Larry Edwards says collision repair shop owners could think of themselves as produce managers in a grocery store.
Edwards, an automotive industry consultant based in Charlotte, North Carolina, says that just like produce managers, shop owners have a limited time to sell the "product" they offer before it is no longer salable. That product is labor hours, and when the day is done, those hours are gone forever.
"If you really stop to think about it, the primary product that you have to sell in your collision repair business is labor," Edwards said. "But if you're running a computer shop or a parts store, at least when you leave your business at night, the inventory that wasn't sold that day is still sitting on the shelf. You'd have an opportunity when you came in the next day to sell it. In the collision repair business, however, your inventory is perishable. If you don't sell all of it you have available today, then it is lost income to your business. You get one shot every day to sell that inventory."
Edwards says that because shop owners can't see their business's "inventory" of labor time, they often don't pay enough attention to it.
"If that labor inventory were money, and you took it back in your shop and set it down in the middle of the floor, would you keep an eye on it?" Edwards asks. "Would you make sure nobody took advantage of it? Would you not let any of it walk out of there? But in our business because you can't see it, you can't touch it, we have a tendency not to pay attention to the lost inventory we have every day."
In a day-long training course offered through the Automotive Management Institute, Edwards explains how a shop can measure and improve how well it is doing at selling those "perishable" labor hours.
"Once you know how to measure that, you can determine how your shop can increase both the amount and the profitability of labor it can produce," Edwards said.
Measuring efficiency
One of the easiest ways to measure your shop's labor profitability, Edwards says, is to measure your technicians' efficiency. To do that, divide the number of flat rate or billable hours completed (daily, weekly or monthly) by the number of clock hours available. A technician, for example, that completes 12 flat rate hours in an 8-hour day has a 150 percent efficiency rate.
"Our study of 200 shops found that collision repair facilities should be operating at a 150- to 170-percent efficiency rate," Edwards said, although many of the top third of the shops in the study had efficiency rates over 200 percent.
Even a small increase in efficiency can have a dramatic effect on a shop's profitability. Edwards gives this example: Say your shop's four technicians are operating at 150 percent efficiency. Each averages 12 hours flat rate hours in an 8-hour day; at a $30 labor rate, each technician is generating $360 a day in labor sales, or $7,200 in a 20-day month.
Now raise the technicians' efficiency 10 percent to 160 percent. In that same month of 20 work days, each technician now generates $384 in labor sales. With four technicians, that small boost in efficiency generates an additional $1,920 in labor sales every month.
What does it take to get that 10 percent increase in efficiency? In Edward's example, each technician that was turning 12 flat rates hours a day now has to complete 12.8 flat rate hours a day - an increase of less than one flat rate hour per day.
Think it can be done?
Little things matter - like finding keys
Edwards said one key to boosting efficiency is increasing the amount of time technicians actually spend working on vehicles during the day. He said a technician who arrives late or takes extended breaks can cause thousands of dollars a year in lost labor sales.
"One lost hour a day can cost you $8,000 in labor sales per year," Edwards said. "If you have technicians hanging around the snack truck outside, wouldn't you come out ahead if you bought them some snacks and kept them inside working?"
How much time do your technicians spend looking for the keys they need for a vehicle, Edwards asks. He recommends storing all keys in a lock box; each set of keys is marked with a tag that includes the repair order (RO) number and type of vehicle; the keys can be sorted within the lock box by the last digit of the RO to make locating them even faster.
Having technicians work from inaccurate or incomplete estimates - or even just those prepared by an insurer rather than the shop itself - also hurts efficiency, Edwards said. Delays generally result because such estimates include parts that need to be replaced rather than repaired (or vice versa), include salvage or non-OEM parts that turn out to not be readily available, or miss structural damage, etc.
Big back lot? Mark it!
If you have a larger lot, techs may waste a lot of time wandering over the course of a year wandering around trying to find a vehicle they're looking for. Striping the lot and numbering the spaces allows you to give a tech the RO and a space number to speed this process.
"When you look at the shops that are really, really profitable, you'll see they focus on things like how parts are handled, preparing accurate repair orders, organizing the keys and parking, and making sure that employee breaks and starting and stopping times are controlled, because those are the things that affect productivity," Edwards said.
Shops find success
Paul Mabie, owner of Cascade Auto Body in Vancouver, Wash., understands the value of keeping his highly-skilled technicians in their stalls working, rather than out in the lot looking for the next vehicle they're been assigned.
"We have our detailers or helpers bring the cars in to them," Mabie said. "The detailers are the ones who usually put the car in the lot so they generally know right where they are."
The shop also uses mobile radios to boost efficiency.
"Each of our technicians has a radio, so he can call the detailer and ask him to bring in a certain vehicle," Mabie said. "He doesn't have to move an inch to find the detailer or bring the car around. Those minutes he saves add up."
Employing a full-time parts manager also boosts the shop's efficiency. Technicians at the shop don't spend time checking in or "chasing after parts," Mabie said. A quick call on the radio when a vehicle rolls into their stall, and the parts manager brings out the parts and checks with the technician to make sure they are all correct.
A couple hundred miles north of Mabie's shop, Mark Cantrell, co-owner of McLeod Autobody in Kirkland, Wash., says he has found a number of ways to help his techs complete just those few more tenths of a labor hour a day that can make a big difference on the shop's bottom line.
The shop, for example, has mirrors installed that help technicians check vehicle turn signals and lights without needing someone else. Magnetic, color-coded and numbered vehicle cones or "hats" help employees identify and locate a particular vehicle. And the shop's tool and supply room is incredibly well-organized so that finding what they need is fast and easy for technicians; Cantrell has used labels and a marker to outline where each item is to be placed or hung, which makes it more likely that things are put away where they should be.
Using information as tool
Information is another powerful tool to boost your staff's efficiency, according to Joe Lubrano of J & E Autobody in Clark, New Jersey. He recommends lots of documentation.
"Get your job descriptions written so nobody has any question as to what anyone expects of each other," Lubrano said. "Write down all the procedures for how things are to be handled, such as how parts are to be ordered and checked in, and what to do when a part is back-ordered. Putting these procedures in writing and getting them out to everyone will eliminate a lot of mistakes and wasted time."
Communication among employees is another key, Lubrano said. A daily meeting between the parts manager, the production manager and the office staff responsible for communicating with customers is critical to make sure everyone knows where each job is in the process and which vehicles are the priority for that day.
"Those meetings just ensure the right hand knows what the left hand is doing," Lubrano said.
Because there's no room for expansion of his facility, Lubrano said boosting his shop's efficiency also involves using every bit of space available.
"Some years ago, we ripped out every single bench in the shop, and anything that was just a 'parts collector' or that was eating up space," he said. "Anything that wasn't important was thrown out, and we picked up usable space all over the shop."
Got a boat stored in the shop?
Lubrano said shop owners storing a boat or "project car" in their shop don't recognize how much "rent" they are paying for that storage in terms of lost production space. He said too many shop owners focus on hiring more people or expanding their shops before they take the steps needed to boost the efficiency of their current employees and facility.
Edwards agrees. "A lot of people say, If I had 10 more stalls, let me tell you what I could do, or if I could hire five more techs, let me tell you what I could do," Edwards said. "The real measure of what your 'could' do is what you get out of what you've got. The people who are really successful are the people who can take what they have and get the absolute most out of it."
John Yoswick