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Use these KPI steps to build your paint business

Monday, October 30, 2017 - 06:00
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The next time you’re looking for ways to raise more revenue in your paint department, remember these three words: Do the math.

As it turns out, becoming far more familiar with the numbers — the key performance indicators (KPIs) —behind materials and labor usage is the first step in getting the most out of those materials and your staff. The next is understanding how these numbers translate into more efficiency and revenue. Following that, you need to transform this new or renewed understanding into a firm plan that creates more dollars for your shop.

Here’s a five-step plan built on input from paint manufacturer experts to help you do just that.

(Photo courtesy of Sherwin-Williams) Paint department KPIs can be greatly influenced by activity in other areas of a shop. Inaccurate estimates, in particular, can influence productivity.

Step 1. Know your KPIs
There’s lots of good news for any repairer wanting more hardcore data on the paint department. BASF VisionPLUS Program Manager Craig Seelinger says his company looks at 100.

Unfortunately for many shops, having too much information can be just as much of a problem as knowing too little. This is why vendors prefer that shops beginning their first deep dive into KPIs start by focusing on a handful.

This is also a good point in the KPI discussion to bring up two caveats:

  1. Working with KPIs isn’t a one-size-fits-all pursuit. Different shops often need to focus on different KPIs based on their markets and operations.
  2. Because of the challenging nature of utilize KPIs, shops need to consider getting help. Reaching out to their paint vendors in the ideal step here. Vendors typically offer consulting to assist shops on their KPI “journey.” Indeed, having an expert who can stand outside a business and assess it objectively is one of the keys to putting a KPI strategy into place. To this end, Seelinger says shops should first assess their current status and then determine which KPIs will be helpful.

With that being said, shops still need a starting point. Most of the vendors ABRN spoke with pointed to three:

  1. Paint Hours per Repair Order. This is calculated using only repair orders with paint hours. Simply add applicable paint hours.
  2. Booth Cycle Time. This is the average time it takes for a vehicle to go through the booth or a complete spray/bake cycle for parts. Another simple calculation to perform—add up cycle times in minutes and divide by the number of cycles.
  3. Paint and Material Gross Profit Percentage. Determine using the formula where you divide the sales revenue of each by the cost of each to first determine paint and materials profit. Then, take the profit number and divide by the sales. This reveals the gross profit percent.

Together, these three KPIs are particularly valuable because they indicate how much charged labor is being performed in the paint department, along with the amount of paint and materials being sold. Using these numbers, repairers can begin seeing where they can make improvements.

Again, you’ll want some help reading into these numbers.

For example, Seelinger notes, “If a shop’s paint and material gross profit percentage is 48 percent and overall cycle time is 15 days, they may not wish to track this KPI and instead focus on something that could improve their overall cycle time—perhaps booth cycle time.”

He goes on, “However, if their Paint and Materials Gross Profit percentage is low, tracking their mixer efficiency may uncover poor mixing habits, which has a negative impact on this KPI.”

Digging into these numbers and then working in other KPIs creates an even more telling, in-depth picture of what’s happening in your paint department.

(Photo courtesy of Sherwin-Williams) Inaccurate paint mixing is another problem area that KPIs can help uncover and correct.

Robb Power, a senior manager for PPG Business Solutions, notes, “A KPI that puts material costs into a better perspective is Paint & Material Costs per Refinish Hour, since it indicates how many paint hours a shop actually produced with X dollars of material costs.

Power explains, “This metric couples costs with productivity. This can be measured at the macro-level--the entire paint department, or at the micro-level--by each individual technician. The later can help to build in some accountability.”

Speaking of micro-level, you’ll also want to dig down into one other key KPI, Technician Production Efficiency, the average production hours each technician creates during each work hour. Power notes,” This gives us insight into our actual capacity to produce labor hours. If this KPI is on the low side we would look for root causes: Skill, will, and opportunity.”

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