Increasing Paint and Materials Profits

But from Hadlock’s vantage point—overlooking six shops in the Oklahoma City area—even the tiniest of problems can be missed. And for Hadlock and his Collision Works crew, that particular oversight happened to be waste in the paint department, causing rising costs and low profits for paint and materials (P&M).

It wasn’t just one location’s fault. When Hadlock stepped back and looked carefully at the company-wide numbers, there was significant waste to be found throughout the entire operation.

Turning around those gross profits hasn’t been easy. But thanks to some inspection process tinkering, diligent tracking of paint department KPIs, and a giant cultural shift that’s improved communication significantly, Hadlock has been able to increase his network of shop’s P&M gross profits by 15 percent. “Over the last 12 months, we’ve spent a lot of time digging into those metrics to figure out what is driving those gross profit dollars, and really getting a good, solid process down to deal with getting the gross profits dollars on the right side,” he says.

The Background

During his 33 years in collision repair, Hadlock has moved from a painter’s helper at the age of 18 to president of Collision Works, which, alongside CEO Jake Nossaman, he has grown from two to six locations in just two years, and is currently working on opening a seventh facility.

Adding four locations in two years is thanks to an aggressive growth strategy centered on customer service training, expanding DRPs, an investment in technology and, as Hadlock puts it, “rapid repairs.” Because of it, Collision Works has seen double-digit sales increases two years in a row, including a 16 percent sales increase in 2014.

And while Hadlock is confident in his abilities to nail down procedures for a thorough repair process (he worked on the assembly line as a body technician for years), he’s always looking for some extra guidance. That’s why, after inviting his paint supplier in to do a walkthrough, he and his vendor were able to find exactly what had caused such high P&M costs.

The Problem

There wasn’t just one culprit for low gross profits on P&M. Discovering the solution meant identifying several problems that plagued the paint department.

Hadlock first had to pinpoint why his shops’ costs per paint hour were above the market average, and identify the factors driving up the cost of waste.

“One of the things that you really need to look at on a monthly and weekly basis is liquid costs per paint hour,” he says. “That’s the one KPI you can look at that will give you a clear picture quickly on which location is struggling with paint and material costs per hour.”

After performing a cost analysis on how many hours a gallon of sprayable clearcoat produced, he discovered that, in what had originally been an effort to save money, an inexpensive clear coat was actually costing the paint department more in the long run, with each gallon of clear only producing 80 paint hours.

A good portion of the issue boiled down to the inspections and repair process and the lack of communication between body technicians and the paint department.

“Many times, cars would go through reassembly, and then they’d realize there’s another part that needs to be painted,” Hadlock says. “It’s a huge waste of materials and time.”

Because painters were not involved in the repair process until the car came to their department, they were missing out on key information from the body techs. As a result, redos became a significant problem due to improper color matching and poor repair planning.

“Too many times, you get this rush at end of the day and the body man loads up the paint shop and the painter the next morning is just in a mad rush and not really thinking about a car that’s just hit the paint booth. He’s completely unprepared,” Hadlock says. “Being in that rush, you really don’t think about cost savings on materials. Your only thought is, ’How quick can I get this car out of this booth and get the next one in?’”

The Solution

Revamping the repair process by including the painters in the inspection and blueprinting process has eliminated any confusion once the vehicle reaches the paint department.

“It’s really made a big difference in gross profit dollars by doing your spray-out and color matching in the disassembly stage of the vehicle,” he says. “By slowing that process down and getting all that information up front during blueprinting, it allows the painter enough time to plan for the job and figure out how much materials he needs and enough time to do appropriate color matching on for car.

” In a further effort to increase communication between the body and paint department, Hadlock introduced glass markers to the blueprinting process.

“If two parts off the car are expected to be painted separate from the vehicle, then they will write ‘+2’ on the car,” he says. “That could be a gas lid door that’s been removed, a door handle, the side molding. It gives the painter an exact idea of how many parts he has to paint."

To raise awareness about how much waste was occurring in the paint department, Hadlock implemented a materials bonus for his painters. If a shop achieves a paint and materials gross profit of at least 40 percent, he splits half of the profits with the paint team.

Hadlock also decided to spend more on a top-of-the-line clear coat, and after a week of documenting every ounce he found that it produced 150 paint hours per gallon of sprayable clear, versus the 80 hours for the less expensive product.

“There was a huge disparity in cost savings,” he says. “Certainly that gallon of clear coat was cheaper, but that doesn’t mean you’re going to get the sprayable costs per hour where it needs to be.”

The Aftermath

Across all six shops, P&M gross profits rose 15 percent within one year. By the second quarter of 2015, the shops’ combined for a 35.6 percent P&M gross profit, which included liquid, non-liquid and body shop materials. By the fourth quarter, those gross profits rose to 42.2 percent.

Hadlock says the bonus plan has motivated his painters to carefully track their P&M waste.

“These guys manage materials for the entire shop,” he says. “It’s a big cause for change. You don’t walk in and see large amounts of materials on carts. Everything became very organized and neat.”

These days, Hadlock says the painters are continuously searching for new ways of reducing waste, including a recent conversion to 3M’s paint preparation system (PPS) cups.

“We were going with less expensive cups, and the major difference we noticed was the strainer that keeps trash in the paint out of the gun,” he says. “There are cost savings when looking at hazardous waste and the quality of air in the environment.

“We now look for the amount of primer left in a PPS cup. At the end of the day, if you’ve got a lot of hardened up mixed primer sitting around, you might not be mixing appropriate ounces of sprayable material."

Redos have been virtually eliminated, which has aided in reducing average cycle times from 8.9 days in the first half of 2015 to 7.6 days in the fourth quarter, and helped average monthly CSI scores jump from between 85 and 90 percent to consistently resting near 100 percent.

With the improved communication, Hadlock says there is now a culture of learning forming amongst painters that is constantly training everyone and keeping the paint department on its toes regarding materials costs. “It’s important for painters to not get that mindset of, ‘I’m the best, I don’t need education,’” he says. “We can all learn from each other. There are always ways of improving on your process and reducing waste.”

The Takeaway

Stepping back and allowing his paint supplier to observe the repair process allowed Hadlock to notice the minor flaws that were adding significant costs and increase his gross profits.

“I would encourage everyone to take advantage of the resources your paint company has provided for you,” he says. “Invite guys in to do an analysis and dig into any wasted steps and processes. It makes a huge difference.”