Insurer-owned shops
Shop profile
RACV has been on a steep learning curve with its two Accident Repair Centres in Melbourne and is now keen to show off the fruits of its labour.
RACV, through its joint venture with NRMA Insurance, has been taking groups of NRMA Preferred Smash Repairers from NSW and ACT on tours of its two ARCs in Melbourne in order that these repairers can see the processes and efficiencies employed in the state-of-the-art facilities.
ARC II, in Vermont, Melbourne, is run by manager Rob Gannon who reports to operations manager -- claims and assessing, John Simpson. Up to 20 per cent of RACV repair work in Melbourne goes through the two ARCs which are currently undergoing a major productivity and management review -- 'Phase II' of the ongoing project.
The first ARC, in Cheltenham, opened in 1996 and the Vermont ARC commenced operations the following year. The opening of such large insurance-owned facilities in Melbourne was not without controversy, with several protests centered around the shops. Consequently, the ARC operations, by John Simpson's own admission, were kept distinctly low-profile. It is only now that RACV is able to start using the ARCs to their full potential; as not only learning centres for the insurance business, but as industry benchmarks.
ARC II runs three semi-autonomous teams across its large factory floor, each responsible for the whole repair process, from dismantling and panel beating to spray painting and re-fit. This way, each team is able to take responsibility for the whole repair and each tradesman has an incentive to make the next person's job easier as the car moves across the workshop. The three teams are also benchmarked against each other and against other RACV repairers.
ARC II produces up to 6000 production hours per week with 100 staff on the workfloor (85 work on the main shift and 15 on an afternoon shift). The centre repairs about a 160 cars per week with an average repair cost which sits below median for the industry. Customer support and administration staff numbers between 20 and 30 at the facility. The centre achieves a 0.4 per cent customer complaints target through to the insurance company as opposed to the two per cent industry average. The average cycle time at ARC II is 7.5 days.
The ARCs have a long-term strategy to reach a sustainable profitability, said Simpson. "They were never designed to make huge profits -- that is not on our radar screen."
The benefits of the ARCs to RACV are less tangible than standalone profit however. "Apart from the fact that we have gained valuable insight into the repair process and are able to benchmark this operation against our other repairers, these facilities bring benefits to RACV and its customers in other ways -- our customers trust the RACV brand and are happy that we have 'taken their problem away' through our accident management process," said Simpson.
Rob Gannon believes the efficiencies and management practices being developed at ARC II are close to achieving the company's strategic objective. "We are currently reviewing all operations which will include the re-distribution of ARC costs versus insurance company costs (ie: claims management costs)," he said.
The ARCs are set up as best-practice operations not only in terms of efficiency and productivity but in terms of environmental and OH&S responsibility. Every work bay has access to overhead dust extraction which helps keep the high-roofed building dust-free, creating a better working environment and less paint contamination problems. All cardboard waste is recycled (RACV and some of its parts suppliers are also working on a bonnet delivery system which eliminates packaging altogether) and environmentally hazardous waste is treated in a specially-constructed facility.
The shop runs the BMS barcode system to manage the workflow and also uses DNS' QuotePlus. The layout of the shop means vehicles enter the workshop at one side of the four-acre site and are worked on by one of the three teams. The vehicle is then sent through one of seven spray booths (six of which are back-to-back and double-ended and two of which contain an IRT infra-red curing arch). The paint mix room, which uses the full PPG Refinish system, sits in the middle of the spray booth block. The vehicle then exits at the other side of the shop for assembly. A separate detail and wash bay sits outside the main floor with direct access to the 220-place parking.
This 'assembly line' approach works well in the large environs. Some of the management staff are trained in manufacturing management and the whole process is centred on removing variation in the work process. Quality Assurance as certified by QAS is in operation throughout the shop.
Parts are delivered into a dedicated parts store where they are placed in wheeled bins and forklifted four-high into the storage area. The ARCs have single supply agreements for each make of part and handle up to six deliveries a day from each.
The shop has a plastic repair area staffed by two experts which allows the shop to minimise plastic parts purchases, cutting down on waste and improving profitability.
Steve Popovic, owner of Mt. Druitt Auto Body Repairs in Sydney, was one of the NRMA PSRs invited to tour ARC II. He said he was impressed by the scale of the operation. "It's always useful to see how other people do it and although I only operate a relatively small shop there are things to learn in a place like this," he said.
Detractors might say the ARCs are not representative of bodyshops functioning in the 'real world' and therefore RACV is wrong to benchmark other shops against them. However, the processes and management systems in place at the ARCs do provide tangible performance results within the framework of a bodyshop and so can legitimately provide guidance for the insurer when looking at efficiency and management issues.
While it is certain that up to 300 jobs a week have been taken out of the Melbourne repair market by the two ARCs, the insurance company is constantly examining ways of improving the customer expense and repair cost efficiencies. The smash repair industry can gain from the initiatives taking place in the centres.
Who: RACV
What: up to 6000 production hrs/wk
100 technical employees
160 cars repaired/wk
0.4 % customer complaints
7.5-day cycle time
7 ovens
IRT infra-red arch
PPG refinish system
Where: Vermont, Melbourne
When: Opened, 1997
RACV is not the only insurer to have gone down the path of bodyshop investment. NRMA memorably launched into the sector in 1997 in Wollongong, closing the centre a few years later after being badly burnt by the experience. Other insurers in Australia have pretty close relationships with certain bodyshops, AAMI for instance, is known to have been using a 100 per cent AAMI shop in Melbourne as a test bed for further initiatives.
Internationally, the biggest investment of late has been Allstate's purchase of Sterling Collision Centers in the US, a 39-shop chain. Recently, the UK saw its largest insurer, Norwich Union, set up a joint venture with Solus, a large UK repairer to purchase a bodyshop in eastern England. There are several insurers in the UK and the rest of Europe that own and operate bodyshops.