ORGANIZATION OF SERVICE AND MAINTAINANCE ACTIVITIES IN TIMES OF ECONOMIC CRISIS ______Assoc. Prof Nikolai Kolev, As. Prof Mihail Milchev, PhD stud.Toncho Balbuzanov University of Ruse
Summary
The paper presents the influence of economics on the organization of maintenance and repair activities in condition of economic crisis. It pinpoints the problems of companies as a result of the economic crisis and offers remedial activities for overcoming crisis symptoms. The article also focuses on the relationship between the economic parameters of company functioning on the organization of work. An analysis of the economic parameters of a car servicing company in the town of Ruse is described and the affect of the economic crisis on the company is discussed.
Introduction
Economic crisis is an obstacle which only the best functioning companies that have correctly organized their work and that have developed a long-term development strategy could survive. It allows the competent managers to better judge the system of work and reevaluate their aims at the stage of huge investment and fast development in the period before the crisis starts. If those managers take the correct decisions and go through the crisis successfully, they will be able to take a better place on the markets after it is resolved. The good manager has to be aware of the fact that the market sets the rules and that its activity has to be carefully monitored. Market monitoring gives an advantage and provides an opportunity for taking quick and flexible decisions before the competitors. Markets have always been part of our lives but not everyone has the capacity to take a solid place there and keep it in times of crisis. When handling a crisis in car service companies, which are a complex type of systems, one should take into consideration that employees are the companies’ capital as time, money and resources have been invested in their training and work experience. Their professional development is an on-going process and it is a huge mistake to dismiss them as a way for cutting down expenses. This, along with the level of Bulgarian economics, demands from car servicing companies to make efforts and plan how to optimize their structure and efficiency. The highly qualified personnel will contribute to the improvement of production and the quality of services offered and this will influence the sustainability of the company and will ensure flexible politics and competitive prices[5]. The low level of financial means of Bulgarians, the increased rate of unemployment and the international debts which the country has are among the main reasons for expenses, including those for maintenance and repair of vehicles. That increases competition among companies offering the services mentioned above and will lead to the lowering of prices so that the companies are able to keep up the quantity of sales and their share on the market. The reduced prices will lead to reduction of costs in the areas of production and logistics and will make companies restructure their financial resources[3]. The politics of the companies have to aim at providing clients with quick and quality services at the best possible price. The objective in this case is to reach and sustain a high level of trust – an essential factor for establishing long-term partnership with the client which is the key to the successful overcoming of economic crisis symptoms. Another possible solution for compensating the drop off work in the car servicing company is to try to find new clients and to enrich the field of offered services. Assoc. Prof Nikolai Kolev, As. Prof Mihail Milchev, PhD stud.Toncho Balbuzanov, University of Ruse, 8 Studentska Str., 7017 Ruse, Bulgaria Tel. +359 82 888605, e-mail [email protected] ORGANIZATION OF SERVICE AND MAINTAINANCE ACTIVITIES IN TIMES OF ECONOMIC CRISIS
The topics related to the efficiency of functioning of complex systems such as servicing companies gain primary importance as the methods for planning and management of economics increase especially in states of crisis. The expediency of one or another decision is most of all a result of the economic indexes for the quality of system functioning. The criterion for efficiency should reflect the specific conditions in which the objective decision of a specific problem is taken. The criteria for efficiency of a vehicle servicing company could be the profit, the norm for cost-effectiveness and the cost price of the production. The profit, which is one of the criteria, is linked and dependable on the shipment prices which in state of crisis do not suffice the conditions for maintenance, the shipment companies and the clients. The norm for cost-effectiveness is an indicator that points the company’s costs but it is a value that has no dimensions and its presentation as target function is limited. The use of the cost price criterion of the production, as well as the profit, is difficult to use with regard to the conditions in state of crisis. If we dwell on the facts mentioned up to this moment, we could claim that in state of crisis, the best criterion to refer to is minimum expenses.
If we focus our attention to the influence of the coefficient for technical readiness т on the efficiency of the system functioning, we will come to the conclusion that it describes the technical state of vehicles[2]. Despite that it does not take into consideration neither the materials, nor the labour costs related to the maintenance and repair of vehicles. If we mark the period of good working order of a vehicle with Xt for the period (0, Т), then the coefficient for good working order could be represented with the following formula: Xt . (1) т T In order to calculate the efficiency of the system for maintenance of vehicles, we need to consider the expenses made for a single vehicle maintenance. In general those expenses are a function of the number of maintenances, the number of employees involved in the maintenance, the number of work places, the organizational structure and the schedule of work in the servicing company[2]. In this case the costs made are a function of the following changeable values: C f N, X , P, D, where N is the number of orders for maintenance; Х – the number of work places; Р – the number of employees at the work places; D – additional factors. When choosing the best type of organization of vehicle maintenance one should make an assessment of the different types of organization using the formula:
Ci п Сi то Е н .К i Ci , (2) 100Ni Di p where i = 1, 2… is the consecutive number of the type of organization; Сi п – the total costs for the stay of the vehicle when the service is done during the working hours of the company; Сi то – the costs for the maintenance and servicing of the system; Ен – norm coefficient for efficiency; Assoc. Prof Nikolai Kolev, As. Prof Mihail Milchev, PhD stud.Toncho Balbuzanov, University of Ruse, 8 Studentska Str., 7017 Ruse, Bulgaria Tel. +359 82 888605, e-mail [email protected] Кi – investment costs for the respective type of organization за съответния вариант; Ni – 24-hour programme for maintenance; Di p – number of work days for the service company for 1 year. [1] With respect to above mentioned the paper analyzes statistical data of the work of a servicing company in the town of Ruse for the period January 2008 to the first trimester of year 2010. The period is chosen due to the fact that the economic crisis in Bulgaria started in 2009. The data for year 2008 are presented here as a basis for comparison with the period before the crisis. The service company indicators which are a subject of interest in the current paper are: The profit of the company in leva and in percentages; Productiveness; Efficiency of the workers; The percentage of usage of facilities; Total number of orders; Those indicators show the economic potential of the servicing company, its efficiency with respect to the profit and the use of workforce, skills of workers and their quality of work. Fig. 1 presents the sales of maintenance and repair services performed by the company during the period of analysis [4]. The mirror image of sales in the 2008 and 2009 year is the first thing that strikes the attention. While the sells increase towards the end of year 2008, in year 2009 the situation is just the opposite – they decrease. As it was mentioned above in the year 2009 the economic crisis affected the Bulgarian economy, the profits of companies and households decreased and they were forced to reduce the sums given for maintaining their vehicles, i.e. less clients for the servicing companies which means fewer sales of services offered by them.
2008г. €18 000 2009г. €16 000 2010г. €14 000 €12 000 €10 000 €8 000 €6 000
Fig.1. Amendment of sales by month during the period of analysis
If we examine the lines presenting the ration in percentages between the profits on Fig. 2, [4], we could see that at the beginning of year 2010 the profits has increased. This could be explained with the optimization of management of finances of the servicing company which is achieved through the optimization of labour expenses as a result of the decrease of employees’ salaries and reduction of staff numbers as well as other secondary expenses due to the economic crisis.
Assoc. Prof Nikolai Kolev, As. Prof Mihail Milchev, PhD stud.Toncho Balbuzanov, University of Ruse, 8 Studentska Str., 7017 Ruse, Bulgaria Tel. +359 82 888605, e-mail [email protected] 2008г.
90% 2009г. 2010г. 85% 80% 75% 70% 65% 60%
Fig.2 Amendment of Gross Profit by month during the period of analysis
The reduction of staff numbers [4] is a conservative step in comparison to other Bulgarian companies which are in a similar situation and which dismiss just one employee. The choice of the company is to reduce with two thirds the salaries of its employees in the year 2010 compared to the level of salaries in year 2008. Thus the servicing company does not dismiss qualified employees who would be useful when the economic crisis is over. The level of productiveness of employees is presented in Fig. 3 [4] which shows the link between productiveness and profits. Lower profits are a direct result of lesser quantity of orders (Fig. 5) [4], which affects both the productiveness of the servicing company as a whole and the productiveness of the employees in particular. These indicators show that productivity is seasonal, i.e. productiveness is lower in winter compared to summer. Here the influence of the economic crisis can be found only in the difference in percentages between the productiveness before the crisis and the present moment. The low season is in winter when less vehicles are used by the clients as a result of the weather conditions and the limited trips of divers. That period of the year is a time when household and companies’ budgets have to cope with additional expenses (mostly for heating) which is another reason for cutting down the expenses for trips.
95% 2008г. 2009г. 85% 2010г.
75%
65%
55% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fig. 3 Amendment of level of productiveness of employees by mont during the period of analysis
100% 2008г. 90% 2009г. 2010г. 80%
70%
60%
50%
40%
30% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fig.4 Amendment of Facility Utilisation by mont during the period of analysis Assoc. Prof Nikolai Kolev, As. Prof Mihail Milchev, PhD stud.Toncho Balbuzanov, University of Ruse, 8 Studentska Str., 7017 Ruse, Bulgaria Tel. +359 82 888605, e-mail [email protected] Two outbreaks in the number of orders are observed in March and October due to the increased number of repairs (Fig.5) for preparing vehicles for the summer or the winter period of the year and the promotion campaigns of the service.
450 2008г. 2009г. 2010г. 400
350
300
250
200 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fig. 5 Amendment of the quantity of orders by mont during the period of analysis
Conclusion
In conclusion, it could be said that in the time of economic crisis every client is sensitive and needs special attention. Only those companies which have a clear strategy for development and flexible structure that combines high quality of services and competitive price will survive. An interesting observation that has emerged during the research of the car servicing company [4] is the stable number of claims with respect to the number of repairs despite the difficult economic situation, i.e. regardless of the savings made, the quality of repairs remains a constant.
Reference
[1] Н.Колев, Ръководство по Организация и управление на сервизната дейност в транспорта, Русе 2005г. [2] Ошниведский, ЮТ., Техническая Эксплуатация, обслуживания и ремонт автомобилей, М., 2005г. [3] Пенчева, В. А.Асенов. За целесъобразността от аутсординг на транспортните дейности в производственните и търговски фирми. ЕКО-Варна. Варна.2007.ц. 309-315. ISBN 954-20-00030 [4] Moto-Pfohe LTD, Scorecard – Service Operation 2008, 2009 and 2010. [5] Web page logistica.bg http://www.logistika.bg/
The study was supported by contract № BG051PO001-3.3.04/28, "Support for the Scientific Staff Development in the Field of Engineering Research and Innovation”. The project is funded with support from the Operational Programme "Human Resources Development" 2007-2013, financed by the European Social Fund of the European Union.
Assoc. Prof Nikolai Kolev, As. Prof Mihail Milchev, PhD stud.Toncho Balbuzanov, University of Ruse, 8 Studentska Str., 7017 Ruse, Bulgaria Tel. +359 82 888605, e-mail [email protected]