KPI: Cycle Time
by Chris Sheehy / Autobody Consulting Group
To define Cycle Time (CT) I must first state that Cycle Time is often perceived in two measures, production biased and customer biased.
DEFINITION:
Production Biased Cycle Time: The average number of calendar days elapsed from the date the vehicle was received at your business, to the date the repairs were completed.
Formula: Date Received / Repairs Completed
Customer Biased Cycle Time: The average number of calendar days elapsed from the date the vehicle was received at your business, to the date the customer took delivery. This is also commonly referred to as keys-to-keys.
Formula: Date Received / Date Delivered
Production CT is the traditional (read: “old school”) method of calculating the average calendar days for auto repairs. Since a shop cannot control when a customer will take delivery of their vehicle, this method calculates the part of the repair cycle a repair shop has most control over. Or so it seems – read on. This is a key measure for KPI management.
Customer CT is a more contemporary measure, and one that, when managed well, is more focused on the vehicle owner receiving a positive customer experience. Managing this measure has a direct impact on CSI. From an insurance perspective, this measure also has a direct impact on loss-of-use (LOU) severity (insurance lingo for rental expense) as well as having a proportional, although indirect impact on bodily injury severity. In a nutshell – this is the Cycle Time measure both the customer and insurer “feel” and is most important to control.
So which measurement should you use? I say measure both!
Analyzing the variance in Cycle Time between Production and Customer biased formulas could target process waste in your business that you can eliminate and be working more “lean.” More specifically (in LEAN terms), it could identify SMED waste – the time wasted in between jobs; like ending one job and getting onto another – or processes, like the transition from a quarter panel repair to door-skin replacement. When analyzing the differences you should ask yourself, “Could we have done anything differently to get the customer back into their vehicle sooner?” Often the answer is yes. Here are some ideas you could use to cut Cycle Time: blueprinting repairs, change from the in-Monday/out-Friday schedule madness, proper technician allocation, transparent SOPs, deliver the car to the customer’s home or work (drive or tow), pick up the customer at home or work, open early or stay open late on advertised day(s) of the week, or change how you schedule the intake of vehicles. These KPIs are easiest to measure when working with a management system. Ed Rachwal from Designer Systems confirmed Cycle Time could be easily measured on Mitchell ABS and ABSe. For businesses operating without a management system, these measures have been difficult to calculate. Autobody Consulting Group has copyrighted tools enabling their clients to measure and manage these most important KPIs.
Managing Cycle Time effectively is a great way to increase CSI, and being proactive in marketing your Cycle Time ratio to prospective or existing business partners just might bring more cars to your door, too!
You are not alone in setting repair Cycle Time expectations. Here is an interesting story about CT from a different perspective. Not too long ago while in a meeting with a major Massachusetts insurer, Cycle Time was the very topic of concern with several of my clients. At some point it became apparent to me that the insurer never looked inward at their systems to see if they had any control of cycle time. “And why would they,” you ask? (Funny – they asked the same thing).
Knowing what I know of the process, I had a hunch the insurance company had some (albeit, to a small degree) influence on setting the initial CT expectation with the vehicle owner and rental company. Here is what I noted - when an insurance adjuster receives a damage analysis report from a staff appraiser or repairer (network or otherwise), they do the same math to calculate rental days as most body shops do to rough-calculate the anticipated repair days [total hours ÷ some number = expected rental days]. Armed with this information the adjuster simply informs the vehicle owner of the number of days the rental vehicle is covered for, often adding a day for good measure. In doing so the seed is planted with the vehicle owner of the perceived repair cycle time!
After hearing this scenario, the insurer admitted they never looked at the process from this perspective and assured us they will evaluate it in the near future. What I haven’t told you yet was that the time of these extraordinary cycle time lapses coincided with some of the worst weather this area had experienced. In this case the cycle-time “perception,” being set by the claim adjuster didn’t account for the extraordinary increase in claim volume my clients were dealing with – indeed, an honest oversight.
Let’s be realistic. Insurance companies are huge and nothing happens fast, so nobody’s holding their breath for this change to occur. However, having a broader understanding of the process will make all parties work a little smarter in the future.
Marketing experts often talk about thinking outside the box and developing creative programs that don’t cost much money, but generate a lot of interest and attention to your business. Brad Zara, owner of Zara’s Collision Center in Springfield, Ill., took that advice to heart and developed a promotional contest that could be exhibit A in the expert’s textbook.
Zara’s Collision Center is celebrating the can-do ingenuity of do-it-yourself auto repair technicians by holding a Don’t Quit Your Day Job promotional contest in July.
“We’re continually in awe of the effort people put into the temporary fixes of their damaged vehicles,” says Zara. “When the vehicle gets to us, we first ‘unfix’ the customer’s fix and then do the repair as it should be done. From what we see, I’m confident there will always be a market for duct tape.”
Click on this link to read the entire article, which was posted to the ABRN Web site on July 7. http://abrn.search-autoparts.com/abrn/article/articleDetail.jsp?id=609294
Anybody who has ever seen vehicles seemingly held together by bailing wire and duct tape can relate to this contest, even if they’ve never had to make temporary repairs to one of their own vehicles.
The contest is open to anyone who has a do-it-yourself repair job vehicle. They are asked to submit a digital photo through Zara’s Web site, www.zarascollision.com. The contest winner will receive $500 in cash.
So for a $500 cash reward he’s reaching out to generate interest in his shop and the industry in a humorous way. If handled properly, this should generate a lot of interest and attention in Springfield, because the contest is quirky, entertaining and a little bit funny. Those are three things that local media – newspapers, TV stations and radio – always are looking for to entertain and educate their audiences.
Zara was quick to point out that some improper repairs pose a safety concern, which is no laughing matter. He took that opportunity to offer the following plug for his business and the industry: “Of course, the main issue is that improper repairs pose a safety concern,” he said. “Professional repairs using the right parts are essential to keep all of us safe on the road.” Now that’s the way to line up on the right side of the safety issue.
Zara didn’t miss the opportunity to include his own little ad at the end of the press release announcing his contest. It is sort of a boilerplate for his company that emphasizes trained and certified technicians and a high CSI score at his shop. He also emphasizes his professional staff on his Web site, which has a ton of information and is easy to navigate.
Check out his Web site and contest by clicking on the above link. Spend a few minutes browsing and you might pick up some ideas that you can use to promote your business.
By the way, if Zara’s Collision Center sounds familiar to you, that might be because ABRN has covered it in print and online before. Here are links to two previous articles about the business. I-CAR honors Zara’s Collision Center with Russ Verona Memorial Award, click here:
http://abrn.search-autoparts.com/abrn/article/articleDetail.jsp?id=543124.
Zara’s Collision Center shop profile, click here:
http://abrn.search-autoparts.com/abrn/article/articleDetail.jsp?id=94660.
What’s so hard about being nice?
I have come to a realization that I should have come to a long time ago. Unsatisfied, underappreciated, underpaid and undertrained personnel are the ones we have on the front lines taking care of our customers. WOW! Have we so insolated and isolated ourselves from those that fuel our paychecks that we are unable to feel the pulse of our business? I think so! It is time for a revolution in the way we present our businesses. I am now, constantly on the prowl, looking for “People” people. Society has produced an enormous amount of people that feel that the world owes them something. I have begun to analyze everyone I meet. I place them in one of three categories: Happy People, Frustrated People and Angry People. Unfortunately I find that for every person I can put in the first two categories I find 10 that fall in the last category. By the way, frustrated people are typically ones you can make happy given the proper guidance and incentive. In my search I have hired a Burger King associate that was so happy to be working with people that her enthusiasm could not be contained. I found myself laughing with her. Later, I found myself telling other people about my experience at that restaurant. She increased their business by at least two customers that I sent in and later reported to me that they had enjoyed the same type of experience. I convinced myself that I had to have her greeting my customers. Her attitude is contagious. What fun for my customers! So I have had to revamp my way of thinking about job positions, pay scales and salary caps. I now place the highest value on people skills when interviewing a prospective employee. It is a skill that is very difficult to teach. It is a skill that will bring in new customers, make existing customers remain and it is a skill that can infect your other employees. It is a skill that I am more inclined to pay more for, even over experience. So, what’s so hard about being nice? Nothing! Hire the right people, upgrade the atmosphere and reward smiles. Watch your CSI scores climb.
Stephen
Creating a Lean Office Environment ……
Just as with “Lean” on the shop floor, “Lean” in the office is about eliminating waste. Remember “waste” is ANY activity that adds cost but does not add value to the process. As we have covered in previous newsletters, “non value-add” activities are wasteful! They do not add value because the customer will not pay for them, while “value-add activities are defined as any activities that the customer will pay for. “Lean” office environments that utilize “Lean” Processes and Digital Technologies are designed to handle high levels in volume, including surges, without issues or additional personnel allowing a collision repair business to do more with less!
While the term “Lean” is close to being one of the most over-used terms in the collision repair industry, the results of implementing the “right combination” of Lean Thinking, Lean Business Processes, and Digital Technologies in an auto body office environment can produce dramatic improvements.
While most shops can “see” how implementing “Lean” on the production floor, most do not understand the dramatic improvements “Lean” will deliver in the front office.
In most collision repair businesses the estimated “administrative costs/expenses” can be as high as 30-60% of their total costs. This means there are TREMENDOUS opportunities to reduce unnecessary costs/expenses and while improving the value and level of customer service delivered to the customer.
The good news is many collision repair businesses already have the basics in place to begin moving towards a lean office environment. The most important “basics” are a computer system and the willingness to implement new business processes.
While almost every auto body shop has a computer or computer network most repairers find it very difficult to implement changes in their office processes. One of the reasons they find it difficult to implement changes in the office is they are typically not involved in the day to day operation of the office processes. Secondly, they understand the repair process MUCH better than the administrative processes. Third, most do not understand the benefits of computerization and automation. Finally, most shops are using software that has not been designed to support a “Lean” office environment.
To begin moving to a “Lean” office environment a collision repair business must first identify waste in the offices.
Let me begin with Frank’s Top Office Wastes……
Fragmented Processes: Fragmented processes create delays that negatively affect all aspects of the repair process and leads to poor internal and external communications, missed delivery dates, longer cycle times, lower profit margins, and lower CSI. As I outlined in my March newsletter there are many benefits to developing and coordinating processes in your office. Below is a list….
· Improved work flow
· Reduced stress
· Improved cash flow
· Reductions in cycle time
· Improved CSI
· Reductions in employee turnover
· Improved efficiencies and productivity
· Reductions in operating cost and non-value added expenses
Searching: Searching involves everything from trying to determine what to do next, to finding a file, an invoice, a repair authorization, part, etc…The typical office worker wastes more than 8 hours per week due to information delivery inefficiencies. By organizing the layout of your office, defining “Lean” processes and procedures, and implementing a Digital Documentation system you can dramatically reduce the amount of “searching” time your office employees spend daily!
Roadblocks: A Roadblock is anything that gets in the way of speeding up the process while reducing the accuracy of the process! Many office roadblocks are a result of existing company policies, procedures, and processes. For example, a shop may require their CSR’s to manually fill out forms with customer, insurance, vehicle and repair information when they could be using software that would automatically create and fill out the forms for them!
Sacred Cows: A Sacred Cow is an obsolete process, task, or operation that once made sense but is no longer pertinent or required. The easiest way to determine if your office has Sacred Cows is to ask an employee why they are performing a process and they respond with “ We have always done it this way!”
Duplication of Effort: This is self-explanatory. Any time a process, activity, task, or operation is done more than once, it is waste!
Improper Personnel Utilization: Improper Utilization of Personnel occurs when a shop has too many or not enough personnel to handle the workload as well as the loss of personnel because of too much or too little workload. I have been in many shops that have way too many office personnel because they are stuck in a manual, paper based operating model. Because the shop needs to process so much paper and manual communications they need more people to get the work done.
On the other hand, I have been in many shops that cannot get their administrative work done in time because they a) have a ton of manual, paper based processes and b) not enough people in the office. Many dealership body shops are victims of this and have a terrible time closing RO files in a timely basis.
Whack-A-Mole Management: If you have ever played the Whack-A-Mole game, you know what I mean by Whack-A-Mole Management. Every day you or your office manager walk into the office and tell your employees to “whack the moles” that have “popped up” today! You can also call it “putting out fires”.
This type of management philosophy creates a tremendous amount of waste due to the fact that the office personnel are always interrupted and asked to perform or complete other tasks other than the one they are working on at the moment. This style of management also causes high levels of stress, which leads to high turnover and improper personnel utilization that we covered earlier.
Manual or Paper Based Processes: I devoted my entire February newsletter to this subject. Based on my research manual or paper based processes “cost” a shop approximately $50.00 per RO!
Old, Obsolete Computer Software and Hardware: This is a real pet peeve of mine. Most shops use hardware and software that require them to operate in a VERY wasteful environment. Today a majority of shop owners presently use a shop management system that is more than 7 years old. Those systems require their users to perform certain tasks and operations that do not support a Lean office environment. For example, many shop management systems require their users to manually change RO line items to properly categorize these items for payroll and their financial statements. Our research indicates that this process adds 2-5 minutes to every Repair Order. If this shop produces $2.0 million per year in sales they are wasting as much as 72 hours per year in line item changes!
When it comes to computer hardware most shops seem to want to invest the least amount required. If a shop’s hardware is forcing their employees to wait for screens to change, reboot 3-4 times per day, or move to another computer to perform another task, this is waste!
According to Raymond S. Louis <http://www.amazon.com/Raymond-S.-Louis/e/B001JRXR62/ref=ntt_athr_dp_pel_1> , the author of “Creating the Ultimate Lean Office”, <http://www.amazon.com/gp/product/1563273713/ref=cm_rdp_product> the key to implementing a Lean office environment is automation! In his book he calls it Administration Automation.
In the book Louis states, “Administration Automation creates a multiplier effect that elevates the staff from performing repetitious activities to performing strategic level activities, further enhancing the competitive position of the company through innovative ways of servicing customers”
I take a different position……If it is not a value-add office process you must try to automate it or eliminate it! Remember, if it is not value-add you are not getting paid for it!
What functions and activities can be improved through Administration Automation? Almost everything!
Þ Ownership and management
Þ CSR performance
Þ Estimator performance
Þ Estimating
Þ Parts personnel performance
Þ Production personnel performance
Þ Technician performance
Þ Shop and production scheduling
Þ Payroll calculation and management
Þ Bookkeeping
Þ Accounts Receivable
Þ File Management and Documentation
Þ Much, Much More……
As I covered in a previous newsletter a typical business process in a body shop office consists of a series of individual tasks that lead to a specific outcome. So before you can begin implementing “Lean” processes and technologies your first step is to determine if you REALLY want to begin implementing Lean Thinking, Lean Business Processes, and Digital Technologies in your office.
If your answer is yes, the next step is to identify and then document the objectives/results you would like to achieve….
Step 3: Once you have documented the objectives and results you are going to want to create an internal team and team leader to take charge of the implementation.
Step 4: Identify and document each of your existing administrative office processes and their intended result
Once you have identified and documented the processes in your office you will then need to ask and answer a series of questions.
1. Are the existing processes presently in place the most efficient?
2. Are they value-add?
3. Are they non-value add but required?
4. Can they be eliminated?
5. Can they be automated?
6. Can policy/procedure changes improve these processes?
7. Are multiple people performing the same process task, or operation?
8. How much do these process actually cost my business?
9. How much do I need to invest to eliminate or automate these processes?
10. How much and how long will my Return on Investment be?
11. Do I have the intestinal fortitude (guts and desire) to make these changes?
12. If I do not make these changes will my competitive advantage be affected?
13. How long before I lose my competitive advantage?
Once you have answered the questions it’s time to move on to Step 5, Creating future processes, tasks and operations. In this step you need to document what you want your new processes, tasks, and operations need to look and act like, combined with who will perform them, when they will be performed, and what technologies are you going to utilize to automate or eliminate non-value add processes.
Step 6: Create an implementation timeline and milestone document that outlines each change how long the change is going to take, what milestones will be measured to insure progress is being made, and ultimately who will be responsible for the changes.
Step 7: Just Do it!
“Great change dominates the world, and unless we move with change we will become its victim…. Robert F. Kennedy July 1964
Click here to purchase Raymond Louis’ book, “Creating the Ultimate Lean Office” <http://www.amazon.com/gp/product/1563273713/ref=cm_rdp_product>
