20 Years Ago in the Collision Repair Industry (July 1998)
I was recently told of a body shop doing more than $5 million in gross sales per year. It sounds like an impressive operation until you consider that this shop, heavy into direct repair programs (DRPs), has only a 4 percent profit margin.
For all that’s involved in maintaining an auto body business---the customer-employee-insurance headaches, enormous outlays for tools, help and training, building and property payments, etc.---such a meager profit is an insult to business intelligence.
With most shops today making less than 5 percent profit (and that margin is steadily dropping) repairers who are also good businessmen are rare.
I’m reminded of the true story of several scientists who were dropped off in a remote region of Africa to make scientific reports. After going months with no human contact and with their food supplies depleted, they eventually discovered a patch of berries that look quite similar to an edible variety back home. In the following weeks, gorging themselves on these berries, they slowly became weaker and weaker until each man died. Analysis of the berries after the men’s bodies were found showed that they had absolutely no food value. These men, confident that they were well-nourished while waiting out their rescue, actually were being weakened and starved to death so slowly that they didn’t realize their mistake until it was too late.
I have to wonder about the great number of shops clamoring for pieces of the DRP berry pie. Why is it so hard for otherwise intelligent men and women to see the trap and the coming malnutrition and starvation that insurers will eventually bring upon us when DRPs have saturated the industry?
Body shops, now contentedly stuffed overfull with DRP berries, will eventually realize they’re starving to death, though by that time, they’ll be powerless to resist. All the work in the world, if it is of no profit, is still profitless.
– from an editorial by Dick Strom, at the time a shop owner in Washington state, published in The Golden Eagle. According to the shop’s website, Strom sold the business to his sons in 2010, and it “continues to thrive as a non-DRP shop” with 14 employees.
15 Years Ago in the Collision Repair Industry (July 2003)
Third-party “desk auditors” faced some critics and tough questions during a panel discussion at the Collision Industry Conference (CIC) held in Hollywood, FL, in late July.
Representatives of three companies that offer insurers remote reviews of repair estimates discussed their companies’ histories, employee training and auditing practices. The three were asked, for example, whether they are compensated for their work based upon the amount by which they are able to reduce a shop’s estimate.
“We are compensated on a per-file basis, whether there are savings or not,” said John Gizzio of American Computer Estimating (ACE), a Pennsylvania-based desk review company that audits more than 10,000 claims each month. “We do not take part of the savings. And we do ... charge if there are no savings. We are compensated for every job that we do.”
Mike Price of the Georgia-based, 30-employee Audit Services, Inc., also said his firm is paid on a per-claim, per-assignment basis. Mike Saliba, vice president of ComSearch’s Ready Review desk auditing service, said his company’s compensation is “based on a number of things, but savings is not one of them.”
Gizzio said that some of the savings they offer insurers is not just in reduction in the bottom line of repair estimates, but in reductions in cycle time, rental costs and direct expenses such as field adjusters.
All three of the companies say they are not using electronic systems that automatically flag certain items on estimates for review. Rather, the reviewer enters the estimate into the company’s chosen estimating system and checks it against the profile established by their insurer client. While those “profiles” cover such things as non-OEM and salvage parts use, all three of the companies say they do not change “judgment” repair times.
“We do not adjust or change judgment items,” Price said. “We apply our client’s guidelines... When it comes to a judgment item, obviously we haven’t seen the damage.”
The other two companies represented on the panel concurred, and although the three represent a majority of the desk audit market, nearly every shop owner at CIC raised their hand when asked if they had had judgment times changed as part of desk audits.
“There are other companies that do this work,” Gizzio said. “We’re not representing them, just our own companies here today ... If you put down a five-hour repair, you get a five-hour repair.”
Price said he recommended that if a remote auditor changed judgment times, the shop should call the insurer involved.
– As reported in Autobody News
10 Years Ago in the Collision Repair Industry (July 2008)
The Database Enhancement Gateway (DEG) has surpassed one of its first milestones by processing more than 500 inquiries in just over six months of operation. If the value of inquiries remains consistent, the first two quarters of the year indicate that the DEG will likely process more than 1,000 inquiries by the end of year on.
“Collision estimating data customers clearly turn to the DEG as their partner for submitting their first-hand-concerns to the information providers,” said DEG Joint Operating Committee Member Nick Kostakis.
– As reported in Collision Repair Industry INSIGHT. The DEG website (www.DEGweb.org) has now processed more than 8,600 inquiries.
5 Years Ago in the Collision Repair Industry (July 2013)
At the Collision Industry Conference (CIC) held in Boston, some participants questioned why the CIC Parts Committee had not addressed certain issues related to electronic parts procurement systems.
The committee is working to produce a matrix that it hopes will indicate differences in features and other aspects of the various systems. But California shop owner Randy Stabler said understanding those differences won’t matter if shops are being required to use a particular system.
“Let the people who want to make a parts procurement engine build the best tool, and let the marketplace decide which one is the best, rather than being forced,” Stabler said.
Aaron Schulenburg of the Society of Collision Repair Specialists (SCRS) agreed.
“For more than a year now, this committee has been asked, at least by individuals of this body, for a very serious discussion about the entry-to-market (of the systems),” he said. “It keeps being avoided, frankly. I think we really need to have that before we just ask how they work.”
CIC Chairman George Avery said the committee should continue its work on the matrix, but acknowledged that “it seems like we jumped ahead,” and that “it’s prudent that we facilitate the discussion that I think is being asked for.”
– As reported in CRASH Network (www.CrashNetwork.com), July 29, 2013.