There’s a lot of pressure on shop owners to perform to the satisfaction of insurers and customers alike -to ensure the future well-being of their businesses.Too much of management time is spent on increasing the gross profit – i.e., how do we get more money to fix a vehicle? Or how do we repair more cars? With increased focus and effort, we could get additional point or two of margin, to a point, but over time, improvement this way comes very slowly. Often little time is spent on overall process improvements. We should be asking questions like how to fix more cars with the same fixed costs or fix same number of cars with lower fixed costs.
Let’s say, for example, fixed costs (equipment costs, utility, building rent, office staff etc) add up to Rs. 50,000 per month. Now look at total revenue. We’ll say that we repair 100 cars per month (3.3 per day) and that equals Rs. 500,000 (100 cars @ Rs. 5000 apiece). The “fixed” cost per vehicle repaired is Rs. 500, or 25% of the sale. What happens when we begin to increase the rate at which you repair vehicles? Let’s say with process efficiency, we are able to move from 3.3 per day to 4 (120 vehicles per month). Not a big jump, a little more than half a car per day. The “fixed” cost per vehicle repaired is now Rs 417 per car. (That’s Rs. 83 additional cash per vehicle into business or Rs 8300 per month). So as a percentage of your sales, your “fixed” cost per car is now 21%.
We can achieve this. It’s a matter of becoming more efficient in how entire business operates. Not in improving technology efficiency or equipment utilization in a vacuum, but in improving how all of the pieces work together. For example, if a technician becomes more efficient and can produce more labor, does it do any good if the rest of the business can’t produce work at the same rate? Vehicle must travel through each step of operational process before you get to squeeze out any profits. One good (efficient) step and one bad (inefficient) step = two inefficient steps. You gain nothing.
We must begin to get more out of entire system, and the only way to do that is to have all the pieces work together in sync. This is possible because we’re not using resources at its maximum potential – none of us are. Is every piece of equipment you own being used for its designed purpose all day long? Does every employee produce the work you hired him for all day long? How many paint booths do you really need, or do they sit empty at times throughout the week? How about office personnel? Do you staff and equip for the peaks or the valleys? How can you get the maximum out of your resources and still keep the customer satisfied? How do you do this and keep your employees satisfied?
This is where production thinking such as “lean” comes into play. It’s an ongoing approach to running a business that focuses on value, waste elimination and increased speed and overall process efficiency and not trying to maximize individual pieces of performance. Today, there are many proven methods and examples of success that we can learn from. Even the best-run shops can stand to improve and certainly need the flexibility to adapt to continuously changing conditions and technology.
We should strive to be as fast and efficient as the pit crew on a racing team. For them, every little detail counts; there is not a wasted second, no wasted motion or waste of transportation, no tolerance for rework or doing more than is absolutely necessary to get the car in and back on its way with 100-percent quality.