Less Stuff, More Money

Sept. 1, 2008
Is your cash flow tied up in inventory? Here's how to clean up and boost your bottom line.

Todd Platt’s body shop used to be a picture of disorganization. The shop floor was littered with partially used masking tape and paint primers, as well as an array of sanding, bonding and glue materials. When Platt, the body shop manager of J.C. Collision Repair in Monroe City, Mo., realized most of his inventory was scattered throughout the shop or overflowing on shelves, he knew it was time to address the problem. “We sat down and looked at the numbers and knew we had to do something,” Platt says. “Our profit margin was too small.”
Determined to clean things up and get back on track financially, Platt came in to work one Saturday and cleared the shop of all the supplies in disarray on the floor and on the shelves. He took everything to a building behind the body shop and started the process of going through each item, labeling it and organizing everything neatly on shelves.

It's not a spring cleaning. It's a change in how you do your business.

Then, instead of ordering new supplies, the shop—which has 10,000 square feet of space, five technicians, one estimator, annual revenues over $1 million, and 80-100 cars per month coming through the door—started using what was in the back building instead. “We ran off the surplus that had gathered in the shop for six weeks,” Platt says. During that time, the shop’s gross profits tripled. When the surplus ran out and Platt completed his inventory overhaul, the shop’s gross profits had doubled.


Platt turned his inventory situation around for the better in only a few weeks. And he increased his cash flow and bottom line at the same time. Here, he shares his tips on how you can do the same.

• Take control and organize. The first thing Platt did to get a handle on his inventory was to organize—and he was meticulous about the process. “I made an inventory list for the body shop materials and for the paint shop materials. I’ve got a part description and quantity of each product.” He also determined what the shop really needed and what it didn’t. “I noticed a lot of things the guys didn’t use a lot. We eliminated a lot of products we didn’t need anymore or that we had a duplicate of.” Now when he goes to re-order something, he only gets what he needs. This method of ‘just in time ordering’ has worked wonders for the shop. “We got it down to just what we needed,” Platt says.

At least once a week, Platt does a walk-through of the shop, checking to be sure his team only has what’s needed for that week’s work. “I can get a visual idea as I go through the shop to see if something is not normal,” he says. “You can visually tell if something is in excess.”
Platt also has more control over inventory by not letting his vendors dictate what needs to be ordered for the shop. “Some of the vendors don’t know what your actual needs are to run your business,” he says. “If they think you need a certain product, they’ll give you too much of it. You just double, triple, and quadruple up on things you don’t need.” Platt eliminated this problem by doing all the re-ordering himself and faxing his vendors a list of the supplies he needs. He also only orders one backup of everything, unless it’s a fast-moving item in the shop.

• Work together. Platt says informing your team of your decision to overhaul the shop’s inventory is critical, because it’s important to have them on board with the new business practice. “You need to include everyone in the shop—you can’t just force it on them,” he says. “They need to know how important it is, why we don’t stock a certain thing for a car.”

Platt also has his techs work in teams. Each team is assigned a cart containing the supplies needed for each repair job they’re working on at the time, and each team member is held accountable for placing only what they need on the cart as well as returning each item once the job is completed. “If [an item’s] not there, someone is going to grab something from the stock inventory. Now you’ve got five rolls of sandpaper and you’re back where you started.” Platt says it takes regular practice for his techs to always be sure to pick up and replace supplies from the cart, but it has a big effect. In addition to eliminating a lot of waste that might be scattered about the shop floor, he says, “It will tremendously lower your inventory.”

• Know your numbers. Platt created spreadsheets to keep track of where inventory is at all times. To be able to analyze the numbers easily, he separated supplies into three separate accounts. One account is for the shop’s paint materials, one is for allied materials (anything used to operate the shop every day—such as masking tape, light bulbs, an air fitting for an air hose, etc.—that’s not for a specific repair job), and the other is a customer account. The customer account includes things Platt and his team order for customers, such as a taillight. “The purpose of splitting them is to see where the dollars are going,” he says. If the numbers change from month to month, Platt can ask, “Did we order too much? Did we waste it?” He relies on his spreadsheets to tell him how the shop is doing. “[The spreadsheet] sees sales versus expenses. This really drills down into the inventory.”

By closely watching his monthly numbers, Platt can make adjustments as needed. He says it’s also essential to share these numbers with your team, because it gives them a tangible number to see and helps them understand how they’re doing and if they’re wasting any supplies.


Platt says a lot of shops are probably in the same position he used to be in. “They don’t realize it; it happens so gradually,” he says. “You have to take control. That goes all the way to your clips and fasteners. You don’t need stuff sitting around if you’re not using it. It’s your responsibility to go out there and see what you’re using.”

He cautions against thinking that getting control of your inventory is a one-time fix. “It’s not a spring cleaning. It’s a change in how you do your business,” he says. “You need to organize everything, label everything, figure out how much you’re going to stock, where it’s going to be put. It’s a totally different way of doing business.” For Platt, it all boils down to running a smart business. “The goal is to be as lean and as efficient as you can and still repair cars.

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