Measuring Your Success Starts with Benchmarking
Unusual in the collision repair industry for their high-volume, 24-hour operations, the managers and staff at Northtown Collision Center in Amherst, N.Y., knew that production efficiency levels there were quite good. But benchmarking these numbers, with the help of a paint distributor, let them figuratively stand side-by-side with similar shops to see just how they measured up. Turns out that when it comes to efficiency, Northtown’s 170 percent is tops.
This collision center turned to benchmarking when it hired General Manager Tony Saiia; the shop buys paint from DuPont and takes part in its free benchmarking program. International paint companies like BASF, DuPont, PPG Industries and Akzo Nobel Coatings have databases with information from thousands of body shops all over the globe; a quick look at some key numbers in a benchmarking report can identify practices and procedures for more production, higher sales and better profit margins.
Inputting sales figures once a month, Saiia can receive a benchmark report from DuPont as frequently as he’d like, but with Northtown’s current profitable state, he checks them periodically, instead.
“It’s just a gauge to see where we are,” Saiia says. “I don’t look at it daily. But I do use it to try and hit certain numbers at the end of the month.”
Benchmarking helps show shops how their costs and revenues — broken down into as many categories as they wish — compare with shops of the same size, in the same market or across the country at large. For example, if the industry average is 4 percent on materials purchases and a shop is at 8 percent, it’s a signal that the numbers aren’t what they’re supposed to be. A significant differential in a benchmarking report may let a shop owner know that he or she has checked the wrong column or included numbers in one area that belonged in another.
Or — and this is the primary purpose of benchmarking — the differential will serve as a bright spotlight on a gaping opportunity for improved business and increased sales. Benchmarking is an effective management technique that’s not unique to the collision industry, but it can be done there to motivate people towards a goal, says Mike Sillay, North American services manager at Akzo Nobel.
If a shop owner’s goal is to be the best in a given market, he or she can benchmark a shop’s performance against its competitors. Shop owners also can compare a single shop to others in the same chain, franchise or in the same region. Or, a shop owner can compare his or her shop numbers to those of the best autobody shops in the country.
Clear, colorful reports from Akzo Nobel help participants in its e-benchmarking program see at a glance what’s working and what’s not. A lot of work goes on behind the scenes to prepare the information for shop owners, although they will receive updated information within hours of its input, Sillay says. The company’s benchmarking clients also take part in Performance Groups, similar to the 20-group concept, where they can compare indicators and learn from those in the group whose performance is best.
“It’s a diagnostic tool,” Sillay says. “We have 22 full-time services consultants who go on-site, work with the customers and teach them to use the tools and benchmarks to make a diagnosis … It’s a good place to start for corrective action measures.”
One benchmarking metric that’s critical for shops to measure is production efficiency, and most crucial to this mark is technician efficiency. If the industry average is 125 percent, the top 25 shops are at 135 percent and the top 10 shops run at 165 percent efficiency, a shop that’s struggling to make 100 percent or that’s stagnant at 110 percent can decide whether or not to take action to improve this figure.
A shop’s parts margin also is crucial, especially considering that, typically, 85 to 90 percent of a collision repair business’ sales comes from parts and labor combined. That makes even a 1 percent improvement in one or both of these areas a significant achievement. Benchmarking these numbers can help identify which improvements are likely to be successful and where.
“It’s at least a thumbnail view,” says Richard Altieri, senior business manager for the Business Solutions Group of PPG Refinishes. “At the very least they’ll know that they’re not keeping pace with the best in class. But some will actually see an area where they’re better than the best.”
“The real purpose is to determine a shop’s current state of performance,” says Altieri. Having amassed information from more than 6,000 shops in the 13 years, PPG has been benchmarking, it takes just a few pieces of key information to get started. None of it has to be proprietary and none of it has to be confidential. Given a shop’s size, number of employees and annual sales, for example, PPG benchmarking can nail this establishment’s production efficiency to within 5 percent accuracy, Altieri says.
Benchmarking can help shops find answers when they’re hoping to increase production or sales — like when an owner is considering shop expansion or buying another spray booth. “Sometimes we can look at the benchmarking figures and help them find an alternative to spending $80,000 to $100,000 and taking up all that space for something that only does one thing: paint cars,” Altieri says.
IS IT FOR ME?
Across the country, there are thousands of shops of different sizes and affiliations — but is benchmarking the right thing to do for all of them? And what kind of shop should benchmark?
“In our opinion, the question is, ‘Who wants to improve their processes?’ That’s who should benchmark. Are you happy with your sales and profitability? Do you want to improve these things?” Altieri asks.
A PPG benchmark report will measure a shop’s current situation in several key areas. Second, it will help identify opportunities for improvements that will have the most impact with the least amount of effort, which are good places to start. Third, the PPG benchmark program will draft a plan so the shop owner or manager can begin to take remedial action.
Whether it comes three months or six months later, the next benchmark report will give the shop owner new information. In fact, Altieri and his cohorts have compared the process to losing weight. Instead of a scale, participants can look at a report and ask themselves, “Did I move the needle?” Altieri says. “This is my new state — are the opportunities for improvement the same now than they were six months ago? What’s the next area to work on? Benchmark reports let you keep coming back and looking at the scale — where’s the needle at now?”
A business of any size can benefit from benchmarking, Altieri says. Historically, though, the shops that do take part in the service that’s offered free from most of the major paint suppliers are those with sales of $750,000 and up.
Collision shops with multiple locations can take advantage of benchmarking in a way that’s unique from a single-location operation. These chains can compare individual shops against each another for performance and other measures, as well as against like-sized shops in other markets across the country.
Benchmarking can point out deficiencies, successes and opportunities for growth. Says Saiia: “You may be letting business slip through the cracks. You can learn this through things like benchmarking and 20-groups. There’s definitely a profit benefit, and hopefully a stress relief, too.”