Larry Edwards says collision repair shop owners could think of themselves as produce managers in a grocery store. 

Edwards, an automotive industry consultant based in Charlotte, North Carolina, says that just like produce managers, shop owners have a limited time to sell the "product" they offer before it is no longer salable. That product is labor hours, and when the day is done, those hours are gone forever.

"If you really stop to think about it, the primary product that you have to sell in your collision repair business is labor," Edwards said. "But if you're running a computer shop or a parts store, at least when you leave your business at night, the inventory that wasn't sold that day is still sitting on the shelf. You'd have an opportunity when you came in the next day to sell it. In the collision repair business, however, your inventory is perishable. If you don't sell all of it you have available today, then it is lost income to your business. You get one shot every day to sell that inventory."

Edwards says that because shop owners can't see their business's "inventory" of labor time, they often don't pay enough attention to it.

"If that labor inventory were money, and you took it back in your shop and set it down in the middle of the floor, would you keep an eye on it?" Edwards asks. "Would you make sure nobody took advantage of it? Would you not let any of it walk out of there? But in our business because you can't see it, you can't touch it, we have a tendency not to pay attention to the lost inventory we have every day."

In a day-long training course offered through the Automotive Management Institute, Edwards explains how a shop can measure and improve how well it is doing at selling those "perishable" labor hours.

"Once you know how to measure that, you can determine how your shop can increase both the amount and the profitability of labor it can produce," Edwards said.

Measuring efficiency

One of the easiest ways to measure your shop's labor profitability, Edwards says, is to measure your technicians' efficiency. To do that, divide the number of flat rate or billable hours completed (daily, weekly or monthly) by the number of clock hours available. A technician, for example, that completes 12 flat rate hours in an 8-hour day has a 150 percent efficiency rate.

"Our study of 200 shops found that collision repair facilities should be operating at a 150- to 170-percent efficiency rate," Edwards said, although many of the top third of the shops in the study had efficiency rates over 200 percent.

Even a small increase in efficiency can have a dramatic effect on a shop's profitability. Edwards gives this example: Say your shop's four technicians are operating at 150 percent efficiency. Each averages 12 hours flat rate hours in an 8-hour day; at a $30 labor rate, each technician is generating $360 a day in labor sales, or $7,200 in a 20-day month.

Now raise the technicians' efficiency 10 percent to 160 percent. In that same month of 20 work days, each technician now generates $384 in labor sales. With four technicians, that small boost in efficiency generates an additional $1,920 in labor sales every month.

What does it take to get that 10 percent increase in efficiency? In Edward's example, each technician that was turning 12 flat rates hours a day now has to complete 12.8 flat rate hours a day - an increase of less than one flat rate hour per day.

Think it can be done?

Little things matter - like finding keys

Edwards said one key to boosting efficiency is increasing the amount of time technicians actually spend working on vehicles during the day. He said a technician who arrives late or takes extended breaks can cause thousands of dollars a year in lost labor sales.

"One lost hour a day can cost you $8,000 in labor sales per year," Edwards said. "If you have technicians hanging around the snack truck outside, wouldn't you come out ahead if you bought them some snacks and kept them inside working?"

How much time do your technicians spend looking for the keys they need for a vehicle, Edwards asks. He recommends storing all keys in a lock box; each set of keys is marked with a tag that includes the repair order (RO) number and type of vehicle; the keys can be sorted within the lock box by the last digit of the RO to make locating them even faster.

Having technicians work from inaccurate or incomplete estimates - or even just those prepared by an insurer rather than the shop itself - also hurts efficiency, Edwards said. Delays generally result because such estimates include parts that need to be replaced rather than repaired (or vice versa), include salvage or non-OEM parts that turn out to not be readily available, or miss structural damage, etc.