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Taking the Cycle Time Challenge

You’d think the simple solution to developing shorter cycle times would be to have everyone work faster. Ahh, Grasshopper, things aren’t so simple. First you have to define, measure, standardize and reward – and each one of these steps is a challenge to achieve. But the long-term gain is worth the short-term pain.

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What do people want? It’d be so easy if they could just give us a simple answer. Is that too much to ask?

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For years, our industry has attempted to interpret the needs and wants of both consumers and insurance carriers. And with their conflicting demands, it seems insurers are from Mars while consumers are from Venus – with shops being some asteroid caught in between.

To help clear up the lack of understanding, I – and my colleagues – have visited with consumers and discussed issues, concerns and challenges. With the insurance industry, discussions include interpretations of the guidelines and expectations based on the individual appraiser, staff adjuster, independent adjuster, re-inspector, claims center, call center or the printed materials sent to us by our direct-repair partner.

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How do we know when we get it right and everyone’s happy? Over the years, we’ve identified and developed numerous tools and measurements to help us evaluate performance. These include CSI, parts usage, rental days, time to initial estimate, average repair cost, meeting guaranteed delivery dates, valid supplement percentages, sales per square foot and sales per tech. That’s quite a list – and still the problem isn’t solved.

One very compelling and challenging issue related to satisfaction and success is cycle time. Many insurers have performed studies that indicate customer retention increases when the customer’s car is returned faster.

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Bet what’s “faster”? And what’s the average cycle time now?

The question of “average” cycle time comes up frequently, but answering that question is complex. One top 10 insurance carrier reports that its average cycle time is 2.8 labor hours per car, per day. But this varies from carrier to carrier and shop to shop. We establish benchmarks in each market and then work for continuous improvement.

As a shop owner, you can make tremendous improvements to your cycle time, as long as you don’t “cherry pick” your areas of focus and then attempt to draw a combined result. To effectively reduce cycle time, you must concurrently address parts options and availability, rental coverages and support, towing and storage needs, estimating and supplement procedures and guidelines, local management and decision-making authority, report measurement tolerances and review schedules, call center and dispatch capabilities, load leveling guidelines and commitments, and volume expectations.

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Once all these items are discussed and agreed upon, mutual commitments concerning cycle time can be targeted, measured and improved.

To successfully address the challenge, we as an industry face four tasks, each more difficult to determine than you might expect:
1. We must define cycle time.
2. We must measure cycle time.
3. We must standardize cycle time.
4. We must reward the repair facilities and companies that succeed in getting it right.

1. Defining Cycle Time
OK, defining cycle time is simple. Or is it? In a nutshell, cycle time is how long it takes to repair the car. But not everyone uses that definition when discussing cycle time. Some insurers measure it from the first notice to payment. Others choose to measure it in segments, including time in the call center, time until the estimate/appraisal is prepared and time until the customer is visited in person.

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When discussing cycle time with insurers, understand that they may have a different criteria than what you, as a collision repairer, are expecting. Many carriers have an internal focus on how quickly they visit the customer after the loss is reported; others may measure how quickly they process the initial check to the customer; others will measure how quickly the initial estimate is processed by either their staff or the DRP shop. It’s important to understand that you both may have dramatically different views of cycle time.

How do repairers define cycle time – and where does it begin? To get the greatest benefit, cycle time measurement requires that everyone agree on some standards. Shops and insurers must understand roles and responsibilities involved in the preparation of the initial estimate, the parts procedures, the rental process and guidelines, storage and any unusual elements regarding off-hour appointments, pick-up and delivery, off-site estimates or any other customer issue.

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Why? Because if the industry standardizes cycle time definitions and establishes uniform measurement criteria, we can then focus on individual performance.

2. Measuring Cycle Time
Once again, it seems so simple: To measure cycle time is to calculate the number of days or hours it takes for the collision repair center to fix the car. That does sound like an easy quantification.

But it gets complicated because throughout the industry you’ll find more variables by which to measure cycle time: dollars per day, labor hours per day, drivables in X-number of days or non-drivables in X-number of days.

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Before choosing a preferred measurement, however, we need to clear up a few items.

Does cycle time begin when we receive authorization to repair the car or when it’s scheduled for repair? (Since these are unplanned events, how can a collision repair center know what’s coming in each day in advance?) With customers who frequently fail to arrive when scheduled, should a shop order parts in anticipation of the customer’s impending but uncertain arrival or wait until the day the customer shows up with the car? And have you ordered parts based upon a “write-what-you-see estimate,” knowing full well that additional damage will result in additional parts needs and delays? Finally, keep in mind the insurance industry measures time on a seven-day continuous work week, while the collision industry works on a five-day production cycle.

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In order to measure anything, you need access to data. But for as long as cars have been repaired, timely and consistent data that all parties can utilize has been non-existent.

When measuring cycle time – assuming a definition has been agreed upon – which report is the standard: the carrier analysis, the shop’s management system, a third-party provider yet to be selected or an agreement achieved with local personnel? With any measurement, tolerances need to be established, measured, communicated and shared with all participants. Too often a review 30 to 90 days after the fact results in friction and defensiveness.

3. Standardizing Cycle Time
Now that we know what we need to achieve a definition and measurement, we need to standardize cycle time. If the average collision repair center has numerous DRPs — and works with six to 15 carriers on a monthly basis and another 10 to 20 carriers occasionally — the task is simple. If the goal is better cycle times, the insurance industry must work with the collision repair industry to define a standard measurement formula. If this is achieved for the industry, individual performance can be measured, and the legacy issues of DRP won’t hamper production facilities.

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What do I mean by legacy issues? Legacy issues within our industry involve the current DRP methodology: inconsistent selection criteria, differing regional guidelines and, in some cases, different local interpretation from adjuster to adjuster. This current “local decision making” will interfere with the “new standardization” that will be required if the industry is to create a consistent process (which will include cycle time). Local DRP inconsistencies must be removed.

Also, each carrier wants a customized program, so collision centers are forced to use the same 12 employees to interpret and respond to dozens of different companies and guidelines. This is currently being achieved in a DRP environment but isn’t realistic in a cycle time world.

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4. Rewarding Performance
Once we get it all figured out, it’s time for insurers to reward shops for individual performance. Those rewards may be in the form of more cars referred to the shop, a rebate bonus for success or a monthly commitment tor volume and dollars based on the previous month’s performance.

If a shop can show better cycle time performance than other shops in the area and other performance criteria are within specifications (parts usage, rental days, etc.), then “rewards” would be appropriate.

But if insurers promise more volume, things could get tricky since they can’t “require” customers to have their cars repaired at a specific collision center. If, however, we have standard cycle time criteria, insurers can communicate performance results to customers as a means of rationalizing their reason for suggesting the customers go to a particular facility.

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By focusing on cycle time, which is in the best interest of all parties – the carrier, the collision repair center and the customer – the following incentives are something insurers may someday consider.

  • Motivate and manage the call centers by measuring and then rewarding based on the percentage of customers assigned to the designated collision repair centers.
    Call centers are the insurers’ current method of choice to distribute customers to facilities on their list of approved shops. While carriers currently operate their centers differently, the future may involve a standard cycle time measurement and a “reward” system that increases or decreases the volume of work referred to a shop based on performance to agreed-upon criteria and cycle time goals.
  • Reward performing collision repair shops for meeting or exceeding performance criteria (one of which is cycle time) by giving them more opportunities or by pre-scheduling for the weeks ahead.
    It’s not unforeseeable to expect that some multiple-shop owners may operate a dispatch call center for insurance partners. This, no doubt, will be difficult for “one shop” operators to provide to carriers seeking cycle time performance solutions.
  • Reward customers by treating them fairly and giving them quality work in a timely manner. Though many complain about carriers recommending shops to insureds, the fact is, most consumers are left with too many choices that often result in frustration and confusion (read: policy turnover). Since all shops don’t deliver a cost-effective, timely repair solution, consumers are often frustrated with unmet expectations: While the work is acceptable, the timing often isn’t.

So what do we do? Simple. We define, measure, standardize and reward. Determine specific cycle time criteria by department (CSR, claim center, call center, appraiser, collision repair center, etc) and then develop and train the different criteria. This won’t be an easy process – but it will be well worth the work.

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Collision repair centers may work most effectively based upon total labor hours divided by a five-day production week. Then you can measure the current level, establish realistic goals by market, review in a timely manner and then reward continuous improvement. In a production center environment, the sales and marketing departments wouldn’t dictate production standards and measurement.

Given the various natures of customers, the decision of who gets taken care of is often based on who complains the loudest. But with clear, uniform standards, we’d make these decisions based on production standards – and all customers would benefit, not just the loudest ones.

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What’s Next?
On paper, cycle time is a simple set of four complex issues: definition, measurement, standardization and rewards. It’s also one of the greatest opportunities we have to positively impact customers’ experiences and our overall profitability. The two go hand in hand.

But if we’re to truly provide cycle time measurement and guarantees, the collision repair industry must agree on a standard measurement formula, and the insurance industry must review and accept it as an industry guideline. Then we can evaluate a shop’s performance and improvement opportunities.

Imagine the impact of a clear definition of cycle time for the industry and the resulting opportunity to evaluate and measure performance. Now imagine cycle time standards that provide uniform terms and conditions for consumers, insurance carriers and repair facilities.

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Does this sound like an industry fantasy? While it may not be a reality today, we can create a clear definition of cycle time, along with concise measurement practices and standardized procedures. It’ll take a concentrated effort and a universal commitment to achieve this goal, but it benefits our customers and should be something we strive to deliver.

The next step is yours. And ours, collectively. If everyone in our industry takes an uncompromising look at our current systems and begins an industry-wide dialogue about cycle time, we’ll be one step closer to a more profitable and productive future.

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Writer Beryl Carlew is executive vice president of CARSTAR, with overall responsibility for insurance relations, marketing and franchise operations.

Why Improve Cycle Time?
To survive. If a shop owner wants his business to exist in the next five years, he must be able to produce more units per day. A shop will make money, grow and expand if it can demonstrate an improved process to insurers. The single-unit operator not only needs to know his numbers, but must be able to compete with multiple-store operators, consolidators and franchises that offer increased production capacity in multiple geographic areas. If a shop owner doesn’t measure and manage, his shop won’t be able to provide the marketplace solutions consumers and insurers demand.

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