Blueprints for Success: A Plan for Profits - BodyShop Business
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Blueprints for Success: A Plan for Profits

Floor plans lay the groundwork for production, but other factors build on this foundation. To construct a solid business – brick by brick – learn how four shops implemented a plan for profits.

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When most shop owners ended their fiscal year
and found that their profits had shrunk, stayed the same or only
increased slightly in ’97, some owners began analyzing their operations.

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What could they do to decrease the time they
were personally putting in, trying to make their businesses run
smoother and more profitably? Why are most shop owners putting
in more time these days, yet going home with less profits? And
why is it that some owners feel they’re waging a losing battle
with insurance companies and competition, while others are smiling
all the way to the bank?

It all comes down to productivity. Sounds
simple enough, but if it were, everyone would be smiling all the
way to the bank. The fact is, productivity is the result of many
factors, such as shop design, employee performance, work procedures,
estimate writing, use of technology and more.

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But knowing what areas affect productivity
is only half the battle; a shop owner also needs be able to identify
– and fix – a shop’s problem areas.

To illustrate this, we’ll examine four shops
– small, medium, large and mega – and take a detailed look at
the problems they experienced and some of the creative things
they did – with my help – to improve their operations.

Shop No. 1: A Small Facility That Was Slowly
Dying

Shop No. 1 is a 4,000-square-foot operation
that was producing an average of five vehicles per week. Its building
is a typical rectangle layout with about 1,000 square feet of
space lost to office, restrooms and storage – leaving about 3,000
square feet for production. The business grosses approximately
$400,000 in total sales – a figure that hasn’t changed in the
past five years.

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The shop has two body technicians, one painter,
one part-time shop helper and the owner. The shop is equipped
with a small frame-pulling system (usually no current books or
frame charts to work with); a manual frame-measuring system that
hasn’t been used in years, along with obsolete tooling; an old
crossdraft paint booth in need of major repairs; a paint-mixing
system that shows signs of abuse; an overabundance of paint mixes
stacked around the paint area; and most of the necessary shop-supplied
tools.

The office space is cluttered with parts and
paper work. (No computer – it wouldn’t have survived the dust
and dirt!) The shop isn’t computerized, so most of its estimates
are handwritten, except the ones the insurance company sends in.
The technicians were once certified but haven’t been to any training
in years – they feel they don’t need additional training, and
the owner feels he can’t afford to pay for their training.

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The owner recognized that his business was
slowly dying, but he blamed insurance companies and competition
for his business losses. To help offset these losses – and increase
sales and profits – the owner’s first thought was to add on to
his business, but the cost of an addition was more than he wanted
to spend.

So what did he do? What many shop owners do:
He settled for status quo and, eventually, if things hadn’t improved,
probably would’ve had to sell or close his doors.

As an outsider looking in, it’s easy for us
to see the many things the owner should have done, but the problem
was, the owner was overwhelmed by all the little problems he encountered
daily. Fortunately for him, he realized where his shop was headed,
recognized that he couldn’t fix the problems alone and brought
in help.

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The first thing we did to improve his shop’s
overall business was to look at his building’s design. This particular
shop’s layout left little room for improvements, so we installed
a door at the rear of the building to allow for finished vehicles
to exit. By adding this exit, we reduced the need to move around
vehicles to get the finished ones out.

Because this was the only design improvement
that could be made to this shop (the owner is unable to expand
due to lack of land) we concentrated on revising how the owner
operated his shop.


SHOP 1
This 4,000-square-foot operation
produced an average of five vehicles per week and grossed approximately $400,000 per year before being overhauled
.

To maximize productivity, we identified all
the areas that could be changed with little or marginal costs,
and then we:

  1. Cleaned up the shop and office.
  2. Sent the owner out for formal training on estimate writing.
  3. Started a bench mark for the business.
  4. Trained the painter on mixing only the amount of paint needed
    and on color-matching procedures.
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  • Consolidated the paint mixes by color family to use as ground
    coats.

  • Quit ordering paint cans and began ordering paint-mixing cups.
  • Cleaned and sealed the paint booth.
  • Fixed the lighting in the paint booth.
  • Installed new filters in the paint booth.
  • Painted the inside of the shop a light color.
  • Cleaned the lighting in the shop.
  • Had the owner change his work clothes from a work uniform
    to casual clothes.

  • Initiated a morning production meeting with the workers.
  • Set firm start times, lunch breaks and quitting times.
  • Set shop production goals.

    These improvements took two weeks to complete and cost less than
    $2,000 – and there was immediate payback, such as reduced paint
    waste, fewer paint reworks and improved overall quality and throughput.
    For example, the shop went from five vehicles per week to seven
    vehicles per week, and the goal is to increase another three vehicles
    per week for a total of 10.

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    Let’s look at some of the changes we made – and their resulting
    improvements – in greater detail.

    • After the owner returned from estimating training, he was
      able to write more profitable estimates and understand the estimates
      sent to him from insurance companies. He also had more confidence
      in his estimating and selling abilities, which showed up in the
      increased profits per estimate and scheduling of work.

    • The painter was our hardest technician to change (we trained
      him on paint mixing and matching) and he still slips back into
      old habits now and then, but the owner is now able to recognize
      what’s happening before it gets out of control.
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  • By cleaning and fixing the lighting in the paint booth, the
    painter was able to do better paint matching and reduce sand and
    buff time.

  • Painting the inside of the shop, and cleaning and fixing the
    lighting improved employee morale and productivity. It allowed
    the workers to see what they were working on, which enabled them
    to do a better job the first time.

  • I’m sure you wondered about the clothing change I recommended
    for the owner. By having him dress more professional, the owner
    began getting more respect from his employees – who stopped treating
    him like one of them. Now, the workers listen to what he has to
    say and follow his direction better. He stopped being their buddy
    and became their boss. (Remember, if you dress like an employee,
    the rest of the employees will treat you like one.)

    After accomplishing these initial tasks, we then set up some strategic
    re-engineering of the shop, which included technician training,
    computerization, job costing, bench marking, equipment updating,
    marketing and, at the end, expansion. If the owner can stay focused
    and track his profitability, his business will continue to grow.

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    Shop No. 2: A Medium Facility That Seemed Well-Run

    Shop No. 2 is a 10,000-square-foot operation that was producing
    five to six vehicles per day. The building is the standard rectangular
    layout with about 2,000 square feet lost to office, restrooms
    and storage – leaving 8,000 square feet for production (the owner
    used to store his boat and his sports car in the shop, which
    took up valuable production space, until someone recommended he
    rent a different storage area for them).

    The shop grosses approximately $1.6 million per year in total
    sales and employs eight body technicians, two paint technicians
    and two paint helpers, along with one receptionist, one data processor,
    two estimators and the owner.


    SHOP 2
    This 10,000-square-foot
    operation produced five to six vehicles per day and grossed approximately $1.6 million per
    year before getting organized.

    As for equipment, the shop has two frame benches, a manual measuring
    system, one vehicle lift, a computerized paint-mix system and
    two downdraft paint booths (the shop originally had only one crossdraft
    paint booth but upgraded to two downdraft paint booths. To fit
    these booths, along with a paint-mix area, the shop had to locate
    the booths’ machinery on the exterior of the building and build
    around the machinery). The office has been computerized for several
    years and has three estimating programs. The shop also belongs
    to three major direct repair programs (DRPs).

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    The business had the appearance of a well-organized operation,
    but it was overwhelmed by reduced profits, production bottlenecks,
    delayed delivery of completed vehicles, a low customer satisfaction
    index, increased employee turnover and low worker output – leading
    to lower-than-necessary profits.

    Over the last few years, the owner had watched his sales go up,
    but was now watching them go down. He had lost control of his
    operation and was finding that everything he attempted to change
    didn’t seem to affect the business’ bottom line. For example,
    the paint area was a major bottleneck until the downdraft booths
    were installed – but the paint area was only part of the shop’s
    problem; much of the profit losses came from the way the business
    was operated.

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    As we looked at this shop, we investigated the major items that
    directly affected profits, starting with office operations. The
    following are office problems we discovered:

    1. Estimators weren’t upselling additional repairs.
    2. Estimators weren’t utilizing p-page logic to get additional
      paid labor.

    3. Estimators weren’t going over insurance-supplied estimates
      to analyze for profitability.

    4. Estimators weren’t negotiating with insurance companies for
      additional labor time.

    5. Scheduling of work wasn’t accurate.
    6. The office didn’t have any production meetings to discuss
      needed production and profitability.

    7. Office discipline was nonexistent; there were no consequences
      for not doing a job thoroughly.

    The next area of investigation was the production area, where
    we encountered the following problem areas:

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    1. The shop was abnormally cluttered with old parts the technicians
      had stacked along the walls.

    2. Technician attitudes were at an all-time low.
    3. Technician quality was inconsistent.
    4. Technician output was below average.
    5. Technicians were wasteful with paint and supplies.
    6. Frame equipment lacked tooling.
    7. The measuring system wasn’t in working order.
    8. Paint booths were in need of heavy maintenance – partly because
      there was no scheduled maintenance system.

    9. An excessive amount of mixed paint had accumulated in the
      cabinets.

    10. An excessive amount of paint rework occurred due to color
      matching.

    11. An excessive amount of paint rework occurred due to dirt and
      runs in the paint.

    12. Excessive amounts of sanding and buffing were being done.

    With the problem areas identified, we needed to put together a
    plan to overhaul the operation; the toughest part of this was
    convincing the owner to make the necessary changes because he
    wanted to start out slow so production wouldn’t be disrupted.
    Once the owner came around, we were ready to start reorganizing.

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    The first item on the agenda was to have a meeting with all the
    employees to discuss the changes they’d be encountering. (This
    turned into quite a discussion, with a lot of negative comments
    being made by employees who felt the shop could never be changed
    for the better.)

    After the meeting, we began making immediate changes. We:

    • Scheduled the estimators for training and then worked with
      the estimators on upselling additional repairs in the blend areas,
      along with any additional damage that wasn’t accident related.

    • Reorganized scheduling procedures with realistic completion
      dates (time frames the shop could meet

    • consistently).
    • Implemented daily production (release) meetings to discuss
      the status of work inside and outside the shop, and assigned each
      job to the estimators to track through the repair process; this
      way they always knew the status of the vehicles being repaired.
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  • Compiled a handbook of procedures for the office operation,
    along with a flowchart so each of the office staff knew exactly
    what he should be doing and how to do it.

  • Worked with a human resources consultant to implement a disciplinary
    program that would allow the owner to impartially evaluate each
    employee; it also allowed the owner to be more objective and fair.

  • Compiled a quality guideline and inspection process and form
    to preinspect the cars before the customers picked them up.

  • Utilized the shop management program for job costing, customer
    tracking, parts ordering and most of the management reporting
    and accounting procedures, including a bench-marking process.
    Although the office operation has a long way to go, it’s headed
    in the right direction.

    With those changes implemented, we then focused our attention
    on the production area. Here, we:

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    • Did some housekeeping in the production area by cleaning the
      shop wall to wall, along with cleaning the lighting and fixing
      all air and electrical outlets.

    • Consolidated all the unused mixed paint by color family to
      use as ground coats, and eliminated the paint-mixing cans and
      replaced them with mixing cups to reduce the overmixing of color.

    • Provided the training to the painters on paint-mixing procedures
      and color matching, and scheduled them for paint school with the
      help of the jobber (it’s important for shop owners to involve
      their PBE jobber in shop changes and enlist his help).

    By working with the paint technicians and helpers, we were able
    to change their attitudes and improve their productivity and quality.
    (I’ve found that a little attention goes a long way when working
    with technicians; listen closely to what they say, and they’ll
    tell you why their performance is low.)

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    From here, we moved on to the body technicians and looked at their
    work habits and procedures. (At this point, the entire shop was
    ready for the changes, and attitudes were very positive – which
    made a major improvement in the output of all the technicians.)

    For the most part, the body technicians were producing a fair
    product but were finding the poor frame equipment to be a major
    problem. To overcome this, we scheduled some frame equipment demonstrations
    to which we took the senior technicians to get their input on
    the best system for the shop. (The owner is also considering other
    new equipment and plans to purchase at least one frame and computerized
    measuring system in the near future.)

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    Because of all the changes made, we took technicians who were
    averaging 60 to 75 hours of flat-rate production and increased
    their averages to 80 to 150 hours of production. Also, the gross
    profits on paint and materials increased from a minus to a fair
    plus side, and we reduced the amount of hazardous waste.

    The shop then renegotiated with several insurance company DRPs
    to relieve the waiting game for adjusters to show up for vehicle
    inspections – another area that has helped to improve throughput
    and profitability. The estimators have contributed here, too,
    by increasing the profitability of their estimates and improving
    their upselling skills.

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    Everyone at this shop has worked very hard to make the changes
    a success, and the owner will see a modest improvement in his
    bottom line this year. The shop should have ended last year at
    about $2.2 million in total sales – which is right on target for
    a shop this size – and this year will be a very good year if the
    owner keeps on course with his operational plans.

    Shop No. 3: A Large Facility That Lacked Discipline

    Shop No. 3 is a 17,000-square-foot operation that was producing
    an average of eight vehicles per day. The building is the standard
    rectangular layout with about 2,000 square feet lost to office,
    restrooms and storage; this leaves 8,000 square feet for body
    repair production and 6,000 square feet for paint production (an
    additional 7,000-square-foot paint department is located off site
    about a half-mile away).

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    The body repair shop layout leaves little room for improvement,
    and the paint shop is a conglomeration of five different additions
    – and was the starting shop of this organization. With varying
    floor heights and multiple ceiling heights, all of which are too
    low for a paint booth, this shop has to utilize the spray areas
    as they are and rely on infrared curing lamps to obtain the throughput
    needed to meet its goals. This shop is in need of a total rebuild
    to bring the total operation under one roof, but before this can
    happen, the shop needs to become organized and profitable.

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    The business does approximately $2.3 million in total sales, and
    it employs eight body technicians, two paint technicians, a working
    paint supervisor, three paint helpers and one porter/detail person,
    along with one receptionist, two data processors, two estimators,
    a parts-ordering person, a supplemental writer/tow-in estimator
    and the owner.

    The shop is equipped with two frame benches, manual measuring
    equipment, one prep station, one downdraft paint booth, a double-stall
    paint room and a computerized paint-mix system. The office has
    been computerized for several years. The shop also has three estimating
    programs and belongs to five major DRPs.


    SHOP 3 – Main Building
    This 17,000-square-foot operation
    produced an average of eight vehicles per day and grossed approximately
    $2.3 million per year – but hadn’t yet achieved its profit potential due to a long
    list of problems

    As with the medium shop, this shop appears well-organized but
    was also overwhelmed by reduced profits, production bottlenecks,
    delayed delivery of completed vehicles, low customer satisfaction
    index and low worker output – leading to lower-than-needed profits.
    This owner, too, has witnessed his sales over the last few years
    go up – and then go back down. And regardless of what changes
    or improvements he makes, his shop’s bottom line remains the same.

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    The first thing we did was identify the shop’s major problem areas:

    1. Estimators weren’t writing competitive or complete estimates.
    2. Estimators weren’t upselling damage on blend panels or damage
      not related to the accident.

    3. Estimators weren’t going over insurance-supplied estimates
      to analyze them for profitability.

    4. Estimators weren’t negotiating with insurance companies for
      additional labor time.

    5. Scheduling of work wasn’t accurate.
    6. The office didn’t have production meetings to discuss needed
      production and profitability.

    7. Office discipline was nonexistent; there weren’t any consequences
      for not doing their jobs thoroughly.

    8. The shop was writing major supplementals on 90 percent of
      its in-house jobs.

    9. The tow-in estimator wasn’t writing valid estimates (only
      writing visual estimates).

    10. Estimators weren’t following insurance-company DRP procedures:
      They weren’t taking pictures or following through with procedures
      and call backs.

    11. Estimators weren’t calling customers when their vehicles were
      delayed.

    12. Estimators weren’t using p-page logic consistently.
    13. Estimators weren’t getting all the vehicle information needed
      for ordering parts.

    14. Estimators were giving supplements to workers but not documenting
      them on the repair order.

    15. Estimators weren’t taking photos consistently, especially
      on a supplemental.

    16. Estimators weren’t asking customers for the sale.
    17. Estimators weren’t preinspecting vehicles prior to delivery
      to the customers.

    18. Estimators weren’t entering notes on estimates for documentation.
    19. Estimators were promising free repairs and not notifying anyone.
    20. The parts person wasn’t ordering correct parts.
    21. The parts person wasn’t properly checking in parts; lost parts
      were being reordered.
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  • The parts person wasn’t following up on back-ordered parts.
  • The parts person wasn’t writing up credits on returned parts.
  • The parts person wasn’t returning unused parts or wrong parts.
  • The shop suffered from low worker output; workers were producing
    30 to 50 hours of sold, flat-rate hours.

  • Workers in the paint shop were working 200 hours per month
    in overtime, and many were doing so just to increase their paychecks.


    Once we identified the major problem areas, we took a closer look
    at their causes – and implemented some solutions. We:

    • Set up enforcement of job performance. This shop shows that
      without discipline, employees will not perform up to expectations.
      It’s evident that the estimators hold the key to solving this
      shop’s main problems; when estimators don’t do their jobs correctly
      and completely, it stops the technicians from being able to produce.
      For this reason, we went over all job duties and accountabilities
      and then informed employees of the discipline to expect if they
      didn’t follow the proper procedures outlined in their job manuals
      and use common sense.
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  • Tackled the tow-in jobs that needed estimates written. First,
    we made these priority estimates, which are to be written ASAP
    so insurance companies have time to inspect and authorize repairs.
    To do this, we brought in these vehicles and tore them down enough
    for the estimator to write a complete estimate.

  • This change reduced supplemental time and allowed the shop
    to order all the parts necessary to do the job. We also found
    that in the majority of cases, the insurance companies didn’t
    need to have an adjuster visit the shop – the shop’s estimate
    and photos were enough to either total the vehicle or get authorization
    for repair.

    This system improved production by moving these vehicles through
    the repair process faster; it also reduced the amount of parts
    being ordered and returned when the vehicles were totaled or when
    the wrong part was ordered (creating less paper work and improving
    vendor and insurance-company relationships).

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    • Worked with the estimators on the quality of their estimates,
      making sure all needed vehicle information was on the estimates;
      this improved the parts person’s ability to order the correct
      parts and allowed us to order the majority of parts by faxing
      the vendors right from the computer (vendors just loved this).
      This also sped up the parts deliveries.

    • Reworked the scheduling system because we could now turn around
      the jobs faster, deliver vehicles to the customers on time and
      reduce car rentals the insurance companies and the shop were paying.
      We found that since we could shorten the amount of days a vehicle
      would be in the shop, we would need to increase the vehicles on
      the schedule.
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  • Reorganized office operations and changed the pay system to
    a more productive system of flat-rate pay.

  • Put together a team system in the paint department. The paint
    department was producing approximately 265 flat-rate hours with
    eight workers working 50 hours each per week. After we put together
    three teams of two workers each – with one of the teams being
    the paint shop manager and working only half the time on production
    – we eliminated one worker in the paint department. The paint
    department is now producing 420 plus flat-rate hours weekly and
    still going! By changing the pay structure, it allowed the shop
    to increase the workers wages and reduce the shop’s labor cost
    of per flat-rate hour sold – increasing profits.
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  • Scheduled the estimators for training so they could write
    more profitable and complete estimates.

  • Began a training process for all the technicians.

    With all these changes in place, the owner can now fine tune the
    shop’s management system to create reports to keep informed on
    how the business is performing and track downward trends before
    they affect the shop’s profitability.

    The toughest challenge for this particular shop owner will be
    to maintain operational procedures and to follow through with
    discipline to keep his employees on track.

    Shop No. 4: A Well-Run Mega Facility

    Shop No. 4 is a 35,000-square-foot operation (a mega shop) that’s
    335 feet long and 60 feet wide, producing approximately $8 to
    $9 million in sales per year. Because it’s a very narrow shop
    – especially for the addition of paint booths – it was designed
    with the booths offset to allow for vehicle movement.


    SHOP 4
    This 35,000-square-foot operation (a mega shop) produces approximately $8 to $9 million
    in sales per year and is an example of good shop organization –
    setting new records
    for productivity and profitability in its marketplace.

    The shop employs 16 body technicians, six paint technicians, six
    paint helpers and two porters, along with two parts persons, four
    estimators, one shop production manager, three data processors,
    one receptionist and a shop manager. The owner is absent on site
    because he owns multiple shops.

    The shop has five frame machines, computerized measuring systems,
    two downdraft spraybooths, prep stations and a parts cut-in booth,
    and the office has state-of-the-art computerization. The shop
    also has its own in-house training and apprentice programs.

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    The business does work for all the major DRPs and has also captured
    warranty and referral work from five car lines that are adjacent
    to the shop in the building’s complex. The shop operates a multiple
    work shift to meet the demands of production, and all the management
    is highly trained and motivated – and maintain the operation’s
    high productivity and profitability.

    The only change we made to the layout of this shop was to relocate
    the parts cut-in booth into the body repair area to reduce the
    distance the parts needed to go to get to the technicians; this
    also allowed more space for prepaint prep of vehicles. Due to
    the configuration of this shop, it was also necessary to put on
    additional shifts in the paint department to attain the production
    goals.

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    This shop is an example of good organization, and it sets new
    records for productivity and profitability in its marketplace.
    Its only problem area is high technician turnover due to the fast
    pace of production. Quality is upper mainstream, and its CSI is
    tied to the management bonus system.

    When shops get this big – and bigger – they tend to put into place
    many bench-marking and reporting systems that allow them to spot
    upward and downward trends before they become a problem. They
    also have the ability to market at higher levels and control their
    market.

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    A Blueprint for Success

    These specific shops all suffered from similar problems – the
    same problems plague nearly every shop in this industry.

    Do you analyze your employees estimating skills and sales abilities?
    Do you provide your estimators formal training as often as you
    do your technicians? Do you maintain control of all your employees?
    If so, do you do it fairly?

    Do you really know what your profitability is?

    If you can’t answer "yes" to all of these questions,
    then don’t be surprised if your shop isn’t as profitable as it
    should be. Many owners try to blame their technicians or other
    entities out of their control for their shops problems, but –
    as we’ve seen with our shop examples – this usually isn’t the
    case.

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    Because productivity and profitability are influenced by everything
    from shop layouts to technician output to scheduling, the key
    to transforming your shop from so-so to successful is to objectively
    look at what you and your employees do that affects the entire
    operation. By doing this, you’ll be able to identify your problem
    areas and begin moving your shop forward – in the direction of
    a more profitable future.

    Writer Paul M. Elkins is the senior consultant for Elkins &
    Elkins Consulting, a value-added, hands-on consulting company
    that provides solutions to a collision shop owner’s areas of concern.
    Paul can be reached at (616) 651-9738.

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