Build your paint department revenues by cutting costs

June 4, 2014
Building efficiency in your paint department can deliver significant cost savings – enough to make this effort well worthwhile.

In 2011, O'Rielly Collision Center, in Tucson, Ariz., was named ABRN's Top Shop of the year. In the previous two years, the shop was named in the top 10 of the best shop's in the country. What finally put it over the top?

Along with nailing every measurable contest area, O'Rielly's initiated some new programs and, significantly, continued honing an ongoing effort to make its paint department more efficient. A year earlier, O'Rielly worked with its paint vendor to implement a system that measures painter productivity based on product inventory use instead of labor hours. O'Rielly made the move after the vendor had insisted this method  provided more accurate measurements of productivity and actual costs. By examining and comparing product use, the shop and its painters received a clearer picture of the paint department's costs and painter performance.

Manager Brian Guerrero reported that the system not only saved money, it allowed his shop to improve its paint services and motivated his paint staff to upgrade their performance since they were able to better evaluate their work. 

ABRN can't promise that incorporating the same kind of changes will make your business a Top Shop. However, building efficiency in your paint department can deliver significant cost savings – enough to make this effort well worthwhile. Read on for more information about what steps you can take and where you can get help to build revenue by cutting your painting costs.

Numbers that motivate
Shops hear plenty of suggestions about what they can do to go lean or cut costs – so many that you may have become inclined to put many of them on the back burner while you work on other parts of your operation. If this is the case with cutting costs in your paint department or if you simply don't believe the rewards will justify the efforts, consider some numbers provided by Ted Williams, Manager of Business Consulting Services for Sherwin-Williams Automotive Finishes.

Most of the steps you can take to cut costs in your paint department begin well before the actual painting. Courtesy of Sherwin-Williams

Williams notes that if a shop's paint material cost is five percent of total sales and paint material sales are 10 percent of total revenue,  their profit is five percent of total sales. The average shop nets less than 10 percent net profit. This means that paint material profit in most shops is equal to half or more of the their total net profit.

Without bringing in any additional work, shops can bump up their revenue significantly just by better managing one cost area. Fortunately, practically every shop has the means to institute a cost management solution, and plenty of help exists to create a program that is effective.

Five steps to building a cost management program
The following steps provide an outline of what your shop can do to institute its own cost program.

Create a better materials inventory by investing in quality supplies and specific products. Courtesy of Sherwin-Williams

Step 1. Contact your vendor.  Paint vendors are not only experts on the best ways to use their products (information they want you to have), they also provide a myriad of other resources to help shops manage their numbers. During the past few years, they've rolled out a number of programs to help shops reduce their painting costs through better management of material inventories and elimination of waste and errors in paint processes.

Many shops already are taking advantage of these programs. Williams reports that Sherwin-Williams is extremely busy working with customers to incorporate its programs. Indeed, he and reps from other paint vendors suggest interested shops requests these services as soon as possible to avoid wait times. Translation: act now to get on board with these services since your competitors probably have.

In case you're wondering why vendors would run programs that potentially could cut into their sales,  Williams says the programs provide greater benefits for a vendor because they help build better shop operations, ones that help shops thrive for the long term. Profitable shops stay in busy and buy more products, and both vendor and shop enter into a long-term, mutually beneficial relationship.

Step 2: Educate your estimators. Paint services may not be performed till the last stages of a repair, but cost savings begin the moment your estimators begin their damage analysis. Williams notes that estimators frequently receive little ongoing training, so they aren't always aware of the true labor hours and materials cost of paint services. When these costs aren't accurately recorded on the repair order, shops aren't properly compensated and lose money.

Williams says the best shops in the country routinely have 10 hours of paint work recorded on their repair orders where many other shops have less than 8 hours and some write as little as five.

He recommends shops enroll estimators in continuing education to ensure an accurate estimate. He also suggests that a shop's paint department review the estimate as well before it's delivered to an insurer or the customer.

“The painter is going to know which panels need painted, which can be blended and where,” he says. “Further, this information needs documented up front so the insurer will pay.”

Inaccurate estimates also result in supplements, which result in costly delays. Williams says supplements for paint work can prove particularly costly since they may not be submitted.

“If the estimator already had written other supplements, they may not be be willing to submit one more to the insurer near the end of the repair,” explains Williams.

Step 3: Avoid inventory flux. Maintaining a proper inventory – one that meets your needs without running low or carrying unnecessary excess – is a key part of cost reductions and a central feature of vendor programs. Pete Mahoney, National Technical Manager/Trainer for ChemSpec, says that one of the chief benefits of inventory control is the funds it frees up for other shop investments. Stable inventories also deter overuse and misuse, along with theft.

Maintain an inventory list to ensure a consistency inventory and to track product use. Courtesy of Sherwin-William

Vendors typically provide a number of tools to help shops determine proper inventory levels. Sherwin-Williams, for example, provides its customers with “smart scales” that transmits product use to the company. Using this information, the company can help set proper inventories for a shop. (The scales  also provide other services, such as determining if products are being correctly mixed at the shop to improve product efficiency and cut waste).

One rule Williams employees when calculating inventory levels is taking into consideration all the products and materials a shop uses. From there, he says says shops should determine where their investment should go, with the bulk of their money being invested in “products that leave with the vehicle over those that end up as waste.” That means spending more on products the customer actually sees (for example, finishes) over those that are discarded after use - sandpaper, masking tape, etc.

Shops shouldn't necessarily invest in the cheapest versions of those products, says Williams. Low-cost products can cost shops more if they don't offer quality and force shops to perform expensive re-dos or if shops must use more of them to provide the same quality a higher-priced product could offer more economically with less use. Williams says shops should invest in those products that provide quality, while keeping an eye on cost.

He also suggests shops practice consistency when ordering products and materials. This means using a single brand of product and specific products (for example, 100 grit sandpaper) for specific tasks. This practice reduces inventory costs since shops no longer need to stock multiple varieties of products.

Mahoney says shops also can save on inventory using products that can be utilized for multiple purposes. Some paint lines feature products that can be mixed into multiple bases, clearcoats, etc., thereby reducing the number of products a shop needs to keep in stock.

A neat, efficient and properly stocked paint room can significantly reduce your paint department costs. Courtesy of Central Collision Center

Step 4: Eliminate waste and re-dos. Once you address issues with estimate accuracy and inventory, you'll cut down on waste and re-dos – two areas that likely are the sources of your largest unnecessary costs. You'll still need to address their other causes.

Steve Tripp, North American Strategic Accounts Manager for Axalta, says shops can cut significant waste by reducing over spraying and performing better prep work. Tripp says many painters fall back into old habits while using new products. They apply 4-6 coats of product where just 1 ½ coats is necessary. (In many cases, painters overuse waterborne products, forgetting that these finishes require fewer applications than their predecessors.) 

During prep work, Tripp says shops can create significant problems, resulting in waste and re-dos, by improperly staging paint jobs. Tripp explains that when shops don't mask correctly, paint is not applied as it should. This alone produces a re-do. Paint departments often complicate these mistakes by sanding and re-masking a vehicle in the booth, producing dust that contaminates the fresh paint work.

Tripp says shops should work closely with their vendors to identify the sources of waste and re-dos and then institute systems that fix these problems.

Spraying technique can vary widely from one painter to another. Work with your vendor to institute the proper technique and spraying consistency. Courtesy of Lefler Collision and Glass

Step 5: Spray smart. Improper spraying technique could fall under the previous step, but technique and other spraying issues constitute such a large part of cost management, they're broken out here as a separate step.

The vendors that ABRN spoke with noted that technique can vary greatly from one painter to another in a single department. Williams notes cases in which the difference in painting efficiency between painters can be as great as 80 percent. The good news here is technique can be corrected, usually without much difficulty. Williams says one shop with this issue videotaped its painters, then noted the difference in spraying efficiency between its best painter and the once with the worst efficiency. After watching the tape, the latter employee was able to quickly close the gap (within 10 percent) between his work and the other painter.

The more challenging issue here is preventing painters from reverting to old habits. Again, your paint vendor can help with programs that maintain proper technique. Mahoney says these programs have been particularly effective with new painters and suggests shops get these employees involved with such program as early as possible.

He also recommends that shops invest in HVLP or LVP guns, which provide greater transfer efficiency.

Incorporating these steps in your shop will involve commitment from you and your staff, along with some hard work. A payoff in greater net profits, and more effective work habits, will make these effort well worthwhile.

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