CRA Business News – USA
By Mark Clark
I had a recent discussion with some knowledgeable folks about how managing the collision shop’s clip and fastener inventories has led to an industry-wide interest in some type of computer system to count and replenish the shop’s entire paint and material (P&M) inventory. I learned a lot – some good, some disappointing, but not very surprising.
“I hate clips and fasteners” is a commonly heard cry from body shops across the country. Those pesky fasteners are typically less than 1% of the total RO dollars but are absolutely an essential part of a correct and timely repair. Known as automotive body hardware, the many possible configurations, shapes, materials and even colors add up to more than 25,000 possible fasteners used in collision repair. The average PBE jobber has around 5,000 SKUs (stock-keeping units) in their entire inventory (paint, sandpaper, adhesives, spray guns, booth filters, etc.) Adding just 25% of the possible body bolts, push pin rivets, Christmas trees and molding clips would double that number. Among those thousands of choices, of course, some are in much more popular use; and a typical jobber assortment of the fastest movers is about 2,000 numbers. Note that the corner auto parts stores blister-package several different clips together, and the only way to get the speed nut you need is to buy the pack with other stuff you don’t. It keeps their SKUs down, and their typical retail buyer still got the emblems back on the car.
Locate and Bill
One rule of thumb says a shop doing $1 million per year in sales will have a fastener assortment of about 24 drawers. An OEM-specific set of clips will add another 15 to 20 drawers. Even for a small shop, that’s a lot of part numbers and inventory. Starting about 10 years ago, the larger clip suppliers introduced computerized inventory management systems that included a scan tool. The goal, of course, was to get all the small hardware pieces billed correctly on the ticket. If a new quarter panel will require eight to 16 new fasteners, then getting all of them not only on the car but on the invoice is crucial to both shop profits and productivity. There are about a half-dozen versions of such a system available today. The best profits accrue when the shop can bill all those retainers at OEM prices, which are as much as 15% higher than a “list” price in an aftermarket supplier’s catalog. It’s a good goal to get reimbursed for the expensive ones. Look for a clip system that will link with your estimating program for the easiest and most profitable pricing.
My conversations with the experts noted the trend of car manufacturers coloring their OE clips in an effort to not lose the sale to a bulk supplier. While there are probably 750 shades of “white” plastic, dying your own versions orange or blue or yellow or some other OE standard hopefully helps keep the replacement business in their franchised dealer’s parts department. Speaking of the car manufacturers and clips, in an effort to keep Mr. Smith from attempting any amateur repairs on his newer auto, they covered both the top and bottom of the engine with a cap and splash shield. And yes, they look nice and finished and do serve to contain noise and dirt, but mostly they hope breaking the eight to 24 plastic fasteners will discourage Mr. Smith from changing his own oil and plugs again next time.
Computerized Inventory Management
The shops I spoke with about their clip scanning programs all agreed they were getting more fasteners billed out – which means more profits. In addition to capturing all the new body hardware they were installing, they knew for sure they were making more money in reimbursements. The overriding negative was getting their techs to use the system every time. The argument, if you haven’t heard from a productive tech lately, is that their time is worth more than getting paid for (3) 65¢ clips. And they have a point: at $50 per labor hour, every minute of time is worth 83¢ at 100% productivity and $1.25 at 150% speeds. My take is you’re going to need the correct clips to get the vehicle repaired; some effort on the technician’s part to capture all the little parts will help the shop get paid for them and is labor time well spent. Even the most productive techs are part of the entire team. If the shop makes money, everyone has a job. Which leads to this month’s other topic: complete paint and material management in-house with scan tools.
Who Will Do the Work?
I know pioneering PBE jobbers who took an existing clip scanning system 10 years ago and modified it to include mixing tints, abrasives, adhesives, masking materials, etc., in an effort to be good vendors and help their customer shops make more money in P&M income. Now a decade down the road, a complete P&M scanning inventory program not based on a clip and fastener project is a hot topic. Exceptional PBE jobbers and several paint companies and abrasive suppliers all have a version to manage the shop’s paint and material inventories.
Successful, progressive shops often gather together (note: in part, this is why they’re successful!) to compare notes and brag in the bar. “Do you have the new unicoupe repair bench yet?” They asked each other in 1980. “Do you have the new computerized mixing scale?” They asked each other in 1990. “How about the dedicated aluminum repair station?” They asked each other in advance of the 2015 F-150 Ford. It looks to me like scanning P&M inventory is the latest “cool-shops-have-it” boast over cocktails.
Much like the argument the techs made about scanning clips, there is a point where the technician time may not be worth it. I contend your shop should spend less than 5% to 6% of your sales out on all paint and material and gross at least 40%. If you’re currently under or over those numbers, I suggest you be content with whatever your current P&M management looks like and move to fix something else – like selling more refinish time on the RO, which will improve your profit margins much faster than spending less for the products or catching all the clips at list prices.
I’m disappointed to report that many collision shops don’t trust their PBE jobber’s salespeople to manage their inventories. In addition, every few years in my long tenure, shops get very interested in not only measuring their P&M stuff but personally taking control of ordering and stocking it. Establishing a list of approved part numbers is a key piece to taking control of the sad fact that many shops have six-inch 220A DA in multiple brands and similar grits, stored in many places. Who will make the list? Who will implement technician access to the new products? Many moving parts.
My first comment when I hear their lack of trust is, “You should get another vendor that you do trust.” In any event, shops taking full control of their P&M inventories have found that it’s lots of work. The goal of taking control of the shop’s P&M inventory is a tempting one. Vending machines were a thing for a while; each tech was issued a swipe card, and they would input both the card and the RO number to get the machine to drop the tack rag or whatever was included in the slots. Things like 175-sheet rolls of sandpaper or full tubes of adhesives were tough to split up on individual ROs. Keeping the techs participating and keeping the many vending slots stocked is a challenge for both parties. I contend the computerized mixing scales now in common use were the single biggest help ever in controlling the most expensive liquid portion (2/3 to ?) of the paint and material bill. Use yours for as many reports and data retrievals that you can manage. And that probably isn’t all the things your scale will do!
Good Jobbers Rock
I’m privileged to know some of the best PBE jobbers in the country. All of them have P&M inventory management and tracking programs for their customers. Their immediate goal is to watch for gross profit leaks by measuring their customers’ P&M purchases by category and over time. Some are simple spreadsheets, some calculate the optimum stock on the shelf based on usage and some include a scanning tool. Purchasing, loading, installing and training on such systems cost the PBE jobber big money.
Shops, of course, contend they’re worth their vendor’s big investment. The physical equipment, organizing software and labor to install and train each individual shop can cost the jobber thousands. Possibly, the key piece is someone must do a regular and accurate inventory count. If no one knows what’s on the shelf or supposed to back up which tint, production slows. And no savings you’ll make in P&M costs will compare with a measurable drop in production when the count is off.
Most current programs have a monthly shop cost around $75 to $350. The reports generated will save more than that modest cost for sure – if they’re read and acted upon. Shops, of course, want the jobber to pay those fees, forgetting that their good PBE jobber was doing much of that same time-consuming counting and recording work as part of the sale price before they wanted to manage their own stocks. No skin in the game, little impetus to play hardball.
Advice for Both Parties
Unless the body shop management, production people and front office all agree on how the program will work, who will do what and what a win looks like, it won’t last long. I find that shop principals or multi-shop managers start out with the best intentions. They talked to their techs and the office, and their plan was well-communicated. They soon discover that they’re devoting labor time to what may or may not be worth it. “Is this an approved emblem adhesive? Can we add it to the approved list right now?” cries the tech. “I can’t mix the color for the Toyota, we’re out of a tint,” explains the painter. Uh oh.
So my advice is twofold: don’t start unless you mean it, and don’t get too deep too fast. If you don’t have a good numbers and percentages spreadsheet on your P&M right now, a more complicated physical control system won’t help much.
Top-quality PBE jobbers put tons of time and effort into getting their customer shops to participate in these programs and numbers gathering. Why, you might ask? Certainly in part to prove themselves a more valuable partner in their customers’ shops. I also know that good PBE jobbers realize that their goal of increasing sales or plans for cutting expenses are absolutely meaningless to their body shop customers. Unless the customer shop sees changes that improve their own bottom line, no shop inventory program has much value to them.
So, my jobber advice is don’t be personally disappointed that the program you and your staff worked so hard on didn’t work in some particular shop. However, if it doesn’t work in anyone’s shop, that’s a problem. But be happy to revert to whatever the prior jobber-managed inventory program looked like. They’re still your customer!
Mark R. Clark is the owner of Professional PBE Systems in Waterloo, Iowa. He’s a popular industry speaker and consultant and is celebrating his 32nd year as a contributing editor to BodyShop Business.
Article Credit to Bodyshop Business.