When it comes to business improvement, it all starts with measurements. There is an old saying of, “you cannot improve what you do not measure,” which stands true today. To effectively understand a metric, a standard must be defined by using benchmarks called KPIs, or Key Performance Indicators. Once this has been measured over a specified duration (nothing less than 90 days is best), the KPI can be compared against previous periods and other regional or national benchmarks to understand where there may be opportunities for improvement.
Let’s begin with a root cause analysis to determine what variables influence the performance of a specified KPI, which could be individual variables or a combination of other KPIs. We will then analyze each one to look for any parts of the process that can and should be improved to begin driving enhancements in the target area. The key is to never stop tracking or striving for even the most minute of improvements – the best improvements are small and incremental. Keep with it, stay focused and do not try to tackle too many areas at once. Pick three to five KPIs that are the most impactful to your business and leverage the industry experts in your area. A great place to start is with your paint manufacturer’s business development manager and taking advantage of performance group meetings if they are available to you.
When it comes to business performance, there are certainly an overwhelming number of data points which could provide potential for improvement. Don’t let yourself be overcome with what is known as “paralysis by analysis” by taking on too much. You should focus on a few KPIs which drive the largest impacts to your business (and as you begin to achieve and revise your goals, additional KPIs can be tracked for continual improvement).
KPIs are often categorized into three key areas: business management, productivity and industry performance. In terms of business management, the ultimate KPI for any business is net profit. This can be tracked as total dollars, or, more frequently, as a percent to total sales.
One business management KPI which supports total sales and allows to break down performance based on varying job sizes is severity, or the average repair dollars per repair order (RO). As the industry continues the shift into stringent OEM repair procedures, this metric is less about balancing this number to keep other industry partners satisfied and more about understanding capacity and performance for your business. Likewise, cycle time KPIs provide insight into the duration of time it takes for various stages of the repair process. These KPIs are often tracked individually so that improvement measures can be applied to that specific part of the process: arrival to start, start to complete, complete to delivered, and total key-to-key time.
For productivity, a great KPI to track is touch time. This KPI determines the average duration of time each vehicle is worked on per day. Of course, the higher this number is, the more labor hours you will be producing in the shortest amount of time. Another KPI that is impactful to productivity is hours per booth per day. In the past, often the predominant booth utilization KPI was booth cycle time. However, booth cycle time just denotes the amount of time it takes to run one booth cycle regardless of how much labor was generated. By tracking hours per booth per day, actual production is being measured and capacity utilization can be determined.
When it comes to tracking KPIs, accuracy and standard methodology is critical to drive consistent and sustainable results. When looking at a KPI, it is important to track the data in the same format each and every time to ensure when comparing against previous periods or other industry benchmarks so that you are comparing apples to apples. For instance, if you are looking to improve paint cost and profitability, tracking this at a net level (after discounts) will allow you to compare against yourself (or other locations if you have multiple), but will not provide an accurate representation of how you perform compared to other shops in the industry.
To fully understand your performance, this should be tracked at what we call refinish or list pricing. This levels the playing field for the KPI and ensures all data points are measured in the same manner and removes the impact any negotiated deal you may have with vendors from the calculation. Doing this will provide a true benchmark comparison so you can be consistent, accurate, and diligent in your efforts for any KPI you have decided to track. The results you get back and sustainability of any improvement will rely on this.
A prime example of how a KPI can influence multiple facets of a business would be hours per booth per day. For instance, if we hypothesize that a paint booth can typically produce ~300 paint hours per week with the right processes in place and your shop has seen bottlenecks in the paint department, this KPI will compare your performance against this benchmark. Let’s say your shop is averaging 175 hours per week and has one paint booth. Your body department can produce 275 hours to the paint department per week. At first glance, one would consider purchasing an additional paint booth to increase the amount of capacity in the paint department to meet the current demand. Without comparing your KPI to a benchmark, you could needlessly be making a substantial investment into a piece of equipment that may not be necessary to meet current demand. When paint booths can range from several thousand to over a hundred thousand dollars, this will significantly impact the profitability and available production space within your business.
An alternative to this investment and risking the creation of excess capacity would be to look at the processes and other KPIs in the shop to gain a better understanding of what could be improved to maximize the capacity of the existing spray booth. There could be an array of root causes: improper QC between body and paint, insufficient preparation resources, lack of productivity boosting products implemented, insufficient training, improper product selection, and so on. The validation of current processes should be a prerequisite to any expansion measures.
There is no time like the present to begin analyzing where your business can make improvements. It starts with understanding your situation and knowing how to use information identified in the KPIs to decide how to move forward. Building a strong relationship with your business development manager will help you identify opportunities for change and growth, as well as networking with other trusted industry professionals who can offer you valuable insight. Regardless of who you decide to connect with, beginning to think differently and realize how quickly the landscape is shifting for the automotive collision industry will help you adapt to new ideas and resolve challenges more confidently as they come up. Start tracking your business’ most important KPIs today and be ready to face the future of automotive collision repair.
