Fixed Operations
What is Your Body Shop Capable of Producing?
By Dave Dunn
One of the most common consulting calls I receive pertains to building additional space for the bodyshop. The bodyshop manager often feels stressed by space constraints, feeling that more room is needed in order to fix more cars. Many dealers are surprised to find that I recommend better utilization of existing square footage before even considering adding on. For me to tell you whether you need to add on I first must determine what your current "Resource Capacity" is. In other words, based on the resources you have at your disposal, what is your capacity for production?
Data Required:
- Number of work stalls
- Staffing density
- Planning horizon
- Labor efficiency
- Average labor rate
- Labor-to-total-sales ratio
Number of work stalls: This might sound like a simple calculation but there are a few things to think about. In calculating work stalls, you must count every stall dedicated to repairing a car. Frame racks, paint booths and prep stations count as stalls. Count all available stalls. Aisles do not count. So if you have 14 metal stalls, 1 frame stall, 6 prep stalls, 2 paint booths and 1 detail stall you have a total of 24 stalls.
Staffing Density: Staffing density is the relationship of stalls to technicians. You must count all technicians including detailers, preppers and helpers. Basically anyone who touches the car as a repairer counts. The formula for calculating staffing density is: number of defined work stalls divided by the number of technicians. Example: 24 stalls divided by 8 total technicians equals 3. So your staffing density ratio is 3:1
Planning horizon: The time over which the plan will extend. In other words what does the calendar and the clock dictate as to how many hours an individual will actually work during a year? The typical planning horizon is around 1950 hours, allowing for normal holidays, vacations, etc.
Labor efficiency: Labor efficiency is the relationship of clock hours to hours produced. The formula for calculating labor efficiency is: bid hours divided by clock hours. So if you produced 6,000 hours over a period of time and you actually spent 5,000 hours of actual time you would have a labor efficiency of 120% (6,000 divided by 5,000 equals 1.20).
Average labor rate: Average labor rate is the labor sales dollars over any period of time divided by the total bid hours over the same period. So if you had labor sales of $210,000 over a period of time and the bid hours sold during the same duration was 6,000 hours you would have an average labor rate of $35 per hour (labor sales divided by bid hours).
Labor sales ratio or %: This is the relationship of labor sales to total sales including labor, parts, sublet and materials. Tax is generally not considered. So if you had total sales for a period of time of $2,000,000 and labor sales were $1,200,000 of the total, your labor to total sales percentage would be 60%. In other words 60% of your total sale is labor (the formula is labor sales divided by total sales equals labor sales percentage).
The Calculation
Step One: Number of work stalls divided by staffing density ratio equals manpower resources.
Step Two: Manpower resources multiplied by planning horizon equals clock hours available.
Step Three: Clock hours available multiplied by labor efficiency equals bid hours capacity (output in hours).
Step Four: Bid hours capacity multiplied average labor rate equals labor sales capacity in dollars.
Step Five: Labor sales capacity divided by labor sales ratio equals resource capacity.
After you have done this calculation you have a good idea of what is possible based on the factors you have plugged into your formula. Look at each of the factors. Are there any you could change and what impact would that have on the capacity of your facility?
Every factor we have mentioned, of course, is a variable. You should play with the factors and see which ones you can change and what impact changing the factor will have.
Generally I recommend that you look carefully at labor efficiency and staffing density. Body men think they need two or three stalls each. I believe a staffing density of 2:1 is the most needed. Many shops operate at 1.5:1 (that is one and a half to one). Labor efficiency can be improved by good incentive programs, visible score keeping and training. Number of stalls can usually be improved by cleaning out any idle stalls, getting rid of project cars and by carefully defining stall boundaries. Labor sales ratio can be improved by making a conscious effort to sell more parts. Incentives for parts sales to your bodyshop manager are a must. You want to have higher parts intensity and lower labor intensity to achieve the highest gross profit per actual hour.
Just for fun, run your own numbers. Do you really need more space or should you do a better job with the space you have?
Scenario
A shop with 24 stalls, a 3to1 staffing density ratio, working 1950 hours, at 120% labor efficiency, and a $35.00 per hour average labor rate and a 60% labor to sale ratio has a capacity of 1,092,000
If you simply improve the parts sales (by lowering the labor to sale ratio by 10%) you will dramatically impact your capacity. Your new capacity would be $1,310,400. It is worth looking into the possibilities.
Dave Dunn is the most respected consultant in the field of collision repair management. Dave owns and operates Masters School of Autobody Management in Santa Barbara, Calif. He also owns Dave's Auto Body in Galesburg, Ill. ddunn@dealeronline.com
