide
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10 February 2016
Sales and Administration (S & A) % of turnover
Meaning
This indicator allows you to check whether the total costs borne in respect of your entire
workforce commensurate with the sales are achieved.
The selling & administration expenses are mainly “back-office” services (such as staff costs
that include salaries, commissions, employees’ and employers’ social security contributions,
and pension provisions for all the staff of the company) and “fixed-costs” sometimes known
as structural expenses (such as rental, electricity and phone bills).
Calculation
Total selling & administration expenses of the dealers

Total net sales
convert result to %
Standard
From the guiding objectives, the suggestion is <13%
Possible actions
1. Cost control for staff costs:

▪ Review and balance salary payments with skill levels required
▪ Convert wages and salaries into remuneration bearing less social taxes
▪ Review balance number of productive and non-productive staff
▪ Relate salaries more to performances to turn fixed into variable costs
2. Improve productivity:
▪ Of mechanics
▪ Of sales staff
▪ Of parts department employees
▪ Of administration staff
3. Continuously review headcount levels.

Reference Guide
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10 February 2016
Cash Flow
Meaning
The variance between incoming and outgoing cash over an established period.
Occasionally, the cash flow can be a negative due to most businesses usually have to pay
for goods before getting paid.
This measure cannot be obtained from the dealer operating system but is usually measured
from the administration area.
Calculation
The formula to calculate cash flow contains many other parameters.

Refer to your accountants for the details
Standard
Refer to your accountants for the details
Possible actions
1. Reduce receivables days.

2. Increase payment period to suppliers where possible.
3. Increase service contract penetration levels
4. Improve control of stocks – particularly used vehicles
5. Review terms and conditions with customers.

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10 February 2016
Total sales revenue (against budget) => SKIP THIS MEASUREMENT
Meaning
Calculation
Standard
Possible actions

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10 February 2016
Aftermarket absorption (%)
Meaning
The Aftermarket Absorption indicates the extent to which the workshop and parts
departments are able to cover the administrative and structural expenses of the company.
The selling & administration expenses are mainly “back-office” services (such as staff costs
that include salaries, commissions, employees’ and employers’ social security contributions,
and pension provisions for all the staff of the company) and “fixed-costs” sometimes known
as structural expenses (such as rental, electricity and phone bills).
A dealership that achieves more than 100% in Aftermarket absorption is more likely to
withstand the high volatility of the new and used truck markets.
Calculation
Workshop gross profit + Parts gross profit

Total selling & admininstration expenses on the dealer
Convert result to %
Standard
A minimum of 100% should be achieved.
The suggestion is >120%
Possible actions
1. Improve shop contribution:

▪ Improve purchasing margins
▪ Increase sales per hour sold in the workshop
▪ Better control of direct expenses in the parts department
2. Improve workshop contribution:
▪ Increase productivity and efficiency of the mechanics
▪ Better control of direct expenses in the workshop

Reference Guide
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10 February 2016
Other Indicators
Note:
Definitions and calculations are not covered in this reference guide.
Workshop
▪ Labour market share
▪ Mix turnovers ‘external / internal / warranty’
▪ Mix turnovers ‘labour / sub-contract / oils and lubricants / others’
▪ Gross margin on labour
▪ Gross margin on sub-contract work
▪ Balance of claims
(Non-credited percentage by importer in relation to total claims)
▪ Number of repair orders per working day
▪ Sales per repair order
▪ Gross profit per repair order
▪ Hours per repair order
▪ Productive / non-productive members of staff ratio
▪ Number of repair orders per day per productive staff member
▪ Parts sales per labour hour sold
▪ Recovery rate
▪ VST usage
▪ Pre-booked repair orders ratio
▪ Workshop contribution
▪ Labour productivity

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10 February 2016
Parts
▪ Parts market share
▪ Mix ‘counter sales / workshop sales’
▪ Mix ‘counter sales to retail customers / counter sales to service customers’
▪ Mix ‘external sales / internal sales / warranty sales’
▪ Mix ‘parts sales / sales of accessories’
▪ Average parts discount at the counter
▪ Gross profit margin on workshop sales
▪ Gross profit margin on counter sales
▪ Percentage of obsolete stock compared to total stock value
Sales
▪ Market shares of the different segments according to vehicle type
▪ Market shares of the different segments according to customer type
▪ % of trucks sold with finance products
▪ % of trucks sold on contract
▪ Sales to existing customers / sales to new customers ratio
▪ Sales persons efficiency

- Number of (new) contacts per week
- Quotations / contacts ratio
- Average number of quotations
- Orders / Quotations ratio (Conversion rate)
▪ Part-exchange / total number vehicles sold ratio
▪ Average cost of warranty per used truck
▪ Average advertisement and marketing cost per new vehicle

Reference Guide
Version 2
10 February 2016

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Dealer

Guiding Objectives for the Key Performance Indicators 6

Delivery precision – new vehicles 15

Dealer Operating Standard (DOS) 24

ID’s Dealer Performance Indicators 2

ID’s Dealer Performance Indicators 3

Dealer Performance Management Process

What is Performance Management?

Performance management is the activity of tracing performance against targets and

 You know what you are aiming for

The effective performance of your organisation depends on the contributions of activities at

Critical factors for success

 Focusing on outcome that meet business objectives rather than output

Frequency of measurements and reporting

Monthly and following the financial closing of the dealers.

ID’s Dealer Performance Indicators 4

Customer/Market Operational Performance

Our Employee Financial

ID’s Dealer Performance Indicators 5

Performance Range Low Medium High

ID’s Dealer Performance Indicators 6

Aftermarket Absorption The extent to which the contribution of both

Contribution The profit contributed by an operating department.

Contribution Margin The contribution of a department expressed as a

Depreciation Amounts provided by the company to reflect the

Direct Expenses Expenses directly incurred by an operating

Gross Profit The net sales value of a product or service sold

Gross Profit Margin The Gross Profit expressed as a percentage of the

Indirect Expenses The business expenses which cannot be directly

ID’s Dealer Performance Indicators 7

Operating Profit Trading profit from all sources after deduction of

Suggested tools: GDS, LDS and workshop time clock

Available guidelines: Volvo Standard Time from IMPACT

Suggested tools: Employee punch card system, access

Suggested tools: GDS, LDS or any dealer management

ID’s Dealer Performance Indicators 8

Source of information: Dealer’s income statement for

Labour Productivity Labour Utilisation Labour Efficiency

Actual time taken Allocated time for

ID’s Dealer Performance Indicators 9

A comprehensive study conducted annually to capture a dealer’s fulfilment with customer

A 5-point scale is used to measure customer satisfaction. It is from completely dissatisfied,

To be number 1 in customer satisfaction, the recommendation is to reach an index of >80%

ID’s Dealer Performance Indicators 10

Customer loyalty creates repurchases, revisits and recommendations.

ID’s Dealer Performance Indicators 11

Number of our vehicles sold

The period is 12 months and type is GVW which is > 16´tons

ID’s Dealer Performance Indicators 12

ID markets: Expected percent is at least 85%

ID’s Dealer Performance Indicators 13

The fulfilment of competencies required from a dealer’s total staff members so as to

The ideal fulfilment is 100%.

1. Individual and group competence development and improvements through:

ID’s Dealer Performance Indicators 14

The number of new vehicles delivered on time or to specification

This will probably need to be calculated manually

The guiding objectives states >90% as high with performance.

ID’s Dealer Performance Indicators 15

Last three months cost of sales x 4

The guiding objectives states <23 days as the benchmark

The exact value is dependent on the dealer’s policy.

1. Rationalise stocks by disposing of vehicles which are difficult to sell, accepting if

ID’s Dealer Performance Indicators 16