Posted by Mike Gilliland on Wed, Jul 28, 2010 @ 09:18 AM
Lately I’ve been having more conversations with repairers about productivity because some believe they have made gigantic leaps forward in making their businesses more productive. The increased focus on the production floor, triggered by the industry’s adoption of lean methodologies, no doubt has had an influence, or has it? I decided to take a quick look into our data to see if I could spot any trends.
How do you best measure productivity? I’ve used our units per day metric, or touch time as it is also known. In this scenario, productivity measures how many hours on average are spent working on each repair, everyday it is on site (Total Hrs / number of days = Units / Day). I choose this measurement for two reasons:
- in order to increase your units per day performance, you must also improve a lot of other shop processes that impact this productivity KPI such as estimating, parts management and scheduling, and,
- there is an increased focus by insurers to monitor units per day performance.
As discussed in a prior article, I believe this is one of the KPI’s a shop should track for its own business. If insurance partners are also tracking the KPI, it just means that you should be able to be proactive rather than reactive with those conversations.
The data we collected includes both customer and insurance pay repairs, and is provided only to see if the trend line has moved. In future reports, we may dig deeper and get the statistical validation required to make a definitive statement. During a three year period, this is what we found:
From what we see, there is support for the assumption that productivity has improved, but what are the factors that contributed to those gains? I’ll take a stab and make some assumptions (if they are proven wrong at a future date, I guess I’ll only have myself to blame):
- Lean initiatives and renewed interest in production processes have contributed to the overall increase
- Some insurers (unfortunately, only some), are adopting a lean mentality to cut out administrative waste that slows repairs
- The top performing repairers are bootstrapping the overall average higher. I know we have some clients with averages much higher than shown, even with customer pay repairs in the average
I am interested to see what further analysis would provide. What are the average units per day of the top 10% of performers? If you segment insurer and customer pay, what are the respective averages? Does the average vary from one geographic region to another? Please let us know what you think, or what you would potentially like to see, and we may be able to include it in future articles.
My final assumption is that the repairers who figure out how to continually increase productivity will be the winners … not just for their insurance partners, but also for their business. I don’t think I will need to eat any crow on that one!
Posted by Mike Gilliland on Tue, Jul 13, 2010 @ 11:59 AM
There seems to be increasing conversations concerning the profitability of collision repairers and most of these discussions raise far more questions than they provide answers. It’s not surprising that this is the case considering the state of the industry today. Some repairers are embracing new ideas and processes, while others are reluctant or resistant to change, using the age old strategy of hoping that if they ignore the problem long enough it will go away. I believe there is hope for the reluctant. Every market has an adoption life cycle and some shops will be late comers. I don’t have much hope for the ignorant however, since I don’t believe this will be a problem that will go away.
So what is repairer profitability, and what does it need to be to have a healthy repair industry and encourage re-investment into the business? At the recent CCIF conference there were several presentations regarding industry sustainability and profitability. The highlights were:
- Questions raised regarding the accuracy of data provided by several organizations working on industry reports to try to gage where the industry is today.
- A presentation given on a lean repair process, suggesting that up to 15% waste (cost) could be eliminated from typical collision repair processes.
- A panel of collision repairers, discussing sustainability, were suggesting that insurers need to increase compensation to repairers. Decreasing parts GP% was cited as an example to reduce margins.
As a few associates and I reflected on the conference topics over dinner, it was fairly apparent the take-aways were discouraging. As an industry, we don’t really have reliable information to assess profitability and sustainability, and we are wasteful with resources; we may be improving but there is a long way to go. We need to increase profitability; I don’t believe insurers have an appetite or can make a business case for increasing compensation until the prior points are addressed. In the meantime, it’s all about maximizing resources and efficiencies.
The good news is that many shops are focused on process improvement and better utilization of resources. The challenge comes with the information we are given; will we be able to get credible and statistically valid information on repair businesses? At AutoHouse Technologies, we are reviewing our ability to provide a repairer side industry trends report. At a minimum, this would provide +/- % of gross profitability, profit center mix, payer analysis, etc. Stay tuned for this and if you have any suggestions or comments on the topic we would be happy to hear from you.
Posted by Mike Gilliland on Tue, Jun 29, 2010 @ 01:43 PM
If you were to ask many collision repairers what Key Performance Indicators or KPI's they track, the likely responses are either:
- Severity, cycle time, and CSI, or
- We don't have to track KPI's; our insurance partners give them to us.
When I hear these responses, I have two comments. First, KPI's supplied by insurers provide insight into how well you're doing for them, while your own business could be going into a death spiral without your knowledge. There may be some similarity and overlap but an "insurer specific" KPI is not your KPI, it's theirs! Second, it's your business; you need to take the time to ensure that you're getting a reasonable return on your investment!
OK, I know the above comments are extreme. Most repairers have some business KPI's, but I'm trying to make a point. Repairers, in general, spend far more time measuring insurer related KPI's than they do monitoring the KPI's impacting the overall health of their business. Tracking numerous insurers' KPI's can suffocate your business. I propose that the business KPI's should get at least the same, if not greater, focus and this will therefore simplify your business enormously.
Repairers and insurers do have a common goal ... repair the vehicle as quickly and efficiently as possible; any gains in business performance should therefore positively impact insurance partners. We've seen, within our client base, that a daily focus on improving repair business KPI's can substantially influence performance against longer term insurer KPI benchmarks.
The business KPI's you should measure vary by shop. The top two or three opportunities for improvement could be on the production floor, in administrative processes, or financial management. Some thoughts to consider when defining your internal business KPI's are:
- "K" means Key - a few key indicators. If you have more than 5, it's just a list.
- Attainable - they must be attainable and track progress against a target daily.
- Leading - use leading indicators so you can affect change proactively.
- Change - KPI's will evolve and change over time as you meet your targets.
I fully realize the importance of ensuring your insurance partners' needs are met. I'm not suggesting that they should be ignored; actually, it's quite the opposite. I believe you serve your insurance partners better by focusing on several key areas that improve your overall business performance. As they say during the safety briefing before take-off on an airplane, "please put on your own mask first, before assisting others".
I will discuss the KPI topic in more detail in future articles. We'll also share some specific areas where we've seen collision repairers make substantial progress. Please let us know if there are any areas you would like us to review, thanks.
Posted by Mike Gilliland on Mon, Oct 19, 2009 @ 11:53 AM
Every morning as you walk into your facility you are met with a tsunami of information, usually (if you are like me) all you have available to fend off the advancing wave is a 3/4 empty coffee cup. You'll definitely fill your cup, but as the wave passes and dissipates you know there is a lot of valuable information that you did not capture and you have an uneasy feeling in your stomach that maybe you missed something important.
This scenario is not a unique to collision repairers, most types of businesses experience it, but it is compounded by the fact that in most collision repairs there are 3 party's involved, yourself, the vehicle owner, and the insurer. In an earlier article we concluded there appears to be a need for Business Intelligence within our industry but how we convert a fairly complex technology into usable "Collision Intelligence" that provides real value to shop operations needs to be determined.
Here at AutoHouse, we believe we should start with your most pressing concern. What is going on today and are we potentially off the rails? If so, can I resolve the problems we've identified before they have a negative impact on my business?
We've identified 3 areas of interest:
1) Administration - ensure the proper information is captured during the administrative process and flag exceptions for resolution.
2) Finance - report where there may be potential profit leaks and identify potential areas to improve cash flow.
3) Production - take a snap shot of production and the incoming and outgoing pipeline so you can prioritize and adjust as necessary.
We think there is potential value to be delivered through Collision Intelligence but in the end our clients will decide. We welcome your comments, critical feedback and general thoughts on the subject.
Posted by Mike Gilliland on Mon, Oct 19, 2009 @ 11:35 AM
Business Intelligence (BI) is becoming more widely known and discussed within the collision repair community. Several industry technology vendors have also released products or services with the word "Intelligence" incorporated within their solutions name. That leaves one to ponder... what is Business Intelligence?
A workable definition of BI was provided in a January 2005 Technology Evaluation report. "BI is an umbrella term that combines architectures, applications and databases. It enables real-time, interactive access, analysis, and manipulation of information, which provides the business community with easy access to business data. By giving this valuable insight, BI helps decision makers make more informed decisions and supplies end-users with critical business information on their customers or partners, including information on behaviors and trends."
To summarize in simple terms, BI makes the right information available, in the right format, to the right person, at the right time.
Collision repairers are driven by numbers, from financials to production efficiency ratios to insurance partners key performance indicators so the concept of Business intelligence appears to be a natural fit. The next question, can it be delivered to collision repairers in a technologically and financially viable solution?