A Path to Profitability in Your Collision Center

 

Paint and Materials Ted Williams - other PR Img

 

By: Ted Williams, Sherwin-Williams Automotive Finishes, Business Consulting Manager

 

Published in Fixed Ops Vol.11, No. 4-July/August 2014

 

 

Learn more about our experienced team of business consultants: SWAF-IMG-BUTTON-LEARN-MORE

 

In a successful dealership Fixed Operations Department there’s a constant focus on efficiency and gross profit improvement. Your collision center is a key contributor to your results and is often an overlooked goldmine for improvement.

The most successful dealership collision centers focus on continuous process improvement in order to develop their business. Focus areas include a 100%-accurate repair analysis, part correctness, express repair and segmentation of labor. So why, with all of the potential areas for improvement in your collision center, should you first take a fresh look at paint and material profitability? There are three reasons:
  • The shop has direct control over the items that impact paint and material profitability.
  • The process around paint and material profitability teaches the shop lean principles.
  • The shop can quickly see and measurethe results of their efforts.

Let’s start with understanding where your results currently stand. Some dealers separate liquid from dry goods on their financials. However, to truly benchmark your results, you should consider adding all of associated products used in the vehicle repair (such as fillers, abrasives and tapes) to the paint purchases. The reason for this is that insurance reimbursement is calculated on paint labor hours. This is the main source of reimbursement for all of the supplies used on the vehicle. Not including these items gives the shop a false sense of profitability. Exceptions to the list should be tools or adhesives that can be itemized on an estimate.

Using a combined number for paint and material purchases you should then benchmark your results. Industry benchmarks for paint and material cost should be 5% or less of total revenue including parts and paint and material
revenue should be 10% or more of total revenue including parts. In this scenario profit is 5% of total revenue including parts.
 

Ironically, the material profit in most shops is equal to half or more of their total net profit.

So how do you change your results?
 

Paint materials reimbursements are based on paint labor hours sold, so estimating is critical:

  • Invest in training your estimators to write complete estimates.
  • Understand the estimating database.What is included and not included? I tend to leave shops printed copies of the Estimating Guides for their database provider.
  • Damage Analysis and Blueprinting of the vehicle leads to more accurate estimates and fewer supplements.
  • Involve shop experts in estimating. Body Techs and Painters should map out the repair at the beginning with the estimator. Color and repair process should be verified by the painter before the vehicle enters production.
  • Ask for what you really need, but not more. Be clear and document needed procedures for the insurer. This builds a trusting partnership.
 

Specified Approved Material List

  • Define a list of approved products built around best demonstrated practices for the repair.
  • Focus on items where cost and quality intersect.
  • Never downgrade products that are delivered to the customer on the vehicle,
  • Cheap is not better if it causes additional labor operations to correct shortfalls (more buffing, cleaning redos, etc.)
  • Bar-coded ordering systems minimize inventory, eliminate ordering mistakes and reinforce adherence to approved lists of products.
 

Measurement

  • Track redos and put a program in place to address these sources.
  • Mix history of paint products tracked and measured.
  • Use a suggested mix by RO hour’s feature that allows for mixing accurate amounts for the repair.
  • Accountability for results. Recognizing good behavior is equally important as pointing out bad.
  • KPIs to measure improvements and identify areas of improvement.
  • Use technology like smart scales to eliminate waste.
 

Application

  • Refine product application technique for best results. Use the right equipment and technique for right job.
  • Learn to spray to coverage. There’s often a tendency to over-apply waterborne, in particular, after it has covered.
  • Use tinted or similar color undercoats to achieve coverage.
  • Have your painters trained on a regularly scheduled basis.


Not all paint suppliers are alike. Look for a paint and material vendor that wants to be your partner. The best vendor is one whose culture is built around the interest of the partnership. Look for these other attributes for a good paint partner:
  • Willingness to work with your team on your shop floor.
  • Mentality of selling the customer just what they need and not more.

Having the tools available to improve results.
  • Investing in providing the training your shop needs.
  • Focusing on providing daily support to help you grow and develop your business.
  • Staffing with a factory-trained, knowledgeable support structure to provide results.

In a competitive market, shops have to invest to grow. If they’re not profitable, then they cannot invest. Paint and materials are a great starting point for a profitable, continuous improvement process in your collision center.