Purchasing Power - BodyShop Business
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Purchasing Power

Before you hand over the cash, rattle off your credit card account number or sign the bottom of a check, be sure you can justify the expense of that new piece of equipment.

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On of the most difficult decisions faced
by all shop owners and managers revolves around the purchase of
new equipment. "Can I afford it?" you ask yourself.

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When looking to purchase new equipment, however,
price shouldn’t be your only consideration. Methods for justifying
new equipment purchases are important, and many different areas
need to be analyzed before a final purchasing decision can be
made.

Your current and future business needs should
be one of your first considerations when looking to purchase new
equipment. To begin analyzing your business needs, review repair
orders during an average week to arrive at an average number of
jobs per day for which a piece of equipment is used. Then, estimate
the average amount of time each job takes, and multiply that "time
in use" by the "jobs per day" to arrive at the
total hours per day the particular tool is used.

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Now that you know the actual usage time of
the equipment you currently own, you can compare it to your forecast
for future business. What you may discover is that your forecast
is unattainable unless you replace or add to your current level
of equipment. An evaluation of your current equipment usage will
also help you to evaluate the types of work you’re doing, which
is important in identifying the need for more equipment.

Justifying Your Purchase

While analyzing your business needs, you may
find that additional equipment is needed simply to maintain work
flow; your technicians are a great resource for gathering this
information. They can help you identify equipment needed for specific
types of work by completing a form that notifies you or your manager
whenever work can’t be started or completed due to the lack of
a certain piece of equipment. Also consider your technicians’
skills when looking to buy new equipment. Having technicians who
are trained on specific equipment is an important part of the
purchasing equation.

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Another factor to consider is redos. By tracking
and analyzing redos, you can determine whether a lack of adequate
equipment is the cause of the rework. Be sure current tools and
equipment are being used effectively and efficiently before you
blame them for redos and invest in unnecessary additional tools.

To determine if the rework is caused by a
lack of equipment, compare the number of times a piece of equipment
should be used to complete a certain job with the times the equipment
is actually used to complete a job. For instance, let’s say your
measuring system is so overworked technicians are forced to guess
at measurements because another technician has the measuring system
in use. In this case, the lack of sufficient measuring equipment
is creating potential rework.

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Another reason many shop owners consider purchasing
additional equipment is to retain work that’s currently being
sublet due to a lack of adequate tools. The added profit from
work that could be done in house may easily justify the expense
of new equipment. An example of this would be purchasing front-end
alignment equipment instead of sending the work to the local front-end
shop for completion.

Identify those sublet opportunities that will
offer a return on your investment based on the potential gross
profit per job or on a gross-profit percentage increase opportunity
in a labor account. How much time will be required to break even
on the new tool? To determine your return on investment, count
the jobs that are currently sent out over a measured period of
time.

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Also review new product information, new environmental
requirements and changes in safety technology on a regular basis.
Changes in these areas will often dictate a need to replace, update
or add to your existing equipment inventories.

Purchasing Power

Once you’ve made the decision to purchase
new equipment, do so in the most cost effective manner possible.
Consider this process:

  1. Maintain reference sources for equipment suppliers, as well
    as for the types of equipment they have available. Request current
    information from all equipment vendors when necessary.

  2. Develop a method to take bids from various suppliers to ensure
    you get the best possible price. This bid acceptance process will
    ensure that you can equally compare all bids received. And remember
    to compare the warranties for all of the products you’re accepting
    bids on – the longest warranty with the best coverage is important.
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  • During your purchasing process, ask for references from current
    owners of the equipment you’re considering.

  • Check the reputation of the equipment, as well as the quality
    of service delivered by the vendor. Examine after-sales services
    to see if they include training, technical support and periodically
    updated operating manuals. Also compare the delivery and installation
    services. Are the transportation expenses prepaid? Are the installation
    and the set up of the new equipment part of the suppliers bid?
    And, if building modifications are required, make sure that they’re
    either part of the bid or that a qualified contractor is available
    before the new equipment is installed.
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  • Compare payment methods. Some vendors offer discounts for
    cash. If financing is needed, shop for the most competitive terms
    and interest rates.

    After the Purchase

    To avoid making any unnecessary equipment purchases, develop a
    plan for controlling and maintaining your inventory of tools and
    equipment. Begin with a system for tracking the use of every tool,
    and assign the tracking to the employees who most often use the
    specific equipment. Once a week, have the responsible employees
    verify the location and the working condition of each tool and
    then file a report.

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    You should also develop a plan to ensure that all tools are operating
    properly and are replaced when they no longer work. Analyze the
    use and productivity of each tool to make sure they meet all insurance
    company and government requirements.

    Smart Shopping

    Before you hand over the cash, release your credit card account
    number or sign the bottom of a check, be sure you can justify
    the expense of a new piece of equipment. To do that, consider
    your direct labor cost (the amount you pay out to complete a job),
    your overhead (the cost of a stall for one hour of operation and
    the cost of a stall per completed job) and the cost of the new
    equipment as it will be costed per job over its useful lifetime.
    Forecast the total profit for each job added by purchasing the
    new equipment by computing the job’s selling price and then subtracting
    the labor cost, the overhead cost and the equipment cost.

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    Using this profit-per-job figure, you’ll be able to calculate
    an annual return on your investment. If the analysis of your current
    and future business needs is complete and the return on investment
    is what you expect, your new equipment purchase will be more than
    justified.

    Writer Mike Jones is an independent body shop consultant who
    also creates video training tapes. He can be reached at (800)
    652-1553.

    Straight Talk

    A body shop manager discusses why they disassemble and measure
    the vehicle on the frame rack before the appraiser arrives.

    Q: What are your main challenges when it comes to measuring
    and straightening, and how are you trying to overcome them?

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    A: "One of the main responsibilities of a body shop
    is to make sure that all the damage is found," says Bob Collins,
    manager, Clair Acura Autobody, East Walpole, Mass. "Here
    at Clair Acura Autobody, our procedure is to disassemble the vehicle
    and measure it on the frame rack before the insurance appraiser
    arrives. This allows us to write very accurate damage reports,
    which gets the vehicle through the shop quicker. It also allows
    us to locate all secondary damage. With the amount of misalignment
    in height, length and variance from centerline determined, it
    becomes much easier to sell it to the appraiser. We hand him a
    printout for his file and another when repairs are complete. Although
    we’re using a laser measuring system now, I was doing this same
    procedure on paper when we used centering gauges, tram bars and
    tape measures. We’ve found it very successful. Insurance personnel
    like documentation."

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    Q: How do you charge for this type of work?

    A: "Our pricing has just changed from an hourly rate
    to a fixed dollar amount. I’ve been trying to determine exactly
    what ‘set up and measure’ means in this area. Clair Acura Autobody
    has its own ideas. With us, it means establishing the base reference
    section and measurement of each frame-rail end. Upper-body analysis
    is another operation and, therefore, another charge. Measurement
    on A, B and C body pillars are additional. Crossmembers, suspension
    mounting points and other important control points are considered.

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    "Only when all the measurements are in can you determine
    what it’s going to take to fix it. Without this critical information,
    there’s no way to determine repair costs. I believe this is where
    we have an advantage. The insurance appraiser doesn’t know how
    much frame/structural work is needed until we tell him.

    "There’s power in information. There are also dollars in
    information. Structural analysis and repair is a highly skilled
    trade. Compensation should follow."

    Q: Does any particular job stand out as being difficult
    or as a learning experience?

    A: "We had a Honda Civic sedan in last week. The car
    was hit in the rear. The deck lid, lamps and rear body needed
    to be replaced. Minor damage to the top of the cover and quarters
    in the rain gutter. We didn’t measure it prior to the appraiser
    showing up. When the appraiser showed up, he insisted that the
    vehicle did not have any structural alignment problems because
    the ‘door lines looked OK.’

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    "We agreed to measure it. We discovered the frame rails were
    both down and swayed – not much, but it was out of specifications.
    We printed it and faxed it to the appraiser. He approved it over
    the phone."

    Q: Do you have any advice on this type of work?

    A: "Tech tip: Try to pull all damage at the same time.
    Use all towers or rams while stress-relieving the metal. The more
    pulls the better. You’ll find that clamps no longer fly off after
    tearing the metal. Low pressure and controlled multipull setups
    are the name of the game."

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