Screw Lean, Get Mean

August 19, 2009 by
Filed under: Collision Repair Industry 

Pick up any trade magazine from the past couple of years and you’ll probably find an article about “lean production” or cutting your cycle time. Anyone whose mind is a jumbled mess from having to deal with the daily BS involved in running a shop would think little about the meaning and intent behind those articles. In fact, many of you have invested time and money to follow some of the advice in these articles.

From people intimately familiar with Toyota’s lean manufacturing processes to the freelancers who write for our industry’s trade magazines even though they have zero experience working in or running a collision repair shop, everyone seems to be banging on the same worn out drum trying to get you to dance. But these writers are no musicians. They are herdsmen, and you are their brainless sheep.

By reading the previous two paragraphs one might think that I’m against efficiency. Nothing could be further from the truth. I treasure it as much as any one. It’s the motives for all this efficiency and cost cutting that has me tasting bile.

I have said it a thousand times, 99% of you are running your businesses based on a business model designed for you by the insurance industry. You can argue against that point until you expire, but you will never win the argument. Aside from a tiny fraction of shop owners, everything most of you do every day to run your shop has evolved from decades of insurer influence and control. That influence has turned a craft into a process.

That transformation has sucked the life and profit from our industry. We repair little and replace everything. Yes, vehicle design changes are responsible for much of that, but who do you think is behind the vehicle design changes?

“Lean” processes are nothing more than a continuation of insurer control of our industry. Insurance companies are in a race to the bottom of the price index. Because insurance has become a mandatory commodity, people look only at price when purchasing coverage. To compete, insurers are constantly trying to price their product lower than their competition. That race to the bottom has created a powerful vortex, a vortex not unlike the one created by your toilet. And our industry is caught in that vortex. The smell is unmistakable.

To lower their prices, insurers have to cut costs. Enter the counterfeiters in China and the dummies running the repair shops. The insurance industry has fought cleverly to legitimize counterfeit parts. And they have tricked many of you into thinking that volume discounting works in a labor driven industry such as ours. Knowing full well that you cannot make up in volume what you give away discounting your labor, the insurance industry is trying to help you save yourselves by teaching you lean manufacturing techniques. Isn’t that nice of them?

There’s the problem, though. Going “lean” should be a proactive endeavor to increase profit margins. Instead our industry is chasing lean as a reactive effort to reduce costs. Though reducing costs  usually leads to increasing profits. They are definitely not the same. Increasing profits usually puts you in a better financial position. Reducing costs is usually done in response to falling profits, thus getting you no where but, hopefully, back to where you started.

The lean movement in our industry is an effort to recover some of the devastating lost ground of the past several decades of working under the insurance industry’s business model, while still keeping your prices artificially low.

Whenever legislation comes up that would help us take back some of the control we lost to insurers–anti steering, labor rate, aftermarket parts legislation–insurers cry about how it will raise insurance prices for consumers. BIG FRIGGING DEAL. Why is it always assumed that low prices are good for consumers or the economy? When prices for any commodity drop, someone suffers. Why should the collision industry suffer? While prices for many things climb much faster than the natural inflation rate, collision repair prices lag far behind inflation. How is that healthy?

Because auto insurance is mandatory in every state (Isn’t it? Are their any states that haven’t made it mandatory yet?) politicians–those who made insurance mandatory with a little help from the insurance industry–have to do what they can to keep the prices down so consumers don’t rebel and have their heads. That’s why insurers use the “consumers will pay more for insurance” argument whenever we try to regain control of our industry. Heaven forbid, insurance prices should keep up with inflation.

We sheep are now obeying our herdsmen and heading for the greener pastures of lean processing. The better we do at cutting our costs the better the insurance industry does on Wall Street. For those of you who think of the insurers as your customers, you should feel good knowing that you are helping them economically, because after-all, the better off your customers are financially, the more money they will be able to spend on your services. Yeah good luck with that theory.

If you are going to jump on the “lean” bandwagon make sure you are doing it for the right reasons, not just to follow the rest of the sheep. Lamb chops are yummy.

Our industry would be much better served by shop owners seeing themselves as craftsmen and raising their prices. You may think you are the smarter business person by implementing lean processes so you can lower your prices even more and steal some work from your competition. Short term, that may be successful. But driving prices down in a labor driven industry only cheapens your labor’s value. Until the value of our labor is appreciated and paid for, we will continue to have trouble attracting new help. This problem of attracting new help is one of the driving factors of the lean processes. It’s just a self consuming, vicious cycle–a vortex or whirlpool our industry in caught in. We’ve been flushed. Can’t you smell it?

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Comments

8 Comments on Screw Lean, Get Mean

  1. orozmab on Wed, 19th Aug 2009 9:55 pm
  2. you said the right thing about shops lowering the labor to get business. to day in our newspaper an ad read -$500.00 FREE BODY WORK OR $ 500.00 GAS CARD, OR 500 TOWARD RENTAL CAR, JUST BRING IN YOUR ESTIMATE – This shop owner is the president of the local states auto body Association . I hope a customer brings in a $700.00 estimate and ask for the $500.00 free body work, they will have to do for $200.00. I did not see anything about a certain amount to get this $500.00 in the ad.

  3. NLDJ on Fri, 21st Aug 2009 12:54 pm
  4. The lean process sounds good but in actuality all is doing is to try to create an assembly line like those in car manufacturing which is only wishful thinking. Before opening my own shop I worked for a consolidator (major mistake) with numerous DRPs and they were trying to implement lean so they could have favor from several ins. companies as to send them work and quality was very questionable. Being a flat rate tech at that job, all it acomplished was a pool of very overworked and underpaid techs. Volume didn’t translate into more money, as one of the locations had over 15 techs and around 5 to 8 office staff they could never reach the monthly break even point. They went to extreme to acomplish lean but never focused on what’s important; fixing cars, writing proper estimates, training and techs.

  5. tom g on Mon, 24th Aug 2009 2:18 pm
  6. i love your writings…however, wisconsin does not require vehicles to be insured. not i am no lawyer or insurance agent therefor not speaking in legal mumbo jumbo but thats the laymens version

    i like lamb chops as well…

  7. Rogue Adjuster on Fri, 28th Aug 2009 7:52 am
  8. Wisconsin and New Hampshire don’t require auto insurance. Here in Ohio they have a bizarre rule that you can’t even get a driver’s license without proof of insurance, even if you don’t own a car.

  9. Rogue Adjuster on Fri, 18th Sep 2009 7:35 pm
  10. I got to the end of my rope today with a DRP at a company that insists on micromanaging every detail about their program. Handing you a set of guidelines and grading or rating you based on you level of adherence to said guidelines is one thing, but having some dude sit in your desk and rewrite your estimate to change the price to his own liking is another. As of today they’ve begun fulfilling all the elements of an employment relationship since there’s no way they can possibly claim they’re not controlling or directing me in the material details of how my work is performed. I’m giving serious enough consideration to filing suit against this carrier for failure to pay wages that I’m busy videotaping all my interactions and photocopying reams of DRP agreements and documents. Now of course there’s a hold-harmless clause in this particular carrier’s DRP agreement with the shop (as I presume they have been sued over this and lost before), but well, that’s not really my problem since I’m not a party to the contract. It should be fun! I’ll even throw in evidence of a few dozen cases of bad-faith claims handling for free!

  11. Chris Sheehy on Tue, 13th Oct 2009 8:41 am
  12. John,

    As an autobody consultant I see businesses every day that do now know how to complete a profit and loss statement or measure some industry standard KPIs (key performance indicators) – like Technician Efficiency or Cycle Time. Many businesses I see have become quite successful in spite of not knowing how to do these things. BUT – times-they-are-a-changin’. Many of these businesses are looking for their exit strategy – succession, not bankruptcy. So too; are many trying to make more with less – seeking greater earnings without significantly increasing cars to the door.

    That said, I preach lean concepts, theory of constraint, and kaizen theory as a way of identifying what elements in their business could be improved to achieve their goals. Very often, I don’t mention any of these things – but do build solutions by incorporating their principles and ideology.

    Yes, insurers are pushing some of these KPIs upon the affiliated shops too, but when you think about it; is knowing how these numbers affect a business really a bad thing? Absolutely not – for them, but it is for any shop NOT measuring the same. Come to think of it – it could create a significant differentiator.

    KPIs have become a viable marketing tool, and one in which customers can relate to – I am certain of this. Average days to repair a car – consumers can relate to that. CSI – yip, that one too. I coach my clients to nail some KPIs and then market them – we actually build a marketing strategy around performance numbers. And were not alone – you hear of businesses touting their CSI scores all the time, we judge automobiles by performance numbers (MPH, BHP, MPG, 0-60, ¼ mile. . . ), so too do we judge business by their stock performance, movies by star ratings, and sport games by scores. Nothing new.

    Independent businesses cannot ignore the fact that when insurers push their affiliated shops for greater efficiencies, that shop will likely also see greater net earnings. I have seen this time-and-time again. For DRPs, the greater the throughput the greater the wholesale concessions become diluted. As long as the DRP revenue concentration isn’t weighing too heavily on business ratio, this business model will work just fine – just don’t put too many eggs into one basket – that’s the theory. Works for any business.

    Efficiencies allow for the increase in capacity which will ultimately create a pull-through for greater productivity (throughput). This is a standard manufacturing model – and it works great for our industry. To nail this though – a business (autobody, watch making, sneaker maker – whatever) needs to identify their baseline (what their starting point looks like in terms of current production vs. production capacity, and profitability) and know what their goals are. Measuring along the way (KPIs) will quantify progress, or measure failures (failure is not a negative thing “”To try and fail is at least to learn. To fail to try is to suffer the loss of what might have been.” – Benjamin Franklin”). I frequently gauge failure when making process changes and use KPIs to measure the degree of this failure. It’s a learning tool.

    DRP or independent – this industry has moved farther away from being a vehicle repair business to a numbers business. Great earnings can be had by simply improving those processes focused on the customer experience and efficiency (technician as well as administrative).
    The estimate has always brought dollars to the table, but efficiency and productivity puts money in a business owner’s pocket.

    Comments – rants – raves – you’re welcome to call me direct @ 401-481-4939

  13. Shawn Clark on Sat, 22nd Dec 2012 12:57 pm
  14. I worked for a GM dealership in Canada for 20 years as a painter. 15 of those years under the normal flate rate system and the last five under a team lean system.

    Under the flate rate system we hit the majority of our delivery dates, were efficient and produced about 2000 plus hours of labor a month with six techs, and 3 office staff.

    After building a new shop and combining two dealerships employees, we now have 17 techs, a partsperson, three office staff and two production managers, multiple cleanup staff (and shared payroll) to make 3500 hours a month under the lean system. We rarely made a delivery date and the shop culture is was so “its not my job, I only apply filler” because of the way lean works (thank you akzo nobel). Bowing down to insurance and refinish companies only takes away the control of your company in my opinion. Paying for a qualified shop forman (maybe with a buisness degree) and someone to bring all the staff together to make them enjoy their environment would be money well spent.

  15. Luke Moore on Fri, 8th Jul 2016 12:48 am
  16. “Wisconsin and New Hampshire don’t require auto insurance. Here in Ohio they have a bizarre rule that you can’t even get a driver’s license without proof of insurance, even if you don’t own a car.”
    I agree

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