News: AAA Says Record Number of Americans Will Hit the Road Over July 4 Holiday
Jon McNeill, CEO, Sterling
The average repair has somewhere between 17 and 19 hours on the sheet. If you look at those 17 or 19 hours, there has to be somewhere to cram that into a three-day period – or even 24 hours. What you have to do is look at what happens from the time a car is hit until that car is fixed and determine where along that process time is wasted. A subset of that is what happens between when the car enters the shop and when it leaves because that’s something universally agreed upon that’s within the control of the shop.
So where does time get wasted? There’s a lot of administrative time up front determining where the car gets sent. There’s also a lot of time [wasted] waiting for parts. And every time you write a parts supplement, you repeat the parts-waiting period. But if you can remove the wasted time, we believe strongly that you can get cars back in three days. In fact, we have a particular store that has a 3.2 day cycle time now – and that’s everything. It’s a conventional-type business where you take all comers, heavy and light. So it is possible.
Now is it possible to do that industry-wide? Yeah, we think it is. Somebody is going to have to drive consistency in the process, though, because it’s all process-oriented. You can’t run a three-day cycle time shop by the seat of your pants. It’s got to be very deliberate.
To be industry-wide, it would take the entire industry. But I wouldn’t define the entire industry as shops. There’s really three parts of this triangle: the shops, the insurers and the suppliers. And it’s going to take all three to get down to three-day cycle times. The administrative process has to go faster, which requires shops and insurers working together. The parts process has to go faster and be much more accurate. This requires suppliers to step up to the table.
Today, we have an unsophisticated technology supply chain to deal with. So you have to pull some tricks and some rabbits out of your hat to get down to three days. But it can be done.
One of the $64,000 questions is how to get parts faster. When you have to go through [fairly] unsophisticated local suppliers for parts, how are you going to complete parts orders quickly? That’s a question the industry has to answer.
Sterling operates in eight different markets across the eastern half of the country, and in each of those markets is a wide variety of suppliers and distributions. I can tell you that the most sophisticated supplier in Houston is a few steps behind the most sophisticated supplier in Philadelphia, so we know there’s work to be done on the supply side of the business just so we can drive the faster parts process. But it’s up to shops to drive it. It’s not going to be driven by anybody but us.
When can we expect to see a common three-day cycle time? While I don’t see the rest of the industry’s cycle time statistics, I’d say the trend toward it is beginning. When we talk to rental car companies, they’re noticing a couple days coming off cycle time. That means part of the industry is figuring it out. It’s been discussed and batted around for about five years, but now there’s real momentum behind trying to figure out how you peel time out of this process. Why? Because everyone’s figured out that time is money. Insurers have figured that out. Shops certainly have, and now suppliers are starting to figure it out, too.
A number of shops are coming to the realization that the faster you get the car through, the more cars you can get through a stall. The more cars you get through a stall, the higher revenue you’ll have. That’s the financial impact.
In any business, it all starts with the customer and what the customer demands. We did some research when we started Sterling, and we found the No. 1 desire of the customers was to get their cars back fast. Some will argue they just want it back on time. In other words, if you just make that on-time promise, you’ve won 90 percent of the battle. But it depends on how you look at it. We had an interesting focus group discussion in one of our stores a couple of weeks ago. Some of our managers went down to the customer-waiting area to talk to customers. One manager asked, “Does speed matter to you?” And the customer responded, “No, speed doesn’t matter. It’s quality. That’s why I’m here.” Then the manager asked, “How fast do you expect them to repair your car then?” The customer said, “Two days.”
It all depends on how you ask the question. We’re pretty convinced if you want to serve the customers in this business, you have to get their cars back quickly.
But there are exceptions to speed. If I’m driving a rare Maserati, I don’t care how long it takes to fix it. But if I’m the average person using that car for work and dropping the kids off at soccer, I need that car.
Will shops have poorer quality if they try to increase their speed? Manufacturing guys will tell you that if you drive process and drive for speed, you’ll usually find better quality. When you line up a process and put that into place (not a shop where cars are moving all over the place, parts are everywhere and techs are in five places at once. I’m talking about a very structured manufacturing process), speed usually starts to flush out quality issues.
So you have a choice at that point. Do I attack those quality issues? (And usually those quality issues are further blockages to speed.) If you attack those quality issues, you can continue to speed up the process. That, in a sentence, is what continual improvement is all about.
The reason the Japanese are so oriented around speed and production is because they know speed flushes out quality. When you see quality problems, you have to continuously try to attack them because that will further speed up the process.
Lexus/Toyota can produce a car from scratch in a few days, while it takes GM, Ford and Chrysler 13 days. And you see what it does for its economics. When you see what it costs to produce one of those cars, Toyota has a 17 percent cost advantage. When you run a $100 billion company, 17 percent is a lot of money. That’s why their profit model is so attractive to everybody else. You can look to Toyota as the only one of the five major auto manufacturers that can pull that off. That means their system really is hard to accomplish. It takes a lot of discipline.
I think shops will be pulled along into doing faster cycle times, rather than being left out in the cold. Let’s face it. Fifteen years ago, estimating systems didn’t exist in many shops. But it became a requirement to do business, so shops stepped up to the plate and bought estimating systems. Laser measuring systems weren’t commonplace eight years ago. Now they are. Three-day cycle times are going to be another tool of the successful business that I think the industry is going to adopt.
Will insurers make stricter demands as a result? They look at something and say, “It’s pro-consumer. We’re satisfying the consumers; they’re getting their cars back faster. Gee, we like that.” Insurers have an interest in serving the customer because they have an interest in retaining that customer.
But in the end, it’s going to be consumers who demand speed. They’ll go where they can get the speed and the quality. They’ll beat a path to the doorstep of the person who has a better mousetrap.
John Londergen, Owner
Doylestown Auto Center
When I was first asked to participate in this debate, I didn’t yet know the topic to be discussed. The person who asked me to participate is a longtime friend and autobody advocate. This, along with his enthusiasm, encouraged me to say yes. But when I discovered what the topic was, my reaction was to decline. I was concerned that to even participate in the discussion would give credence to the legitimacy of the topic: three-day cycle times.
This whole three-day process speaks to what I see as the most basic problem that faces collision repairers today: Many repairers forget who their client really is. I’ve always repaired vehicles for the owner. The owner signs my authorization to repair, and the owner always pays me. So I must first start off by saying, what’s all the hubbub about? I worry about customer service and quality. Not quickening cycle time.
As a business person, I want to repair all cars to the highest degree of quality, in an appropriate – not the fastest – amount of time, at the most accurate price and at the highest profit to my business. How this is achieved when I pretend to forget who my client is and try to make the insurance company No.1 is something I don’t understand. How are my business goals ever achieved when I eliminate necessary repair procedures and pretend I don’t know insurance company standards of payment, particularly via direct repairs, ignore legitimate costs and lower payments to the point where they don’t cover expenses? How is this situation not exacerbated by a three-day cycle time?
What I see happening is shops giving up their long-held client base by agreeing to direct-repair agreements. Under these agreements, clients are directed to your shop (sometimes illegally), but you’re handicapped as to how you fix their cars and as to the parts and materials you’re allowed to use. This creates a reality where you’re no longer able to do all the things that pleased your customer base and brought them to you. In other words, you can’t supply the quality your customers are looking for. If supplying this quality is hard now, how will it get any easier with a three-day cycle time?
Then things get harder when you add the reality that when a large consolidator opens in your area, where do you think they’re going to get their volume, particularly if they have the same direct relationships as you? A classic example is State Farm’s new direct program that’s limited to large consolidator-like shops. This is reality.
For all of the above reasons, I don’t even know why shop owners who represent the consumer would even allow a company that was hired to pay the bill the opportunity to pressure and control their daily operations. Cars come into my shop, and they’re numbered. When the insurance company provides accurate budgets, the parts are then ordered. When the parts arrive, the car is scheduled for repairs as a technician becomes available. The tech gets the original damage report and starts the repairs. If the insurance appraiser misses something, we document the underpayment, call the appraiser and wait for him to pay the difference. The repairs are then completed properly in the appropriate amount of time. My techs are treated with the dignity and respect that seasoned professionals deserve. In other words, they don’t get rushed. When the car passes an internal inspection, final clean-up is authorized.
How long this all takes reflects the needs of the particular car, the workload of the repairer, the availability of the parts and the speed at which the appraiser sees the car, puts accurate dollars on the table and gets the check for payment. Keep in mind that no insurance company covers you without proper payment. The way I see it, the insurance company doesn’t meet any three-day cycle in my shop. They rarely – within a three-day period – get notified about a loss, see the vehicle, write a correct damage repair report, negotiate an honest payment and make that payment. Yet they’re trying to create the illusion that we can diagnose a loss, order parts, receive parts, repair, refinish, align other sublets, detail and deliver that car within three days. Oh, I forgot to include tow the car, hold the client’s hand, set up car rental and absorb much of the administrative overhead – again, all in three days.
I’m in business to make money, and I cannot provide the quality of work outlined by Pennsylvania Rules and Regulations by accepting less money than is required to make the necessary individual repairs to each and every vehicle I repair. No two of these is ever exact, so I can’t pigeonhole my repairs into any prescribed number of days.
What this whole argument is about is the insurance industry raising their demands and creating a standard where neither the consumer nor the repairer is treated fairly. Remember, our job is to repair vehicles to pre-accident condition, and we’re to be paid the actual cost of repairs. Black Law dictionary describes actual cost as “the bona fide price paid after repairs, which may not necessarily be the market value of the goods.” I don’t remember anything in the law book about three-day turnaround. I won’t allow the insurance industry to further intrude into my business or my relationship with my client.
If I’m to rush these cars through in three days, I’m to absorb any overtime charges for this. This will generate a savings for the insurance industry – which I’m sure they appreciate – but what does the legitimate collision shop get out of this? I know – more of what we always got.