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.
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:
- 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.
- 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:
- Paint Hours per Repair Order. This is calculated using only repair orders with paint hours. Simply add applicable paint hours.
- 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.
- 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.
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.”
He goes on, “Opportunity issues would be things like the work sent over from body is not 100 percent ready for paint, incomplete estimates, spray equipment is not working properly--booth, compressor, spray gun--or techs standing around and waiting for work. These are just a few of the usual suspects that rob capacity from shops.”
Step 2. Find your benchmarks
Addressing these areas effectively means comparing your KPIs to industry benchmarks, touch points that show where your KPIs should be and where they are for the best, most efficient and productive shops.
Seelinger provides the following examples:
Paint Hours per Repair Order – Top performers create more than 10.0
Booth Cycle Time – Top performers are less than 1.9 hours
Paint and Material Gross Profit Percentage - Top performer numbers are over 40 percent.
Looking at these benchmarks, it would appear your goal is keeping pace with the top performers in the country. It is. The value in benchmarks is forcing you to look at where you should be and then determining how to get there by setting improvement goals throughout the paint department.
Step 3. Set immediate targets
Your first goals are immediate — in that they can be targeted quickly with improvement plans you and your staff will develop together. The key here is working with everyone within the department to determine why there are shortfalls and where you can set performance targets and expectations for specific staff members.
Seelinger, for example, points to a method to quickly improve booth cycle time. He says, “Implement an SOP that calls for a vehicle to be staged ready to enter the booth before the painters/helpers leave at night and additionally before they take lunch. We often see a spray booth not being used until an hour or two after the paint team arrives in the morning. Making sure a vehicle is being painted first thing in the morning and right after lunch break will improve your booth cycle time and overall cycle time as well.”
Power looks for ways to produce more paint labor hours: “If we have a 6-man paint team working 8-hour days that gives us 48 working hours for techs to produce. If their production efficiency is 150 percent (meaning that for every hour worked they produce one and a half hours) then on average we would expect to see this team produce 72 paint hours per day.”
He suggests an initial improvement goal to 175 percent production efficiency. Getting there is a matter of reviewing estimates to see if there are opportunities to capture additional paint labor operations and to determine if there are any production issues that may drain capacity.
Power notes, “On each of these, once the initial goals have been achieved and performance is sustained at this level it may be time to look for 6 cycles per day or an efficiency of 200 percent. We know this and much more is achievable because we have a number of shops that have been able to drive this type of improvement and sustain the performance.”
Important here too is the fact that repairers need to look outside the paint department in order to address all the factors that affect the department’s KPI’s. Ted Williams, Manager of Business Consulting Services at Sherwin-Williams Automotive Finishes, says shops need to look make to the estimate to make sure every department—including paint—is used to its fullest and charged accurately. Williams further notes that mistakes made during the estimate can cause delays and inefficiencies that later show up in the paint department and drain revenue there.
| AkzoNobel plays detective |
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On the surface, your KPIs are simply numbers that indicate performance in various areas of your business. They key to using them is, essentially, being a detective who determines where they should be and how to get them to that target. That’s a difficult for anyone new or relatively unpracticed in using KPIs. Vendors can provide plenty of help. Here’s a brief submission from AkzoNobel designed to help shops determine where their shortfalls are in Paint and Material Profitability and how to fix those deficiencies. Diagnosing Paint Material Profitability At the most basic level, there are only two factors that influence a shop’s Paint and Material Profitability — the amount they pay for their materials and the amount they sell them for. This is perhaps the main reason that shops tend to focus so much on cost; they have little to no control over the price they charge and collect for materials. With this thinking driving their behavior, they often neglect to ensure they are charging for all the Refinish Labor operations the repair requires, which in turn drives their Material Sales. To diagnose the effectiveness of a shop’s Paint and Material Profitability, you need to first look at two additional measures. 1. Material Sales as a Percentage of Total Sales 2. Material Cost as a Percentage of Total Sales These 2 measurements will indicate whether the shop is selling the right amount of materials, and whether they are spending the right amount on materials, in relation to their total sales. This will point you in the right direction to make adjustments to their Paint and Material Profitability. To calculate these KPI’s: Material Sales as a Percentage of Total Sales Material Sales / Total Sales = Material Sales as a Percentage of Total Sales Example: $30,000 / $325,000 = 9.2 percent Material Cost as a Percentage of Total Sales Material Cost / Total Sales = Material Cost as a Percentage of Total Sales Example: $18,000 / $325,000 = 5.5 percent Once again, in order for these measurements to mean anything, you need a benchmark. When the Material Sales as a Percentage of Sales ratio is too low, begin your search to improve material profitability by examining repair orders to identify missed refinish labor operations. When the Material Costs as a Percentage of Sales ratio is too high, begin your search to improve material profitability by examining the accuracy of their cost accounting. Shop owners are often quick to jump to the cost of their materials, waste or theft when Material Cost as a Percentage of Sales ratio is too high. Quite often though, the true culprit is inaccurate cost accounting. For example, a shop usually purchases the following items from the same vendor as their paint materials but these items should NOT be accounted for as paint materials. · Body filler spreaders and mixing boards · Sanding blocks · Stripe removal discs · Shop towels · Welding wire · Rubber gloves And this is just a sample. |
Step 4. Set long-term goals
Williams also notes that the long-term goals of using KPIs is increasing efficiencies that allow and create greater through-put, which significantly bumps up shop revenue. He says that through the proper use of KPIs, shops can make fuller use of their facilities.
“In a lot of shops, you’ll see one tech is responsible for three bays that are never full,” explains Williams. “What you want are full bays and the need to hire additional techs to handle all the work.”
Those numbers, of course, ring truer to shop owners than any other. Getting there is a matter of using KPIs to fix deficiencies and build efficiencies. Every shop can benefit significantly by adding one extra job per week. Utilizing KPIs has proven effective in helping add that job and far more, based on what a shop can handle.
Step 5. Maintain and grow
So, you’ve contacted your paint vendor, begun using KPI data and have increased revenue. What now?
Using KPIs to build business is a lot like joining a gym, hiring a trainer and cutting off 20 pounds of fat in the first four months. That’s the easy part. What often happens in the following months is that you lose interest, stop working out, slide back into old habits and pack on even more weight.
Businesses too often live in a similar culture of immediate gratification. Long term business plans and goals frequently are set aside in favor of short-term fixes. This is exactly what can happen in your KPI journey. You’ll see immediate benefits. You might also experience how easy it is to backslide into old, inefficient behaviors once you’ve made a few positive steps forward.
The truly beneficial KPI journey is long term—actually, permanent. Your focus here is understanding that utilizing KPIs means building upon success after success, even small ones, as a standard part of your business. Numbers don’t lie. And they don’t go away.
Therefore, they need to be made part of your SOPs. That means training employees on how your KPIs are calculated and how they work into continuous business improvement processes. Fortunately, the first part is easy since nearly every paint vendor provides software that calculates KPIs. That software then feeds into your shop management system to provide shop-wide reports. That information can be used to help track employee performance—including management.
Ultimately, making everyone take personal responsibility and accountability for KPIs is the key to instituting them as part of your operation, one that will truly benefit your bottom line.
Keep doing the math as you grow your shop, and you’ll find a true partner in success.
