The worldwide collision repair industry is undergoing a period of dramatic change. One main reason for this change in Canada is the evolving relationship between collision centers and insurance companies.
Insurance companies and market-leading collision repair shops are developing closer business relationships, as evidenced by the ubiquity of Direct Repair Programs (DRPs). Insurers are providing DRP shops with a steady stream of work, and looking to fewer facilities to help contain the costs associated with repair. In turn, DRP shops are providing quality repairs, and higher service levels to the vehicle owners.
This situation has resulted in productivity issues in the repair shops. “Cycle time,” “performance measurement” and “throughput” are buzzwords in the industry today. These fancy phrases simply translate to the time it takes for the owner of the car to get their keys back.
IMPROVING ‘CYCLE TIME’
Shop owners are looking for ways to increase production capacity, or increase vehicle “throughput,” to reduce “cycle time.” This move is expected to maintain profit margins in an increasingly demanding environment. Some options are:
* increasing the productivity of the technicians,
* increasing the number of productive technicians, and
* increasing the size of the production facility, or building another facility.
However, one missing aspect of the repair shop equation is emphasis on quality management. This is curious for an industry that is closely affiliated with some of the major auto manufacturers in North America and worldwide. Car makers have long embraced quality management principles, ranging from codifications of procedures like ISO to “total quality management,” “six sigma,” and the “theory of constraints” adopted by Toyota.
There are distinct reasons why auto manufacturers have pursued these quality approaches, and these go well beyond management fads. In quality management, these companies have discovered methods to simplify complex assembly lines, improve productivity and eliminate waste from the manufacturing process.
This emphasis on quality management could also be applied to collision repair.
INCREASING EFFICIENCY, ELIMINATING WASTE
The collision repair industry experiences inefficiencies from accident through to insurance claim and repair. These systemic inefficiencies are mainly caused by:
* interactions between insurers and body shops, including established and antiquated claims procedures;
* fragmentation and excess capacity in the body shop industry; and
* management that doesn’t have experienced with Quality Processes at the shop level.
This does not mean repair shops are doing a bad job in today’s market. In fact, shop owners already know the technical elements of repair and they accomplish these tasks with a high degree of professionalism. The emphasis of quality management principles, rather, is on codification of procedures, proper use of skilled technician time, improved business process and greatly reduced waste and inefficiency.
The approach PPG Canada’stakes is using quality processes, understood through the manufacturing processes, and use them in collision repair. We call this “Throughput Performance Solutions (TPS)” and it is something we have been developing for two years. We have run three pilots starting in 2005 at repair facilities across Canada, and we are currently forming a 20 group in the GTA to implement these processes.
These shops are taking a step back, looking at the repair process and implementing new business procedures. The early results are very positive. If the repair cycle is the repeatedly the same, from the time a vehicle starts being repaired to the time it comes out, this establishes predictability and consistency. That is what both insurers and consumers want. One of the goals of our quality management pilot projects is to educate insurers that there is a new way of doing repairs.
PRINCIPLES OF QUALITY MANAGEMENT
So how do quality management principles work? A host of techniques speed up the “cycle time” of the repair process, from the time the order is placed to final delivery. Key elements of this process include:
* streamlining administrative time,
* scheduling to maximize repair capacity,
* segmenting jobs by type and size of repair, and
* organization of vehicle disassembly.
The process to reduce “cycle time” involves using proven Lean principles to reduce wasted time and increase “touch time,” the time technicians actually spend working on a vehicle.
Perhaps the easiest way to demonstrate quality management is to look at how a traditional repair process works in an insurance claim.
Typically when a damaged car arrives at a shop, claims adjusters will want a “visual estimate” to set a reserve for the claim. That is fine as far as it goes, but often in the collision repair process, especially after and during disassembly, additional damage is found, resulting in more labor and parts. The shop then needs to order other parts; this process typically must be approved by the insurer through a “supplement.” The process of multiple supplements can drive the vehicle over the top in terms of costs and time.
INSURERS ON BOARD
In contrast, if you look at the TPS process, the shops start by doing a vehicle disassembly or discovery to find all the damage. If there is hidden damage, they order all the parts once, get a proper price and get the commitment from their supplier to deliver them on time. In this sense, the parts follow the car. There are no delays or confusion in ordering. When repair facilities start doing this, waste disappears. The emphasis is on simplifying the repair process one vehicle at a time.
A crucial element in our pilot projects is “technician touch time.” The technicians in the shop are the people who make money. If they are not working on the cars, the shop is not making money. We want to find out what is slowing them down from doing their job. For example, the parts may not be right, parts may not be ordered at the right time or there are “supplements” ordered by the insurance company adjuster. The efficiency of a technician is extremely important in the quality management process.
The principles of quality management, if applied properly, can reduce cycle time significantly. As vehicles move more quickly through the shop, cash flow is increased, inventory is reduced and the shop is able to keep more capacity and get more business. The overall aim is improving throughput, leading to increased profitability and customer satisfaction.
As a manufacturer, PPG has learned and experimented with many of these quality management principles over the past 20 years. We are eager to share these with repair facilities, but realistic enough to know quality management will not work for all shops. Independent collision repair facilities are the main source of insurance repair work and are also the most highly fragmented part of the supply chain. Quality varies dramatically across repair shops, depending on size, experience, equipment and service capabilities.
In all, there are roughly 6,500 collision repair facilities in Canada. Many are small, family-run shops that are struggling with the frustrations of day-to-day service repair, including ordering parts, hiring staff and managing administration.
But sizeable facilities are increasingly open to trying out new ways of doing business. They are interested in using quality tools to improve the collision repair process, with the end goal of improving the satisfaction of policyholders.
Insurance claims professionals can play an important role in this process. In order for quality management principles to work, insurers have to be on board. Claims professionals m
ust allow shops to find the hidden damage and get the required parts. The repair shop can eliminate waste and improve efficiency on its end, but an aspect of internal insurance cycle time needs to be addressed as well.
Most collision repair facilities know how to fix cars. Where they tend to fail, however, is in capacity and equipment use. In the past, shops could be profitable while being inefficient. Today and in the future, shops will need to squeeze the last drop of profit from every square foot of production space. This is where quality management principles can help make repair shops and insurance companies more efficient, to the benefit of their mutual customers.