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The actual cost of shop rework includes many intangibles

Wednesday, May 25, 2016 - 07:00
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“Hey can you guys dust a little color on the edge of this fender; I scratched it a little putting it on.” If you have been in a collision center more than one day you have heard this at least once.

Most of those asking the paint shop to “dust a little color” on a part do not really know what it costs. They also are not aware of today’s paint processes. You cannot just “dust a little color” on something, most times it must be completely refinished. Refinishing a part because it was scratched not only costs in materials but also the time it takes to rework that panel and the time lost on other repairs.

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Some simple math will show the costs associated with reworking a panel as well as the costs of lost time on other repairs. Let’s say the scratched part had 2.3 hours of refinish time on the original estimate and required .5 to repair the scratch. Taking the 2.3 hours times an average labor rate of $40 equals $92. Additionally, the .5 to repair the scratch would be $20 and the materials for refinishing calculate out to $69 using an average of $30 per paint hour. In total $181 was expensed to “dust a little color” on a scratched fender.

As we think this through a little further, the 2.8 hours expended repairing the scratched fender means 2.8 hours was not spent on another job. So, theoretically two repairs were stopped in production causing 5.6 hours of delay. Using the national average for touch time of 4.5 hours per day, 1.2 days were lost in production. One might say the proverbial snowball is rolling down a slippery slope.  

The expense continues when you consider rental expense, missed deliveries resulting in lower CSI scores, reduced cycle time and insurance company penalties. While it would be difficult to put a dollar figure on the missed delivery, reduced cycle time and lower CSI, at a minimum, most insurance companies will ask for reimbursement for the car rental. With rentals averaging around $59.99 per day multiplied by two stopped repairs, our scratched fender expense has now increased to $300.98.

Depending on how you expense the $300.98 determines on how it affects your bottom line. Some will charge it to a policy account that hits the bottom line directly, others will reduce the labor rate, which will affect your bottom line indirectly through lower labor gross profit. There is no real soft bottom on this slippery slope; even if you charged the technician, you would still suffer a loss through reduced production.

Another place these calculations can come in handy are when you are asked to fit non-OEM parts. It’s very easy for a supplier to say, “I’ll be happy to pay an hour for you to fit the fender.”  After reading what I have written above we now know that is going to cost much more than an hour. Since that hour does not appear in the repair hours, it cannot be calculated into cycle time measurement, a factor that controls our world. Using the theory above, that one hour becomes two because of lost production time on the next job. Put on your skis, we are heading down that slippery slope again.

I hope this article helps illustrate that in the collision industry we sell hours. That’s it. Everything we are measured on relates to hours. When a mistake is made or we have to put extra time in to fit a part, it costs us in a variety of ways. It is difficult to recover that cost because you can never get that time back. Once it is used it’s gone. All we can do is work to maximize our potential by getting the most out of each hour, keep track of hours lost to rework and identify the ones causing extra work. I hope that showing a technician this article will make him think twice and find ways to install a fender without it getting scratched.

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