There are many challenges that face the collision repair shop owner today. Some of these challenges are a result of the economy, some are insurance driven and others are a result of the rapid change in vehicle technology. Regardless of the reason, a shop owner must face the challenge and develop a strategy to maximize efficiency and productivity if they want to survive and be profitable. While none of these problems are simple to resolve, having multiple locations can make solutions easier. Let’s take a look at a few challenges that a shop owner can resolve by having multiple locations.
Managing DRP relationships
Trying to meet the demands of several DRPs can be a challenge, but having multiple locations may help. If you have a DRP that continually brings work to your shop, and you have a good relationship with them, it might be a consideration to steer that work to one location. You could have estimators or customer service representatives at multiple locations who are trained on the policies and agreement with that insurer. It usually becomes obvious that an estimator may excel with one insurer and not do as well with another, for one reason or another. You may also notice that an estimator and a technician work well together. Moving these employees to the locations that are exclusive to that insurer can be a great advantage, as long as everyone buys in.
If you are concerned with one DRP holding too much control in one location, you may pair DRPs together that have similar guidelines, or that hold equal value in your business. For example, if you have DRPs that have similar aftermarket parts usage requirements, they might be paired in one location. If you have one location that works with multiple DRPs, it can serve as a backup for overload. If you measure the amount of work that you average for each insurer or DRP every month, you might be able to regulate — or load level — work for a location by pairing them with other appropriate insurers in each location. By knowing the maximum amount of work that a location is capable of producing and pairing that location with the right insurers, you can achieve maximum efficiency.
You may also review other things that are typical of an insurer, and reorganize people, tools, suppliers and software to better fit the insurers you serve at that location. You might say all of this sounds like focusing a little too much on the insurer and giving up too much control of your business. However, in reality, if you have invested in property, spent countless hours finding the right staff and negotiated with insurers for months to build a business, doesn’t it make sense to maximize the relationship?
Managing job types
Beyond structuring a location around an insurer, you might consider organizing locations based on types of repairs. With the fast-paced change in vehicle technology, the cost of tools and equipment to do every type of repair in every location might be out of reach. It will not be an overnight transformation, but you can start looking for trends in manufacturing and set one location up for that type of work. An example would be the increase in the use of aluminum in vehicles that we have seen in the last few years. While aluminum-intensive vehicles were once limited to high-end car models such as those from Mercedes-Benz, we will see an all-aluminum Ford F-150 within a couple years. It would probably be wise to start creating a location that is equipped to repair aluminum vehicles. This will also streamline training, and begin the process of hiring or moving the right employees to a location.
There are also other vehicle trends to look at, such as hybrids. Recent studies show that more than 5 percent of cars on the road are hybrids, with the Toyota Prius making up more than 90 percent of those vehicles. Consumer studies indicate that more than 35 percent of new car buyers considered a hybrid vehicle, and that it is the fastest growing segment of new vehicle sales. Companies like IKEA, Coca-Cola, Fed EX and Hilton are using hybrids in their fleets. Would it make sense to develop a location that specializes in hybrids and fleet vehicles? This would be a great location to market as a green aspect of your business.
You may have a location that only does fleet business. Equipment for a shop that only does fleet work would be based on the fleets they secured a contract with, along with the type of fleet vehicles they used. This, of course, brings up the notion of working primarily on one brand of vehicle. While this might not be feasible, in some situations it might. There are multiple options to consider when you look at branding your shop with specific vehicles. You might consider having an Asian, European or American shop. How attractive is it to a customer who drives a Toyota Camry to arrive at the collision repair shop and be offered a Camry as a loaner car because the customer service representative has compared it to what he drives? Every person I know has some loyalty toward the vehicle brand they drive. Beyond being a great marketing strategy to the direct customer, it might be a great business-to-business marketing technique. As we have mentioned in other scenarios, it will allow you to streamline training and equipment. For example, many repair procedures on late-model Toyotas, some as simple as adding coolant, will require Toyota training and the use of a Tech-One scan tool. Whether you create a specialty location based on marketing or vehicle type, there are advantages worth considering with this concept.
Managing business economics
The biggest reason we may need to create specialty locations or load level may not be related directly to insurance pressures or vehicle repair procedures. It may be a matter of good business economics. With multiple locations, it can be very defeating to have all but one making a profit, and that one corroding away at overall profitability. If one location is overbooked and backlogged, it is most likely killing cycle time and profitability because the funnel is full and nothing is being delivered. You would be much better off to move that work to another location that is just on the verge of being profitable. The net result will be significant improvement at both locations.
Many cycle time gurus will tell you the benefits of having a fast lane in a shop that repairs vehicles meeting certain criteria. This criteria may be a vehicle that only needs parts that can be painted off the car, no frame damage, no supplements, all the parts in stock, or any other repair criteria that might delay a job. While I agree that a “fast lane” may boost profitability and improve cycle time for a location, you might ask yourself if you need an express shop instead of just a lane. It may make sense to dedicate an entire location to express-type work, or maybe just the opposite.
With the same thought process of an express lane in mind, do you need a “hard-hit alley?” Every shop owner will agree that most of the time severely damaged vehicles can and will kill good cycle time in a repair facility. Even when a severely damaged vehicle is blueprinted properly, trying to navigate a large job that is towed in and dropped into the schedule with little prior warning is difficult to deal with at best. These types of jobs may be less damaging to your financial outcome if they are selectively moved to a different location. Another option is to have certain locations that take in vehicles with repair criteria that are just the opposite of the fast lane. This again may help with organizing people and equipment.
If the insurers see what you are attempting to do, they might not hold you to the same standard as the typical dashboard. For example, this type of facility may be able to improve cycle time on these large jobs, but severity is going to be terrible.
As I look at the typical MSO, the trend I see is to develop a footprint that works and duplicate that model across one or more markets. In most cases, this means similar in size, if not identical, square footage; same number of technicians; same DRP relationships; same equipment; same paint line; and the list goes on and on. You could say the goal is to become the McDonald’s of collision repair. While you cannot argue the success of these types of operations, we can never afford to not ask “what if?” We are now seeing McDonald’s in the mall, paired with gas stations, mini-sized in a town of 5,000, and super-sized with multiple drive-through lanes in largely populated areas. Regardless, the food is the same.
I suspect the MSO of the future will have to adapt to the industry that lies ahead, and that will include some load leveling and specialization. Success in this future arena will require your entire team’s cooperation and some detailed planning — both of which should start today.
