A Lean Transformation - BodyShop Business

A Lean Transformation

The New Year brought us another opportunity to transform an existing body shop from the traditional way to a better, process-centered way. So we ripped off the Band-Aid and got started.

the first step of “5s”: sort. sort through everything and determine what’s important and what’s not.The third step of “5S”: scrub. Clean everything, including tools, equipment, floors and walls inside and out.
For a few years now, I’ve been writing articles on the fundamentals of “lean.” We’ve discussed topics like value, waste, 5S and kaizen. Many of you have demonstrated great interest in bettering your understanding of these philosophies by calling me and e-mailing me, and I appreciate all the great feedback. But frequently, you’ve shared that the theories don’t easily translate into actionable items. So I thought, what better way to help tell the story than to actually take you through the transition of one of our new shops? The timing is perfect as we signed a deal for a new location at the end of 2007, and now I can share it with you.

The Transformation Begins

Our new location is a typical midsize body shop tied to a dealership. It’s about 8,000 square feet with enough parking but tight. It has a small front office with the basic setup: counter up front, office in back and a couple windows looking into the shop. The footprint of the shop is typical, too: a main shop, open and square, with several garage doors. The paint shop is adjacent to the main shop and has its own bay doors and a man door connecting the two. The shop has a couple racks and a UMS, several lifts, a downdraft, some welders, some pots and posts… nothing fancy but workable.
The shop has been around for quite some time and has seen several different owners. At one point, it was a pretty big player in the market with many strong insurer referral relationships. It used to turn quite a bit of cash, too, and even ran a second shift for production. But over time, as ownership changed, the business lost its focus. Today, it’s a pretty small player, mainly around just to service the dealership’s inventory. This situation is not unlike the bulk of other dealership shops – collision was just not the core business of the organization and became more difficult to manage. It struggled to stay on top of changes in the market with DRPs, equipment, training, operating models and management.

By the time we got there, the shop was down to just three employees that included a semi-working (ex-tech) manager and secretary. All were fairly well tenured and comfortable with their situations. The shop had lost all but one of its DRPs (and a small one at that). It was turning around $60,000 per month in revenue with about two to three collision repairs per week and the rest internal work. There was no profit being generated, although the books indicated otherwise. No, it wasn’t a case of unscrupulous accounting, it’s just that dealership shops usually account for their body department’s overhead as a percentage of their total expense. And these numbers are rarely accurate. So, when we applied typical costs as if the body shop was a stand-alone business, it was in the red.

The current owner of the organization was an aggressive and smart young guy who liked the idea of establishing a relationship with a professional collision repair organization. He had a clear understanding of what he does and does not do well organizationally, and the damage that could be done by continuing to operate the same old way. He saw the value that we could bring and believed that a good collision repair organization would strengthen his own brand. With that, we set out to transform the shop into a new “lean” collision repair service.

Beyond all these things were our objectives. First came the basic stuff: What did the market have to bear? Who was the competition? Where were the DRPs? What could we draw from the existing customer base? What were the needs of the facility? What resources would we need to add or train? What was the shop’s reputation in the market?

Next was the bigger stuff: How would we get to where we wanted to be? Where we wanted to be was: 15 to 20 percent net, “all in-real” cycle time of less than five days (seven-day weeks, drop-off to pickup), $1.2 million in revenue the first year and a Customer Satisfaction Index quality and total average greater than 99 percent. We wanted this shop to be a self-managed operation requiring less than two or three days per month of oversight and working each month on improving its collision repair process. We also wanted it to be place that people were happy and excited about working at.

Move-In Day

So now that you know what square one looks like, let’s jump to move-in day. It’s the day after the International Autobody Congress and Exposition (NACE) and I’m fresh as a daisy. Not! Anyone who was hanging out at the brew pub in the Monte Carlo knows the truth.

Anyway, I had only had one conversation with the existing crew before that day, and that little talk didn’t go very well. In fact, the manager quit the following morning with no notice. The rest of the crew were, needless to say, concerned. We finished signing all of our agreements in the morning and then pulled the crew together. The message to them at our prior meeting had been short and sweet: “We’re taking over the business and everyone will be offered a job at their same wages, benefits and tenures.” That’s about it – no “lean” talk of kaizen or kanbans, just trying to ease their fears.

The customer must be the architect of your process. That means you need to decide who they are and know specifically what they want.

The second meeting, we decided, would be different. We were going to rip off the Band-Aid, which is usually best done without notice. Just grab it and pull hard. But before we go here, let me step back.

For an organization that’s new to lean, you wouldn’t start here. You would start with the first two fundamentals:

  • The customer must be the architect of your process. That means you need to decide who they are and know specifically what they want.
  • Value must be determined from the standpoint of the final customer. This means that you need to thoroughly map out and understand exactly what you do today and how much of it adds “value” (a task the customer is willing to pay for) to this customer you have defined.

You can go back and read prior articles that cover this in BodyShop Business, but essentially you need to know roughly what your process is going to look like. You have an outline of the new business you’re building. For us, we know the outline, but we don’t know the specifics. Lean is far from a cookie- cutter approach. In fact, the only thing that’s the same is the way we think about things. We use the same thought process and beliefs about how a business works, but the tasks themselves are usually irrelevant.

The 5S Strategy

So the Band-Aid gets torn off. This activity is more associated with getting the facility ready than it is getting the minds ready. It’s like planting a garden: You don’t just drop seeds on the ground and expect success, you first turn and prepare the soil. Your facility itself is your collision repair machine. It’s about to get a new engine, so you better make sure it’s going to be able to support it. The next step is to begin the 5S strategy, which is named for five steps beginning with the letter “S”: sort, straighten, scrub, stabilize and sustain.

– This means look at what you have, where it is, what’s needed and what’s not. Sort through everything and determine what’s important and what’s not. Prioritize not just tools but also people and process.

– This means reorganize it all. Where do things belong? What are we going to use and what will we no longer need? What’s used most frequently and least frequently? Determine the proper place for everything, then put it there. Rearrange items so that they’re easily seen and accessible.

– This one’s simple. Clean it, repair it, replace it. Make everything right and in proper working order. That means everything…tools, equipment, floors and walls inside and out. Make cleaning and maintenance a normal part of everyone’s work.

– This means creating rules and expectations about housekeeping and physically supporting those rules, i.e. have brooms, trash cans, hoses and dustpans all in the area you wanted cleaned.

– This means making 5S stick – mistake-proofing these activities and managing with an approach that views these activities as critically important.

With that understanding, here’s the approach. There’s so much about “lean” that’s counterintuitive and goes against what your gut says is right that you’re better served by just “doing” than trying to explain your way through it. If your store leaders are newcomers to lean, then obviously you have to spend some time getting them to understand what’s about to happen. This can be to whatever level you like, but the gist of the message should be, “Just please do as I say right now…We have very little time…You will only truly understand by seeing this in action. So doing now is more important than talking.”

Conversion Plan

OK, so back to day one. Everyone was pulled together and wondering what just happened as well as what will happen next. First, we got the basics out of the way with the team, which usually sounds like this: “I assume you all want to stay here because you’re here today, and that’s great. We’ll sit one-on-one and go over the human resources details together.” You obviously need to get any compensation concerns out the way up front, but our approach is kept simple: “Everyone stays the same, we’ll talk about the rest later.” Clearly, that means guaranteed wages for now. Once we have that cleared up, it’s on to immediate 5S.

Remember, the word “kaizen” is usually translated as “break to make better,” so get to breaking.

The first step is always a shocker: Shut it down immediately. The conversation goes like this: “Here’s what we’re going to do. General Manager, today you cover the front and deal with any customers. I’ll give you a tech to bail you out if needed, but otherwise call every customer and apologize now. Set back every target date a week, buy rentals where you have to, then call every scheduled customer and reschedule until next week.” Clearly, this is a painful message, so you’re better off not giving the manager any notice about this. There will be too many reasons “why not,” emergencies and exceptions why you shouldn’t “just do it.” So on day one, just shut it down.

Remember, the word “kaizen” is usually translated as “break to make better,” so get to breaking. I know this sounds aggressive, but there really is no better way to change than to just get it done, so why wait? For us, day one is about tearing the thing apart and quickly putting it back together in a better way. No matter how you look at it, there’s never a good time, so now is as good a time as any…right?

Here’s what the conversion plan looks like:

Week 1

  • Gut and clean facility
  • Train every day at lunch
  • Clean up the “old way” work

Week 2

  • Rebuild the shop
  • Develop the new way
  • Train at high level
  • Train at each position
  • Start bringing back work

Week 3

  • Train each day
  • Flow work the new way
  • Stop and fix problems
  • Stabilize the process

The keys to getting through a conversion are:

  1. Be confident. This is uncomfortable for everyone, and they need to know everything is going to be OK.
  2. Keep everyone busy. Have “something to do” ready for everyone.
  3. Keep it focused on the “right now.” Don’t talk about how much work is required or is ahead of everyone – it’s a one-day-at-a-time thing.

For the crew, the first day needs to demonstrate or reinforce that this is going to be a new and better way. We start by focusing on the things that make immediate sense to them. We’ll ask them to pull every car out and park/secure them in the lot. Then, we ask them to start organizing their own tools and tool boxes: take them all out and clean them, put them back together in a simple and organized way, clean the tool boxes. Make them visual, easy to use and easy to move.

Next, it’s cleanup. That means everything. Take the place down to the bare walls and floors. Just start making piles – equipment, materials and trash. Keep it to the basics and don’t stress over subsets.

I think these three steps summarize the whole thing. For example, do you keep stuff that you may use one day or used to use? Do you save old parts? Just eliminate it all. You want to sort through the business and peel it back to just the things you need and nothing else. The cost of managing clutter from storing rarely used or extra stuff is always greater than the cost of just buying it. This entire activity is a team event and you need to move through it in a day. Have everyone involved and stay busy with it.

Next is straighten. Look at what you have. What’s actually needed? Look at materials alone. Spend no more than an hour and decide what’s staying and what’s going. Once you know, make two piles, a keep and a junk, and throw out the junk. Don’t hang on to it or let people “take it later”…it all goes today. If you’re a pack rat… just forget all this stuff and move to the next article now. Think through how you’re going to organize this stuff now. Where does everything go? Shouldn’t everything go in the place it’s going to be used? Don’t build a new way where transporting stuff multiple times is built in. Make it simple, visual and easy to understand.

Next, it’s scrub time. For the piles, have the team go through them all and clean or make right all the individual things in it. That means fix it, paint it, whatever. Do it all: cabinets, desks, anything you’re keeping. The same goes for the shop. Clean from the top down. The ceiling, the lights, the walls, the floors, the lot. Wash it, sweep it, paint it. Replace the bad bulbs and leaky lines. Leave nothing behind. Make simple rules for everyone: “You take this space and clean it, paint it or fix it. There’s no need to ask me if you should…permission is already granted.”

If you think this is expensive, it’s not. It probably costs less than $1,000 for cleaning supplies. And we were typically through this part in just a few days. It’s a powerful message to your people and customers: “Things are different now! Don’t miss this opportunity to quickly and easily take a giant step forward.”

Next, it’s stabilize. The motto should be, “A place for everything and everything in its place”…literally. Everything needs a home, and that home needs to be easily and visually understood by all. No one will need to ever again wonder where anything is, where it belongs, if it’s available for use or if it’s in proper working condition. That’s what stabilizing is all about: The important parts of your machine are now dependable. These images should help convey the message.

Lastly, we sustain. There needs to be a “built-in” expectation about the new way. That means we have to make it harder to do it the wrong way. For example, if everything has a home, then never build in a summer home. For example, if you put in a new work bench, how quickly would something random get placed on it? Five minutes? So don’t have any extra benches or tables or whatever. How about instructions for use on equipment? Laminate a sign on the shop equipment that states how it’s to be cleaned and maintained after each use. What about shadow boards? Don’t give vague instructions on where things belong…be exact!

As you can see, these rules apply to the entire organization. And as I said earlier, you must build the chassis before you install the race engine. Don’t skip or do this part halfway. This is the foundation for performance – if it’s weak, then everything you build from there will be questionable. The truth is that you won’t get very far without this part, so it’s much simpler to take this aggressive approach and get it all done quickly.

Making Progress

What happened with our recent project? It took us about two weeks to get through the work. We wound up delivering about one-fourth of the normal output of the shop in the first month, but the second month we did nearly double the old volume. The first two months combined were slightly up over the old average. Other performance for us over this period?

Cycle time
– Horrible for the first month. About 18 days average. But by the middle of month two, it was down to six days and averaged about 11 for the two months combined (slightly better than the national average of 13).

– OK, plenty of early trouble, but by the end of the first two months, things were beginning to click very

– None. But without startup costs, even with a couple weeks down we actually increased over the old average (very close to break even).

Self-managed operation
– Not a chance.

Happy employees
– I think we’re well on the way. We’ve got an excited crew and a mutually respectful working environment.

Next time we’ll talk about training and implementing the lean production process itself, how it affects the people and some of the early results. As always, feel free to e-mail with questions.

Contributing editor John Sweigart is a principal partner in The Body Shop @ (www.thebodyshop-at.com). Along with his business partner, Brad Sullivan, they own and operate collision repair shops inside new car dealerships, as well as consult to the industry. Sweigart has spent 21 years in the collision repair industry and has done everything from being an independent shop owner to a dealership shop manager to a store, regional and, ultimately, national director of operations for Sterling Collision Centers. Both Sweigart and Sullivan have worked closely with former manufacturing executives from Federal-Mogul, Morton Thiokol and Pratt & Whitney in understanding and implementing the principles of the Toyota Production System. You can e-mail Sweigart at [email protected].

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