Poor performing labor operations will reduce profits substantially and must be reviewed in a different manner. The definition of a poor performing labor operation is low margins in parts or effective labor rate. The primary source for this review begins at the detail analysis report for advisors. Today we'll look at one as an example of a common poor performing labor operation. The most common labor operation typically is the oil change in most shops. Recently some manufacturers have increased the price of motor oil $.40 per gallon. Even with the worldwide cost of crude oil falling over 60% in the last few months this increase was put in place. If your dealership purchases motor oil under a manufacturers program it is time to quote at least two other vendors. Traditionally vendors such as Valvoline and Quaker State are aggressive in gaining new accounts providing cash with a five-year commitment. The oil filter is another way to reduce the cost of the oil change operation. It is amazing to me how many places sell these oil filters below dealer cost from the manufacturer's parts department. A low cost oil filter might reduce parts cost on an oil change over three dollars. The reality is a vast majority of customers don't even know what filters placed on their vehicle. We just pay the higher cost and reduce our profits to stay competitive with the quick lube. The next consideration on the oil change labor operation is what should a technician be flagged? Some shops have high skilled technicians perform oil changes with flagged times of .5. This will cause your dealership to lose labor cost on every oil change. Now let's do some math on this labor operation. If your shop performs 600 oil changes per month and the parts cost is reduced four dollars per oil change that would amount to $28,800 per year. If labor cost was reduced from .5 to .3 your dealership could see a reduction of another four dollars per oil change in labor cost adding another savings of $28,800 annually. Customer retention programs the dealerships are using to provide oil change customers a roadside assistance protection program are considered a benefit and should never be considered a cost. These programs do a great job of retaining customers and reduce the need for local advertising and mailers. If we can reduce the cost of one labor operation by $57,600 with a quick review imagine what could be saved looking at the top 100 labor operations.