If you haven’t noticed, auto claims frequency has been steadily declining.
What does that mean to you? It means that less and less volume (supply) is available to each market, causing a lowering of prices (Economics 101). And the purchasers of services can expect a reduction in their costs due to the increase of competition to get their dollars.
Is this the correct way to handle the decreasing supply of, in this case, wreck jobs, available? Definitely not, but that’s a whole other issue. This article is about the “pain” this trend causes those who keep doing business the same way they always have, as well as the opportunities this paradigm brings.
The main reason for the increasing pain is because we haven’t dedicated our efforts to change the fundamental approach to repairing vehicles. We’ve certainly updated to advanced equipment, but the process of how the vehicle is repaired (in stalls) isn’t much different than when carriage builders opened the first “body shops.”
What I’m proposing is industry-wide change. I suggest you review the past four articles in this series on industrialization, published in the November 1999, January 2000, January 2001 and January 2002 issues of BodyShop Business. If you don’t
still have them – I assume everyone is like me and never throws anything away – you can read them at www.bodyshopbusiness.com by searching back issues of BSB using the key word, “Industrialization,” or you can read them on
my Web site at www.aeii.net/published.html.
A Different Model to Learn From
Sterling has built several “purpose built” facilities across the country. Some say they’re successful; some say they aren’t.
Regardless of who’s right, by examining their systems, we can become better providers of services to our customers (whether you consider the customer to be the vehicle owner and/or the insurer).
Some of Sterling’s systems are designed to reduce the common waste issues that exist in almost every shop I’ve reviewed and visited worldwide. These issues cost a great deal of money to perpetuate. And the fact is, the business model has changed.
What used to be: COST + PROFIT = PRICE is now PRICE – COST = PROFIT.
This is what’s causing the “pain” for many. Pricing is controlled by market conditions, which include an effect from a lessening supply from the actual source – due to lower frequency, customer reluctance due to the economy and priorities, and market share increases by progressive service providers utilizing better marketing and tighter work-provider agreements.
The way to prosper in this business model is to get control of your business costs, which leaves more profit.
I’m not talking about your telephone bills, utilities, indirect labor, insurance, etc., even though you should have each of these areas examined by an outside resource. I’m talking about your cost of how you’re operating your business – the very way you process vehicles, customers and claims. This is hard for most to grasp because they see no other way to do it. But there is!
Proofing and Parts Processing
Sterling uses many of the industrialized ideas I’ve written about in articles and taught in seminars. There are two that I want to stress in this article.
Repair & Mechanical Department – Detail View,
Light & Medium Repair Dept. – Detail View,
Refinish Dept. – Detail View
The first idea is to properly “blueprint,” “stage” or “proof” the vehicles before they’re incorporated into the process. This one step, if you get it right, can increase your profit significantly. But most only talk about it, say they do it (but really don’t) or do it part time.
This concept has been taught for more than seven years, yet it’s still not commonplace in our industry: Don’t put a vehicle into production unless you have the variations under control.
Putting vehicles into production with variations increases all types of costs, such as labor (costs associated with stopping and starting a job), inventory (space for vehicles, parts and the costs for such), administrative (supplements, parts ordering additionals, errors for such, carrying costs) and throughput.
Another very basic process that’s incorporated into the Sterling model is in the parts processing: Don’t start a repair without all the parts there and verified.
This, too, is very simple to say, but is even more scarcely performed in our industry than staging – even in some Sterling shops.
Why do we bring vehicles into a work area, only to let them sit for days because parts aren’t available or arrive damaged or incorrect? Is it because we wish to keep techs “busy,” even though they’re constantly stopping and starting? Do we enjoy rushing to get the correct headlight, trim piece or molding 30 minutes before the customer is due to arrive?
Instead, simply verify every part to the vehicle before it goes into
I’ve said it before and I’m about to say it again – current management techniques and procedures most often restrict the efficient operation of the production staff, rather than improve it. And this costs a tremendous amount of money every day on every job.
However, the “pain” today apparently doesn’t hurt enough for most shops to stop the madness. If the pain were great enough, our U.S. shop count would be dropping like flies. Even though it is declining, there’s still a lot of room to “make a buck” doing the same old thing the same old way.
Examining Shop Layout
I’ve covered many shop processes in my four prior articles, but the one area I haven’t addressed is the physical layout of the operation.
First, keep in mind that no person wanting to create an efficient process will buy a building with the idea of “fitting” a process into it. The building must fit the process. Of course, this makes a lot of money for consultants, since the majority of business owners do the opposite and then try to get someone to fix the problems.
If the process is a major departure from the one currently in place, changing the layout radically may be necessary so the system doesn’t drift back to what it was before. This new layout and thinking utilizes process-improvement concepts of Kaizen, the Theory of Constraints (TOC) and ISO9000:2000 standardization.
The present systems we have in place don’t address many fundamental issues that cause waste (expense). We often see them as unavoidable obstacles that we maneuver around rather than address. Yet positioning work in the most effective position has been addressed by many industrialized systems for more than 100 years.
Utilizing Linear Processing
Industrialization almost always includes an assembly-line process, hence linear processing (same thing). In a linear-processing layout, variations must be controlled, or production will stop or be hindered. This is one of the main reasons I’ve been an advocate of linear processing; it forces the issue – you MUST get the variations out at the beginning.
This concept is like an assembly line; vehicles don’t sit in work bays with conventional aisles, as just about every dealership service department is configured. In a conventional layout, most technicians have two or more work bays, so vehicles can sit as long as the inefficient processes let them sit.
But no person can work on two vehicles at the same time, and the remote possibility of jumping back and forth from vehicle to vehicle usually is eliminated by the technician going to get or return parts, finding someone to look at the additional damage or missing items he’s found or taking a coffee/smoke break.
Putting vehicles in a linear sequence requires planning both by management and technicians. This planning alone causes processes to improve.
Many shops have used linear processing in the paint department because once the vehicle gets to refinishing, most variation has been addressed. But not many shops have explored linear processing in the metal department. Why? Because they don’t understand how to manage or implement it. This is probably due to our industry’s lack of formal training in manufacturing concepts and a lack of pressure to find a better way.
Most of the breakthrough strategies have been developed as a result of radical survival needs. We haven’t gotten there yet, but those who continue to resist changes are certainly heading in that direction.
Categorizing by Severity
Linear processing requires that the vehicles be categorized by severity (or resource utilization). And if manpower can shift from one area to another (cross functional), the system can handle minor to medium fluctuation in severity with little challenges.
Basic categories of severity are typically defined based on the need for time (labor) and a limiting resource, such as a frame rack, measuring device, etc.
An example we use with many clients is:
Light Damage, Category 1:
No mechanical work required.
No structural needs.
No pulling needs with hydraulic
No weld-on panel replacement.
– Paint-only vehicles to R&I trim
(up to three major panels).
– Replacement of three major bolt-on panels.
– Repair of up to three major panels.
– Minor welding only for repair panels.
Total time for combination of
above – less than 12 hours.
Medium Damage, Category 2:
Structure damage to upper damage
only (no frame rail damage).
Pulling limited to upper or weld-on
Minor mechanical disassembly or
Minimal interior disassembly.
Replacement of up to two weld-on major outer panels groups – excluding roof panels, A-pillar, B-pillar, C-pillar and rocker panel.
Repair of more than three major panels exceeding 12 hours.
Heavy Damage, Category 3:
Structural damage to lower control
points or rollover-type damage.
Replacement of roof panels, A-pil-
lar, B-pillar, C-pillar, rocker panels,
frame rails, aprons, floor panels.
Removal of engine or suspension.
Requires major mechanical work.
Mechanical Work, Category 4:
Majority mechanical work (sublet
Fleet Repairs, Category 5:
Wholesale repairs performed for fleet companies.
Corporate accounts for fleet.
Aluminum Vehicle Repairs, Category 6:
Aluminum vehicles only.
Theft Recoveries, Category 7:
Generally includes radios, glass, steering columns.
Parts, Category 8:
Normally dealer-referred parts replacement and refinish.
Generally items such as mirrors, moldings, etc.
Normally vehicle is not with parts.
This categorizing begins to assist with scheduling as well.
Understanding Vehicle Mix
No system that’s been designed expecting a certain “range” of work can effectively handle a high frequency of “out of range” work. In other words, if you expect an average of three panels per vehicle to be refinished, allowing for a booth utilization of six per day, you’ll have major problems if 100 hail jobs requiring almost complete overall paint jobs show up on your door step, and you don’t modify or add another system.
In these cases, you can’t add enough staff or shifts on demand to handle even the differences in prep time to have the vehicles ready for paint. Not to mention, now the whole system is concentrating on this type of damage and not handling the typical damages.
For this reason, many shop owners are trying to dedicate facilities – or part of facilities with dedicated resources separate from others within the shop – to segregate severity types from each other.
This can be accomplished with separate locations of larger buildings broken down into areas. Then you can implement category lanes, so that larger (Category 3) jobs can be handled separately and even “down repaired” to fit into a medium or light repair lane.
A linear system keeps everyone focused on the process, since when vehicles are placed in line, it’s very visual as to what needs to be accomplished when. And it’s very hard for a vehicle to “fall between the cracks” and get forgotten when it stops four vehicles behind it.
The following shop layout and process flow was set up in Malaysia a couple of years ago during a project by Ford Motor Company. Since then, we’ve implemented similar pieces of the layout and process (more often in the paint departments and fast-track lanes) in the United States and Canada.
The main production departments for this system are:
Heavy, Category 3 and Mechanical Repairs: The Heavy Repair and Mechanical Department diagram outlines an area of a facility dedicated to handle the more severely damaged vehicles and mechanical work. This isn’t much different than what we’ve done for 40 years. The photos with it illustrate how the diagram becomes a reality.
Light and Medium, Category 1 and 2: This begins the departure from conventional job-shop thinking and introduces the linear-processing concepts that have been utilized in manufacturing for many, many years. The Light and Medium Repair Department diagram outlines a five-lane system that includes lane categorization based on severity. The photos with it illustrate how the diagram becomes a reality.
Two lanes were designed with no floor pulling capabilities due to budgeting constraints. This could be a factor if the vehicle severity increased and the need for the “quick pull” was increased. The concept of each lane is to be loaded according to severity, even within each category. In other words, the lanes would be loaded with the lightest repair at the top lanes and the heaviest (Category 2) at the bottom.
The vehicle lanes all begin with the staging before entering the disassembly lanes. Disassembly may be necessary at the staging locations (LM1c and LM1d). Once the vehicle enters the production lane, it moves forward through the processes.
Preparation and Refinishing: As I mentioned earlier, linear design is more common in the paint department. The key distinction here is the extensive breakdown of individual stages within the refinishing process. Normally there’s a pre-preparation area, the prep station and then the booth. If the booth isn’t positioned to be a drive-through, an extra stall is required so the vehicle can be removed from the booth. But this hinders everything. So if drive-through booths aren’t an option, side loads should be used so the vehicle doesn’t have to ever go backward.
The Refinish Department diagram clearly shows the addition of vehicle placeholders for when volume increases to handle variations of severity upon demand. The system also uses IRT drying units – both portable (in front of the priming stations) and as a separate drying oven in front of the spraybooths – to assist in the speed of processing. The photos show how the diagram translates into reality.
Light reassembly is handled outside each drying oven while heavy reassembly is brought back to the heavy reassembly area only a few feet away. (We’ll address the administrative and pre-production areas in a later article.)
Quality control is the key to successfully making these changes – it’s what assists in driving down the waste (costs).
For example, before the vehicle moves to the next stage, it must be accepted by that next stage in the hand-off process. It’s been proven time and time again that inspecting for quality at the end of the job does not work!
To improve quality, quality must be built into the system and into the hand-off process. You can find very valuable information about quality improvements at www.qasidirect.com and www.VerifactsAuto.com.
Both of these Web sites provide tools and systems to make major quality improvements. And if you improve quality, you almost always reduce costs.
You can also check out more information at www.TheBOSs-Online.com.
Those of you who understand that reducing costs increases profits will be in a position to take advantage of the new opportunities it brings. Those of you who don’t will certainly continue to feel the pain and will have a difficult time competing – as repair dollars continue to shrink and competition continues to grow.
Contributing Editor Tony Passwater is president of AEII, an international consulting, training and system-development organization specializing in the collision repair industry. He’s been in the industry since 1972; has been a collision repair facility owner, vocational educator and I-CAR International Instructor; and has taught seminars and worked with clients across North America, South America, Australia, Malaysia, Korea and China. He can be contacted at (317) 290-0611 or at [email protected] Visit his Web site at www.aeii.net for more information.