Saturday, 30 September 2006 17:00

Non-charged processes should be credited to cycle time

Written by Lee Amaradio, Jr.

The tactics used by the insurance companies to outsmart us never cease to amaze me. They have us processing their claims for free. They've figured out how to control our labor rates and dictate the way we repair vehicles. Now we are being asked to pay rental bills.

I'm not anti-insurance company but I am anti-bully. When I was a kid there was this guy who just kept picking on me. Because he intimidated me, I always laughed it off and pretended that I thought he was joking - although I knew he was not. For a couple of years he pestered me and I continued to take it, even though I wouldn't take it from anyone else.

Deep down inside I knew there would be a day of reckoning. Something was building inside of me that the kid knew nothing about. He couldn't see the effect his bullying was having on me, but I knew his day was coming.

Each time he pricked my pride, I became a little less intimidated and a lot angrier, until finally I was ready to stand up to him. One day he came up to me and started picking on me as usual, Though I acted like it was all a big joke, this time was different. I was ready, I'd had enough. I waited for him to let his guard down and, while he was looking toward his friend and laughing, I sucker punched him so hard it knocked him to the ground; I jumped on top of him and never stopped punching. I beat him up that day and he never bothered me again.

When my anger overtook fear, he was powerless over me. I just didn't care. I won a fight with a bully who thought because he was bigger, he had the right to push me around.

Grown-up bullies

As adults, it feels like shop owners are being bullied by the insurance companies. As with the schoolyard bully, we take it because we are afraid of losing their work. Like addicts, we will pay anything for more cars. Just like the bully I dealt with as a kid, the insurance companies will never stop pushing us around until we stand up to them.

Cycle time has become a major issue. In my opinion, the formula used by insurers is only intended to make us pay for another portion of their costs - rental charges.

What about the free stuff we already do? Where is this calculated into the cycle time? What about the extra two hours it takes for detailing? In our shop, we spend more than two hours detailing every hard hit vehicle. Shouldn't we get a cycle time credit for time spent even though we are not charging for it? What if we credit ourselves one hour for photographing and documenting a vehicle or an hour every time we have to take two employees to transport a vehicle to a local dealer or sublet vendor? What about test drives? Part searches? All of these things take time and are a legitimate part of cycle time that for which we deserve credit.

Let's take a close look at the items that show up as dollar amounts in the sublet column. These line items should be converted into labor hour credits and added to our cycle time formula. Divide these dollar amounts by the labor rate to create a realistic cycle time. Items such as wheel alignment, AC charge, and windshield replacements should be included.

Activities that lengthen the repair process, including all of the free work we concede to, need to be a consideration in calculating cycle time. The insurance companies don't figure concessions and free items as part of the repair process and have eliminated them from their formulas. We need to get them back.

If we recoup all of the hours we give at no charge and recalculate the cycle time to include everything we do, cycle time would look quite different. As it stands now, procedures not included in the body of the estimates are omitted from the cycle time formulas.

Now if we list all of the things we do on each estimate and convert the sublet items to labor hours we will see a substantial increase in allowable cycle time. We could easily gain as much as eight hours on many repairs.

Not only are shop owners doing too much for free, we even allow the insurers to charge us for not doing it fast enough. We allow ourselves to be bullied into paying rental bills. The insurance companies are demanding we comply with their unrealistic formulas, and if we fail (which we will), we must pay a portion of the rental bill.

The national average for cycle time is 2.3 hours per day, according to the collision industry's survey conducted by Beryl Carlew and Associates. The four-hour per day formula established by the insurance companies is wishful thinking. As shops, we should never be liable for any rental bill unless we decide we are negligent, and choose to pay it because it's our decision, not because we are being bullied into it. Remember they collect the premiums for rentals, not the collision repairers.

Try adding a line at the bottom of your estimate showing all of the additional labor items you do for free, and explain that even though you're not charging for these items, they must be given cycle time credit. Create the real cycle time formula by adding together sublet items which have established labor hours and the actual labor charge.

While this formula seems logical and fair, the insurance companies will not accept this interpretation of cycle time - explaining that it doesn't work that way without providing specifics. While cycle time is an important issue, the one-sided unrealistic formulas along with their bulling tactics need to stop. Cycle time issues are just one example of the bullying type of tactics used against the collision repair industry.

Just as the bully who kept pushing me until it finally backfired on him, the insurance companies need to realize that no one likes a bully, and sooner or later these tactics will backfire on them.

 

In business for 26 years, Lee Amaradio, Jr. is the president and owner of "Faith" Quality Auto Body Inc. in Murrieta, California. With 65 employees, he attributes his success to surrounding himself with good help, claiming to have some of the best office staff and techs in our industry. Amaradio has been in this industry long enough to see the handwriting on the wall. He feels that now is the time for us to unite as an industry before it's to late. He can be reached by e-mail at lee@faithqualityautobody.com.

 

Read 2752 times