I like to define lean to our new employees as “continual improvement through the continual elimination of waste.” They quickly get the point.
“Waste” is any task or function that adds no value to the customer. It’s not real work. It’s just stuff that we do that the customer is not willing to pay for.
Where’s the Waste?
It has been nine years since I first learned about how to implement lean in the collision repair industry, and nine years since our first full-blown kaizen event. So that’s nine years of seeing and attempting to eliminate waste in the process of repairing collision-damaged vehicles (that includes everything required to take a customer from the moment the vehicle comes to rest to having the cash clear the bank for the completed repairs).
Most people I meet want to know where the biggest waste is, and I usually throw it back at them and ask, “Where do you think it is?” And it’s always interesting how far off those people’s answers are from where waste really lives.
Most people want to relate waste to the problems they face every day, such as parts quality, a lack of skilled technicians and the problems unskilled people create, and trying to blend within a panel when it’s impossible. While all these are all good points and do represent waste, they also indicate that the vast majority of repairers are completely missing the boat. This is not meant as an insult but rather to illustrate how blind most of us are to real waste. And by the way, insurers are just as bad at missing the boat if not worse!
The Mother of All Waste
So, where does the big waste live? One word – ESTIMATING. It is the mother of almost every other waste we deal with.
Start by looking at the value in estimating, remembering that value is defined as “a task that the customer is willing to pay for.” Why do something if the customer doesn’t want it? For example, does the customer want an estimate? Ask yourself what the customer really wants when she comes into your shop after an accident. Would she want you to prepare an estimate of repairs needed to fix her car if she knew your estimate is not accurate nearly 100 percent of the time? Would she be comfortable paying you on the spot for some paperwork that is an incorrect representation of what’s wrong with the vehicle as well as what it’s going to cost to repair it?
The obvious answer is no. No one in their right mind is going to hand over their hard-earned money to have you do some half-assed number-punching into a computer without even understanding what’s damaged. That’s the same as talking to a doctor over the phone about a pain in your head and scheduling brain surgery. The fact is that the process of estimating is a leftover, antiquated practice that made more sense in 1948, when knowing what was wrong with a vehicle’s body after a crash wasn’t quite so mysterious. It makes no sense in 2008.
But this is just the tip of the iceberg. Estimating being a worthless and irresponsible activity is only the start. I said earlier that this activity was the mother of almost all of the waste in the collision repair process. Let me further explain.
A Monster in Motion
What’s the cost to the shop? Take a look at your total estimating staff. What’s the average expense for these folks? While not all of their work is associated with preparing incorrect appraisals of damage, much of what they do is.
But it’s not just the cost of preparing the estimate itself but the inevitable supplement. If you look at the work that’s required to process the supplement, isn’t there nearly as much time and effort spent to process it as the actual estimate?
And what about subsequent supplements? We’ve found that most collision repairs produce on average three estimates: the original, the supplement, and finally, the invoice for the repair that cleans up all the prior mistakes. Isn’t the inevitable supplement really just a “comeback” on the original estimate? Shouldn’t you consider the supplement the same as redoing body work for pinholes or waviness? If this is true, and you could fix it so that you only needed to write one estimate that was 100 percent correct, wouldn’t your expense end up being about one-third of what it is today? But there’s more.
Typically (as the result of much insurer influence), these estimates are used to start the parts ordering process. Think about the system you use to process a parts order and the associated expense. You probably bring the estimate into a management system and then call vendors, locate stock, create purchase orders, do something to track the POs, follow up, receive these “estimated parts,” open them, check them, move them, store them, receive the invoices into the system for payment and communicate the status to several parties. And you do this, by the way, understanding that you’re going to do it all over again once the vehicle repair starts and techs identify the wrong or missing parts needed at that moment.
Now add in the return process and map out for yourself how much paperwork, motion, communication, accounting, scheduling and follow-up is required to make a return. Now add all the cash missing from your bank account that you spent on all this junk that’s never going to be used. One more thing…don’t break any of that stuff or throw out the boxes if you want to get your money back.
The customer understands the minute she walks into your shop that you’re a professional. Surely you know what you’re doing. Why in the world would you ever go through all this up-front work to repair her vehicle if you were wrong?
So what’s the cost when you have to inform the customer that you’ve made a mistake and a supplement is needed? You told her the job would take three or four days and she believed you. Now you’re answering her calls on the fourth day and telling her, “Well, we ran into some trouble…” At that point, your credibility is shot. Be prepared for a thorough examination of every nick and ding on that vehicle at delivery, and start picking up rental days or, at the least, paying people to spend hours on the phone each day dealing with insurer and rental agency calls.
And what about the rental? When the initial estimate is used by the insurer to calculate rentals days, what is the customer’s reaction to the actual repair time once she understands it? How many times have you seen customers panic when they’re told by the shop that the repair is a seven-day job and they only have a voucher for a two-day rental? What’s the real cost here?
What about parts vendors? How much better off could your parts vendors be if you only ordered what you needed and never returned anything? How much savings could they pass back to you if they only drove to your shop one time per repair? How about not having to keep extra and unneeded inventory? How about not having to go through all the paperwork, motion, management and expense of processing three parts orders versus just one? I’m sure your parts vendors are not going to drop their prices after realizing these savings, but they might buy better information systems, training and counter staff that would ultimately make it easier for you to repair vehicles.
What about your techs? How much time do techs spend dealing with supplements? In a flat-rate shop, the cost comes straight out of their pockets. But you pay, too, for the time you lost while they weren’t generating cash for your business and also the expense of them fixing your administrative process. Aren’t you double-paying here for the work?
What about the impact to your techs’ stress level and quality of life? Whether your techs are paid flat rate or hourly, supplementing is a stressful experience for them. They don’t want to deal with this stuff. They want to fix cars, and any time they’re not, they’re basically doing whatever they have to just to get back to work. What’s the real cost here? How many of your good techs just quit because they got fed up with these types of issues? Does your guess even come close to what this actually costs you?
What about insurance companies? I’m sure the amount of cash an insurance company wastes on processing estimates and supplements is mind-boggling. What if the policyholders knew how much money was being wasted here? What else could be done with that cash?
What about the expectations that insurers set with customers regarding the estimating and re-estimating process? How do customers feel once they really understand what just happened to them? They probably think, what the heck? You mean to tell me I just took time from work to get an estimate at a shop or drive-thru that was completely unnecessary? What level of credibility does that insured now place on the insurer?
How many insureds change companies after this kind of claims experience? What’s the cost there? Where does that leave the shop? How many times are you the shop owner stuck between the driver and insurer over estimate and supplement issues? You’ve got two choices: Throw the insurer under the bus (and maybe lose a program) or throw the customer under the bus (and maybe lose her). It’s ugly stuff.
Out With the Old
The only thing an estimate does is create additional activities that both shops and insurance companies have to pay for and, at the same time, create friction between insurers, customers and shops. An estimate doesn’t fix a car…it doesn’t even give you a good head start.
The truth is that no one knows what it’s going to take to fix a car until the whole thing gets a thorough examination. So why do we continue to utilize a system that went extinct some time during the Johnson Administration?
In a lean world, the objective is to continually work to remove this horrific waste. So what does that look like? How about this:
Don’t write estimates…sell the repairs! Customers (excluding those who are paying out of pocket and thus are price shopping) don’t want estimates when they walk in your door – they want to know if this is the right place to get their cars fixed. They want to gain a sense of security that you’re going to do a good job and continue to be there for them if anything goes wrong down the road. Customers come in for estimates because that’s what they think they’re supposed to do. How many times do you get a blank stare from a potential customer when reviewing the estimate, especially after telling them that it’s most likely wrong? Tell them the truth: “We don’t know and won’t know what it will take to completely fix your vehicle until it’s completely dismantled…and no one else does either.”
Find out what’s wrong before you do anything else. Like anything else, you can’t fix what you don’t know. But don’t screw around – get that thing apart right away once it’s in and find out exactly what you need to do, no exceptions! Take the right amount of time to get it right up front. You’re going to find that out at some point anyway, so why not just do it all at once when the vehicle first comes in?
Get everything you need to finish the job all at once. Why go through all the work for finding, obtaining, verifying and receiving parts and invoices more than once for a job? Order it all, correctly and immediately. Then, don’t accept anything but complete orders…just don’t do it. Why should you have to do more work (as the customer) to make it simpler for the vendor?
But what will the vendors say? If they only have to deliver to you once per job and you actually keep what they sell you, they’ll say thank you.
But won’t this extend the cycle time of the repairs? Not a chance. How long does a car sit waiting for supplemental parts, and how many times per job do you order supplemental parts? If it takes about two days to get parts and most jobs have two supplements, doesn’t that add at least two days to the repair? And that’s just parts waiting time. Once the parts arrive, how much time does it take to get the car back into a tech’s bay to get the repair going again? Collision repair is about finishing a job faster, not starting a job faster. Anyone who doesn’t get that is terribly misguided.
That’s it. No more estimates and no more running around trying to fix administrative defects, just good, clean work that can be completed and returned to the customer. Estimating is the mother of almost all waste in the collision repair process, and that’s a fact. Nearly every waste task that we must complete (the stuff customers are not willing to pay for) is a child of estimating.
Will both collision repair facilities and insurance companies open their eyes to this? I believe that at some point in the near future, estimating will be on the same shelf as the lead file. So start looking for waste here if you want to make it easier to deliver great work and thrill customers. As always, feel free to contact me with questions or help in your lean journey.
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].