Chris Sterwerf graduated from Miami University in Oxford, Ohio, in 1999, and soon found himself determined to put his business degree to use at his father’s shop, Fairfield Auto and Truck Service, in suburban Cincinnati.
Surely, the family shop, which largely focused on heavy-duty trucks, would benefit from the younger Sterwerf’s number crunching, right?
Not necessarily.
While Sterwerf spent plenty of time studying the facility’s productivity numbers in his younger days, his efforts failed to make the impact for which he hoped. The shop’s paint department, for example, still had multiple inefficiencies. His father, Dennis, didn’t completely see eye-to-eye with his son’s business methods, either.
“I was always, you know, working the numbers from the office,” recalls Chris Sterwerf, currently the COO/CFO at the shop. “But you can only move ’em so much from the office.”
The second-generation shop operator—who’s involved in multiple industry organizations, such as the Automotive Service Association of Ohio—eventually learned that he needed to determine KPI benchmarks for the heavy-duty truck shop, and closely monitor each of the business’s performance metrics (while additionally comparing them to competitors). In particular, Sterwerf learned that a poor paint materials gross profit figure can make it difficult for your shop to be competitively priced.
He also learned that he needed to get out of his office and more closely examine the inner workings of Fairfield Auto and Truck Service’s shop floor.
Then, and only then, would the Sterwerfs have a shop that came closer to reaching its full potential.
SHOP STATS: FAIRFIELD AUTO AND TRUCK SERVICE Location: FAIRFIELD, OHIO Size: 16,000 SQUARE FEET Staff Size: 20 Average Monthly Vehicle Count: 58 Annual revenue: $2.8 MILLION
The Backstory
For years, the younger Sterwerf studied KPIs like gross profit margin. When he started, he aimed to transform Fairfield Auto and Truck Service from a shop with a 15-day cycle time to something of which father could be truly proud.
Along the way, Sterwerf has discovered just how splintered the heavy-duty truck segment of the industry is in many respects. He hopes to do his part to steer the heavy-duty truck world toward greater unity, perhaps even through the creation of repair standards.
The Problem
Back in 2008, Fairfield Auto and Truck Service implemented an inventory system in an effort to better track costs. When employees did yearend inventory, they were left feeling as if their shop’s financial figures were dialed in nicely.
Eventually, though, in 2012, training with the Axalta Business Council exposed shop floor inefficiencies. That fact led to a negative, trickle-down effect. Because of the shop’s fairly poor paint materials gross profit (Sterwerf aimed for 25 percent back in those days), it wasn’t competitively priced compared to its marketplace.
And, the business lost jobs because of it.
The Solution
Sterwerf credits the fact his shop joined its 20 Group in 2012 for providing the business with necessary direction. The 20 Group enabled Sterwerf to try innovative new spray equipment like ionized heated nitrogen, for example, and using lower air pressures.
Despite the fact he had never pulled the trigger on a spray gun in his life prior to that point, Sterwerf swallowed his pride for the greater good of his shop.
“I came back from training and compared what I had learned to what was being done on the floor,” he notes. “We found that we could be utilizing the products better, we could waste less paint, lower rework, do less buffing and lower stress levels.”
Sterwerf has few qualms about letting others learn from the lumps he took earlier in his career, as he tried to improve so many elements of his family’s business. In that vein, Sterwerf shared with FenderBender the performance and efficiency metrics he feels are among the most valuable to monitor at heavy-duty truck shops:
Receivables. For heavy-duty truck shop owners, payment from fleet customers can often be drawn out 60–90 days.
Once a truck is released, in many states, shops lose any rights to using a mechanic’s lien on the truck to help guarantee payment, Sterwerf notes. So, in a worst-case scenario, if a fleet were to go bankrupt, for instance, a shop like Fairfield Auto and Truck Service could find it nearly impossible to recover outstanding receivables.
“Minimizing and knocking down your receivables is huge in the truck world, because cash flow is king,” says Sterwerf, who believes one month of sales is a solid receivables benchmark. “If you don’t have cash flow, you can’t buy parts, you can’t keep the job moving. So it’s very important to keep an eye on your receivables.”
Cycle time. There’s obvious value in being able to verify to fleet customers how fast your shop can fix their vehicles. Yet, somewhat surprisingly, many truck shops don’t keep close tabs on their cycle time.
“So, just the fact that you’re keeping track of it at all will impress a fleet,” Sterwerf says of cycle time. “Because they’re all about up time; if their truck’s not on the road, it’s costing them anywhere from $800-$1,200 a day.”
Fairfield Auto and Truck Service currently boasts a cycle time of 13 days, which, for its industry segment, is respectable.
Profit per productive square foot. Sterwerf has become a big proponent of tracking how effectively space is used in his 16,000-square-foot shop, because the vehicles the shop works on typically range from a single axle all the way up to a massive motor coach. Ultimately, Sterwerf hopes it all adds up to leave his shop with a total gross profit of 45–50 percent.
“Gross profit margins on RVs are much higher than a typical fleet vehicle, but you have to take into account that it’s going to typically have to be kept indoors, taking up valuable space,” Sterwerf explains.
Parts delivery time. Tracking the speed with which vendors deliver parts is becoming increasingly important, Sterwerf says. In recent years, he has found merit in comparing the delivery speeds of each vendor his shop has used.
“In the truck world, a lot of the parts tend to be as needed,” he notes. “So the lead time to get those parts into your shop can take some time. And if you can get the dealer [to] get you the parts more quickly … that’s a huge advantage.”
Sterwerf’s typical benchmark with regard to parts is 26–35 percent.
The Aftermath
Through gaining a full understanding of the paint materials gross profit metric, and by making the necessary adjustments to rectify that problem area, Sterwerf saw his shop’s bottom line improve.
Before long, the shop was getting higher-quality paint jobs, and better color matching. In the process, Sterwerf saw gross profit on materials numbers improve drastically (the figure was around 25 percent in 2008; it’s currently at 46 percent). Fairfield Auto and Truck Service’s annual revenue, which had been $2 million in 2008, rose to $2.8 million in 2016.
Sterwerf says his painters are also taking great care to keep overspray down. Guided by its Axalta training, the paint department does, in fact, require less rework than in the past, which has helped lower cycle time to 13 days.
“What has happened,” Sterwerf says, “is our sales have increased gradually, but our costs have decreased.”
Tapping into the expertise of others in the industry was also eye opening for Sterwerf.
“In the truck world, you’re dealing with competitors from a 200-mile radius,” he notes. “So you really don’t have a good feel for what’s going on in the market. So, joining a 20 Group, and being able to see what was going on outside of your bubble, was an ‘a-ha moment.’”
The Takeaway
After his prolonged cram session with regard to the heavy-duty truck industry, Chris Sterwerf walked away with one main lesson learned: Don’t be content sitting in neutral.
“Monitor those numbers, and see how you can move them,” he says.
Sterwerf also learned that, if you want to hit a higher gear as a shop operator, you need to take the initiative to get hands-on learning.
“Get some time on the floor, get your hands dirty,” Sterwerf adds, reciting a key principle of lean manufacturing. “You can see the opportunities for savings.
“When you can move a KPI, increase sales, and increase efficiency? That’s where you start seeing the dollar figures add up."
Expert Advice
--
Dean Hancock, owner of Bob Johnson’s Body Shop in Cayce, S.C., has 35 years of experience in the industry, the last 12 of which have been dedicated to the heavy-duty truck segment. Calling upon that experience, Hancock provides insight on how to attain top cycle times while operating in the heavy-duty truck realm.
You have to communicate with the customer up front. We need to see what their expectations are, and let them know up front, “Hey, it’s X amount of days out before I’m going to get parts. Once I get parts, it’s going to take us X amount of days.” We try to pre-order parts.
We’ve implemented a lot of the stuff that Aaron Marshall [manager of Marshall Auto Body and noted lean guru] does. We use a lot of visual signals. Like, we put a tag on the windshield; it’s a piece of paper that puts the in and out date, and it has the unit number, who the customer is, what insurance company is involved, and who wrote it. When that gets put on the windshield, that’s the visual signal that this was going to be assigned to someone, and it’s mapped out. When we get through the entire process, the detail person can see I wrote it and he’ll put that piece of paper on my desk. I take that same piece of paper and put it on accounting’s desk, and let them know that it’s OK to bill it, and call the customer.
Also, the management system will send customers an email as the repair moves from body to paint. That way I don’t get so many calls of, “Hey, where’s the truck at?”
