Retooled processes help dealership body shops rack up big gains

Paying attention to details may not sound like a game-changing philosophy for driving revenue growth at dealership collision shops. But doing the little things right is yielding big results at two collision centers run by Craig Zinn Automotive Group in Florida and one operated by Home Motors Chevrolet in California.

At Zinn's Lexus of Pembroke Pines and Lexus of North Miami dealerships, new processes helped cut repair cycle times by slightly more than 21 percent, from 14 days to 11. Moreover, revenue in the first full year of using the new protocols — February 2019 to February 2020 — jumped about 9 percent. Revenue now averages around $1.7 million a month between the two stores, says Brian Martin, director of auto collision at Zinn.

At Home Motors, owned by Tim Ritchie and Mike McNulty and based in Santa Maria, about 160 miles northwest of Los Angeles, a new playbook reduced the "keys-to-keys" repair cycle times by half. It also produced about a 150 percent increase in average repair orders per month, from about 30 to around 75, says Nick Paulicano, collision center manager.

More importantly, the 8,000-square-foot collision center — which lost money for years — now generates an average monthly net profit of $27,000. The center features eight service bays and employs seven technicians, Paulicano says.

The 31,000-square-foot Pembroke Pines shop is a standalone facility. It features 25 service bays and 60 technicians but will expand to 40 bays when a $6 million, 10,000-square-foot addition is completed in mid-2022, Martin says.

The 50,000-square-foot North Miami shop, located inside the dealership, includes 45 bays and employs about 55 technicians, Martin adds.

Many dealers shun collision work because of high startup costs, pricing dictates from insurance companies and strong competition from independent shops and large consolidators. In fact, only 37 percent of the nation's 16,623 dealerships operate on-site collision centers, down from a high of 39 percent in 2017, according to the National Automobile Dealers Association Data 2020 report.

Yet it's a lucrative business; the report shows collision revenue in 2020 was $6.1 billion, with average repair orders of $719.

"If run correctly, it's a very profitable business," says Jose Perez, Home Motors service manager.

That wasn't the case when Paulicano was hired last April.

"We didn't have the right people in the right spots or enough technicians," he told Fixed Ops Journal. "We also didn't have good standard operating procedures. But now we're nearly doubling our net profit every month."

Introducing formal processes and holding technicians accountable for following them drove the dramatic turnaround.

"It was a lot of little details — things that weren't done that compounded into big things," Paulicano says. "Now each person — from customer service representatives to estimators to the parts manager to technicians — has tasks that must be completed before the next person can do their job."

Technicians now must examine repair estimates line item by line item to ensure all problems are fixed. They make sure customers and insurance companies get billed for every service performed and every part used. And customers don't get their vehicles until payment is received, he notes.

"You can't buy a gallon of milk at the grocery store and say you'll pay for it later," he says. "We had a really big receivables account before."

The store also invested in new equipment, which improved productivity — and technicians' morale, Paulicano says.

The Zinn dealerships proactively inform customers about collision services. That helps to steer customers to the dealerships instead of letting insurance companies send them elsewhere, Martin says.

Every customer who buys a vehicle at any of the five Zinn dealerships receives a letter and an email that promotes the body shops and explains the value of automaker-certified technicians (they're certified to work on 10 different brands) and original automaker parts. Customers also receive emails that remind them of their legal right to choose where to go for repairs, he says.

The marketing campaign works; Martin says vehicles bought at Zinn stores represent about 70 percent of repairs.

In the shop, Martin implemented a "blueprint process" centered on a complete teardown and diagnosis of each repair, as opposed to partial teardowns. The repair process includes details such as "mirror-matching" parts — comparing the new part to the broken one to verify it's correct.

"It's better to find out about missing or wrong parts at the beginning of a repair, not at the end," Martin says.

"The blueprint process has increased shop morale because techs turn more labor hours per job on a weekly basis," he adds. "They're paid by commission, so the more hours they turn, the more money they make."

Other key components include meticulous inventory and quality controls. For example, a 3M inventory-tracking system monitors usage of dry goods; as technicians receive the bar-coded materials, they're scanned into the system, Martin says.

"We set minimum and maximum inventory levels, and the system automatically reorders materials to maintain those levels," he explains.

It also creates complete invoices for insurance claims, which ensures payment for all labor and materials, a commonly overlooked detail that depresses profitability.

Martin uses data from the system to determine the amount of materials technicians are using vs. the work they're performing. This exposes materials waste and even theft problems, he says.

"Our materials costs decreased by half after using the system for 60 days," he says.

The company pays a monthly fee to use the system, but Martin says it pays for itself just by ensuring everyone is charged for all materials used.

Martin also uses Carbeat production-management software from AkzoNobel to monitor how long each step in the repair process takes, from customer check-ins to the initial repair teardown to the actual repairs. It can even track the time it takes for parts to arrive and how long it takes insurance companies to approve repair plans.

The end result? Actionable insights for improving processes, he says.

"You can't manage what you don't know," Martin notes. "The devil is in the details."

Providing compassionate and comprehensive customer service also is critical. Martin points out that customers involved in collisions are at a low point in their vehicle-ownership cycle. As such, phone receptionists are trained to be empathetic.

"Our average repair is $5,000," he says. "So a mishandled customer call could be a $5,000 mistake."

Furthermore, about 60 percent of people in a collision switch to another car brand, Martin says.

"So if they like how they're treated, it gives them a reason to switch," he notes. "If a customer didn't buy their car from us, our goal is to get them to buy their next car from us. Providing great service and quality repairs is our way of conquesting customers."