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Taking Inventory

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Ellis and Salaz Collision

In 2017, ProCare Automotive swept the competition away when it came to materials usage.

The Texas-based MSO took home first, second, and third place from Axalta for Excellence in Materials Management. Joe Lewright, COO of ProCare, says the goal for all of his shops is for materials costs to be less than 5 percent of total sales. The winning location, South Congress, finished the year with a 4.68 percent average. To put that in perspective, Steve Trapp of Axalta says that the industry average is 6.5 percent.

Success like this doesn’t come overnight. Lewright has always been a stickler for tracking material usage, but when the MSO grew, he realized that not all of the shops had the same ideas about material management that he did.

 

The Backstory

Lewright, owner of Ellis & Salazar, saw an opportunity to expand his shops’ presence by partnering with Clay Fallis and Vince Brock of ProCare Collision. So, in 2015, the two MSOs merged to form the ProCare family, which now has 16 locations.

 

The Problem

When the shops merged, Lewright noticed that all of the locations didn’t track materials the way he did. The ProCare Collision shops let the techs determine the materials that were used, which often resulted in multiple different vendors used for the same material. In essence, the technicians were able to select the sandpaper or tape they preferred and order those materials on an individual basis. This practice made little sense to Lewright.

Looking at the numbers, some of the locations spent close to 8 percent of total sales on materials. Numbers like that don’t leave a lot of room for profit, so, Lewright began implementing his strategy in all of the locations right away.

Ellis and Salazar Collision outside

The Solution

Lewright has always focused on profitability and has used a number of different strategies throughout his career to keep material costs down, but the most effective has been implementing a standardized inventory.

The first thing that Lewright did with the new locations was to eliminate duplicate products.

“So many vendors come through and try to sell us stuff,” Lewright says. “If you let your techs pick what they want, you’re duplicating that throughout the shop over and over.”

Now, instead of vendors being able to go to whatever location they want and sell, they have to go through Lewright first. If he decides to test a product out, it’s put in ProCare’s most successful shop for about three months to test whether or not it has an impact on profitability.

Lewright adds that it’s not always the cheapest product that the shop ends up using. Some could cost more, but last longer, which ends up being more cost effective. Because of this, ProCare is always testing out new materials and getting feedback from it staff.

“We’re not going to make someone use something they don’t like, but he better have a solution,” Lewright says.

Lewright adds that the painter’s roundtables hosted by Axalta have been a great platform for his staff to voice their opinions. It also helped to eliminate any type of opposition when the standardized inventory was implemented because it gave the staff an outlet to express their concerns.

 

The Aftermath

With materials management, it’s always fluctuating.

“You’re never done,” Lewright says.

However, implementing a standardized inventory has lowered the percentage of total sales spent on profits in all of the locations that did not have one before and was a key factor in winning the Grand Prize for Excellence in Materials Management.

 

The Takeaway

From a profitability standpoint, it makes sense to pay close attention to materials costs because, as Lewright points out, it’s the only profit center that can be controlled on both the cost and sales side.

“Everything else has a profit margin that’s already set. I don’t get to control the cost of a replacement part and no matter how efficient I am, I can’t use less of a part,” Lewright says.

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