The importance of cycle time

Every insurance company has its own set of performance criteria (key performance indicators or KPIs),but there are two that top the list - ‘Cycle Time’ and ‘Average Repair Cost’. Michael Preece*, a vehicle repair industry expert, discusses the relevance and importance of the former.

GET ON YOUR CYCLE

For insurance companies, there are two cycle times that are of keen interest. The first is their number one internal KPI - the total cycle time from first notification of loss through to closing off the claim at final settlement. The second KPI has a significant influence on the first. This is the key component of the repair time at their nominated bodyshop - from
delivery of car to facility through to customer collection from facility.

Why is this so important to insurance companies? In simple terms, every time a claim is logged with a quote cost, the insurance company then adds to its borrowings from the money market. Then, when the claim is fully settled, the case is closed and this subsequently reduces their borrowings again.

I am sure you will understand it is a bit more involved than that, but this is the fundamental issue. Therefore, it does not take a genius to work out that a reduction in overall cycle time will reduce costs and when you are dealing with multi millions of dollars, it adds up to lots of money.

This of course leads to further benefits. The car owner gets his car back sooner and if the Insurer offers free courtesy cars, it reduces this cost too. As just one example, this is obviously the strong rationale for Suncorp’s seven-day turnaround program.

As to the future, there is little doubt insurers will think up new initiatives that will be designed to drive improved cycle time.

MEASURES OF SUCCESS

Within the bodyshop, depending on the situation, there are various cycle time measurements which could be taken into
consideration. However, the obvious and most important is from delivery of the car to the shop through to collection. But if your facilities are tight for room and space is a premium, actual repair completion to collection may be important. If this is not right it will impact on your potential to produce revenue. Every vehicle on site one day longer than scheduled
will be one less vehicle coming in.

If you are cash flow critical, completion to invoice is a very important cycle time measurement. Having said that, once you get into measuring cycle times, you will no doubt find that an overall average can be misleading when compared with month-to-month. You might look at an improvement in overall cycle time one month, when in fact no improvement
has occurred. How is this possible? Well this could be because the average size of job you repaired was smaller. For greater accuracy, you then need to look at cycle time by severity.

It is clear that any bodyshop that can deliver reduced average cycle times consistently will certainly delight their work provider and possibly help to guarantee work provision into the future.

For those bodyshop owners still focused on negative attitudes towards their main work providers, the first thought about this might be - “Why should I help them, they continually squeeze my profit and rip me off on my quote values? What have they ever done for me?”

EVERYONE WINS

Well, here is the truth about reducing cycle times. Done properly and consistently, it will produce a win/win/win outcome for the bodyshop. Certainly it’s a good win for the work provider. But just as important, it is a win for your insured customers (you did the work) and even more so for your non-insured customers - getting the car back in reduced
time is just about their number one priority (for most owners anyway).

Just as important, it is a big win for you. If you can change your process and improve your cycle time and this allows your existing team (no extra overhead cost) to repair just an extra couple of cars a week you are winning. At an average repair cost of $2,000, this adds $200,000 of potential additional revenue to your business a year.

Alright, reduced cycle time is a good thing - so now, what do you have to do to improve. In simple terms, you improve cycle time in two key ways - by reducing the time a vehicle sits without being worked on and by reducing the time
employees sit without working on a vehicle.

The bad news is first you have to do some work to find out what your current average cycle times are. You can do this yourself, but it will involve lots of manual data collection. The good news is you can get help. You could of course use your accountant, but he will have to do it manually too and he may not understand your business in sufficient detail plus he may take a month of Sundays to get it done (at what cost?).

You could use one of the excellent support modules available from the paint manufacturers. But if you really want to be in control of your own destiny, you should get a management system that will do this for you. I am sure that you won’t be surprised that our BodyNet Workshop Management System would be a perfect solution for this.

TO START

Once you have obtained data on your current cycle times, the question then must be - “What area of your business needs to be looked at to achieve an improved result?” Unfortunately, there is no single activity or business process
you can focus on to achieve the required result. The reality is you need to look at everything you do to move vehicles through the total repair process in reduced time - including making sure the car owners collect their vehicles as soon as possible after the full repair/detail & clean/final QC inspection is complete. Measuring the whole process is the key. It’s OK to see an individual cycle time figure, but if you cannot pin point what is influencing this figure it’s hard to make a
sound decision on change.

Let’s have a look at the start of the process - your booking-in diary. This is much more important than many bodyshop owners realise.

Not having enough work is an obvious problem, but having too much work booked in can be even worse. Over-booking results in vehicles sitting around not being worked on, taking up valuable space and creating unproductive vehicle movement - this has a big effect on cycle times.

Then we come to the challenge of managing and locating parts - parts delays, wrong parts delivered and time lost in
location of parts once on site, all effect cycle time. Externally, choosing the best parts supplier is sometimes more effective than choosing the cheapest. If parts delays and mistakes are an issue, then maybe it’s time to try a different source. Internally, managing and locating parts is certainly something you can control and very often, this is an area that
can be improved. It is important to ensure, wherever possible, that vehicles do not get started until all parts are available. There is also a need to improve on the verification of parts as soon as a vehicle comes in for repair - too many times a panel beater only discovers a wrong part once he has started work on the vehicle - a costly delay. The introduction of
mobile parts carts is but one way of locating and getting parts to your panel beaters in a more effective way.

STAFF EFFICIENCY

Now we come to your employees. Firstof all let us look at what we call utilisation or productivity. This of course needs to be measured to establish the current situation.

The process is to compare time at work to time productively employed. Once you have accurate data, do not be surprised if the result is not much better than 70 per cent - that is not an unusual statistic. Next job is to find out
where all the non-productive time is being wasted. It could be maintenance, moving vehicles, waiting for jobs to start on, re-work etc. Here is an example of the big gains that are possible through improvements to utilisation:

Example with 10 productive employees
data: Each employee available for 1649 hours
pa. (total weeks less holidays etc)
Average labour utilisation is 70 per cent
(statistical average)
1649hrs x 70 per cent = 1,154.30hrs
available
1,154.30hrs x 10 (productive employees) =
11,543hrs available
11,543 x $80 (shop rate) = $923,440.00
labour turnover revenue
To improve revenue and cycle time with
Labour Utilisation at 90 per cent
1649hrs x 90 per cent = 1,484.10hrs
available
1,484.10hrs x 10 (productive employees) =
14,841hrs available
14,841 x $80 (shop rate) = $1,187,280.00
labour turnover revenue
$1,187,280.00 - $923,440.00 = $263,840.00
in improved labour turnover revenue

This improved utilisation and revenue, using the same number of employees, automatically improves cycle times.
Now, let’s look at employee efficiency. Once again you need to establish current efficiencies with all your workshop staff. The process here is to compare the Target Hours you have allocated to jobs to the actual time taken by employees. Statistically, it is not unusual to find that overall average employee efficiency is between 75 - 85 per cent. This is almost always the result in a salary-only based pay system.

However, this is by no means the only reason and poor management processes are often more of a cause of these results than the employees themselves.

A solution often recommended by consultants is to introduce a bonus or performance pay system. There is no doubt that statistics indicate that efficiencies are rarely less than 110 per cent within a performance pay program and it is obvious that this delivers more profit and better cycle times. However, these do need to be implemented correctly with a clear
focus on a win/win for both the owner and his employees, otherwise long periods of stress for both owner and staff will ensue.

There are of course many other ways to improve employee efficiency, such as:
In the panel shop
Invest in new equipment that gets the job done faster. Make sure your technicians are trained on the latest repair techniques. Make sure all tools and equipment are in easy reach of each panel beater. See potential for mobile parts
carts as previously mentioned.

In the paint shop
Change to latest technology paint materials that speed up drying times - UV Primers/Clear Coats, Waterborne Base Coat and make sure your technicians are adequately trained. Often new products are introduced into the paint shop, but
the new techniques to use these products are not, hence no benefit is gained, often only more cost for the product. Introduce infra red drying.

Management
Make sure employees always have jobs to work on and know what is expected of them. Do this by proper scheduling of work, either to individual employees or to teams. You will find that one of the biggest single opportunities to improve cycle times is to get the right amount and a good mix of work to your shop floor team on a daily basis. Run twice-daily
production meetings and always pre-plan - people do not plan to fail, they fail to plan. Look at the potential to introduce a separate smart repair production line.

The key to improving cycle time is to remove the road blocks that impede vehicle flow through the bodyshop. Do this and you will delight your work providers, your customers, your employees and your own pocket. To achieve this you will need to change the way your business operates. Remember that definition of insanity - doing the same things over and over again and expecting a different outcome. You will need to think change, think differently and think positively - if these are the words that fit into your new vocabular, then the future becomes an exciting prospect.

Mike Preece is managing director of software company PAC Total Solutions ANZ. He has had 42 years in-depth
experience in the vehicle repair industry, predominately with refinish paint in the UK, South Africa and Australia, including technical sales, marketing and sales management and general manager’s roles. For information on Bodynet
contact PAC on 07 5554 6424.