Is it time for advanced inventory systems in your collision repair shop?

Aug. 1, 2018
There’s an App for that. Is it time to consider one of the several body shop inventory control programs?

There’s an App for that. It seems that for just about every aspect of our lives there is an app to make it simpler or better. Our industry is no different. Is it time to consider one of the several body shop inventory control programs?

There are several good apps or programs to aid in managing materials, including Nuventory, PMCLogic and Leantec, all three of these top companies have good programs and can be a benefit for many shops. Several of the paint manufacturers have programs included with their color tool offerings. There are also a few distributors/jobbers that have apps/programs to help shops better manage materials. There are far too many independent programs or apps to cover them all individually here, so for now we will cover some general concepts.

Before choosing a program to work with there are a few key questions to ask yourself:

What aspect of my shop’s paint and materials (P&M) margins has the most opportunity for improvement?

Is P&M management a priority for my shop (at this time)? Is it worth the added time to improve this area of my business? With P&M making up a potential 10 percent of the shop’s overall revenue, there is surely some benefits to working to make this segment of your shops sales mix profitable.

How will this impact my shop’s workflow and culture? Does this fit?

Am I and my staff willing to devote some amount of time to best utilize one of these programs?

Do I really need a program? And if so which program is best for my shop?

What aspect of my shop’s P&M margins has the most opportunity for improvement? Is there more opportunity to enhance sales of P&M or to reduce costs? (Obviously doing both will have a positive impact on margins).

A good rule of thumb would be to take a look a couple key performance indicators of overall P&M sales and P&M costs. If P&M costs and sales are substantially “off” industry standards or averages, that would be a good indicator of where to start.

For example if P&M sales are less than 10 percent of gross sales there is probably a sales opportunity.  There are plenty of sources for benchmarking, including Mitchell, CCC, ABRN and other trade magazines, and 20 groups. This is generally a fairy easy method to determine if P&M sales are lackluster.

The other side of the coin is P&M costs these same benchmarking sources suggest that P&M costs above 6 percent indicate a high P&M CGS (Cost of Goods Sold). We do need to validate what is included in the P&M CGS and be sure it only includes the actual costs of materials sold, not necessarily all purchases from jobbers/distributors. These purchases almost always include other items that are not part of P&M CGS, such as safety supplies, shop maintenance or other billable items (not included items).

Once we have determined which side — sales or costs — offers the best opportunity for improvement, we can then evaluate which program is best for our needs. Some of these advanced inventory programs are geared more towards cost recovery or detailed line item billing of materials and some are geared more towards inventory control. The three programs reviewed and mentioned above all are very capable in both areas.

Is an inventory control program the right fit for your shop? Is this a priority right now? Being efficient and effective in all operations in and around the repair is essential. With all the potential areas that seem to demand management involvement, is P&M a top priority for everyone? The answer is no, not for everyone, not all the time. Yes, it’s important, and in the top 10 of areas to work to improve, and improvements in P&M performance should be on everyone’s to-do list. 

There are some things that these programs cannot help with directly, such as: re-dos if you suffer from re-dos or repaints in or back into the booth, this is best corrected with other tools, such as training, quality control steps (handoffs) and SOPs.

Keep in mind there are generally three ways materials (once purchased) leave a shop:

  1. On the vehicle, hopefully not either over applied (excess cost) or under applied (potential future defect)
  2. In the waste stream (HM Drum or trash)
  3. Out the door (side jobs, theft?)

If you haven’t established SOPs, that would also be a required prerequisite. These SOP would also include an authorized stock list. Shop organization, or a place for everything and everything in its place is another good prerequisite. A couple of these programs when implemented can help with this and include these steps in their implementation process.

If you want to make improvements, but you’re not quite ready for an advanced inventory system, there are some steps to get things moving in that direction. You can look to get assistance from your jobber/supplier (several of these systems are very good) or use some of the capabilities already included in several of the paint manufacturers’ color tools (formula computers).

Does this fit with your shop culture? How and by whom are these tasks (inventory control, ordering etc.) handled by now? Will these changes have a cascading effect on other areas? In other words, can an advanced inventory system fit into your existing SOPs and can you get employee buy in? How much time and effort is involved in implementation and then day-to-day operations of these potential programs?

While each program has different attributes, some of the best attributes with these programs include:

  • Cloud based, allowing the program(s) to be updated, improved and accessed easily from anywhere and anytime.
     
  • Ability to keep up with current prices/costs of materials. (With as little user intervention as possible)
     
  • Ability to create invoices for actual P&M to present for reimbursement.
     
  • Accessible to the front-end or management systems. And the ability to use these with your business partners and clients. (This may or may not be a priority depending on other factors with business partners.)
     
  • Ability to generate restocking orders (Purchase order to jobbers/distributors). Link to jobber systems to send/receive stock orders (beyond printed or faxed orders)
     
  • Direct link to estimating systems to gather RO specific data. And pull back in actual P&M costs
     
  • Direct link to Paint Mfg. Color Tool system to gather actual mixed/sprayed paint costs.
     
  • Storage systems (inventory control point) where materials are “checked out” and costs are assigned to a technician, RO, department or team.
     
  • Real time reporting of materials lists, inventory and financial inputs (General Ledger).

Just as we used to order parts with a phone call and later a fax, electronic parts ordering is now common place. There will likely be a time when virtually all paint and materials are ordered in a similar fashion, with the press of a button. For now, the choice of if or which system is best for your shop depends more on your particular shop and your priorities. After reviewing each of the three systems highlighted here (Nuventory, PMCLogic, and Leantec) I can safely say the technology, the logic and the abilities of these systems are ready to help with your P&M needs. The bigger question is are you ready for these systems… yet?

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