Reducing Costs and Streamlining Processes with Inventory Management
Managing inventory is a lot like piecing together a puzzle.
“Inventory management” is a broad term and can encompass everything from a month-end physical inventory to managing daily orders and product usage. And while many collision repair centers employ similar theories around inventory management, no two shops are the same.
Until recently, many collision repair centers relied on physical inventories provided by their supplier at the end of the month. But in addition to being a tedious task, reviewing inventory reports often leaves shops with a few questions: How much is enough? When is there too much? Too little? It’s a conversation that we have with most of our customers.
However, we know that implementing and following an inventory management system will reduce shop costs and is an opportunity to improve processes.
How do we help get our clients to that point?
We understand that inventory management is not one size fits all. A program must be tailored to meet the shop’s needs, and to help the shop reach its goals. The FinishMaster team in the Los Angeles North/Central Valley area uses a simple yet strategic approach to inventory management by implementing a step-by-step process.
FinishMaster Area Manager Kassie Bonnell says the first step to managing inventory is getting the owner or general manager on board with changing behavior, habits, and processes within their collision center.
“Once you get support, the implementation of process is easier for the employees to adapt to,” she said. “The next step is to have our team review historical shop usage reports, determine an appropriate minimum inventory level, and gain approval from the manager. Once the minimum level is set, it can only be altered with the approval of the manager.”
One of FinishMaster’s large independent customers in Van Nuys, California went through this very process at their shop.
“We reviewed the inventory list with all of our team members once the minimums were set,” the general manager explained. “Talking through our products and process to check out inventory was an important step in changing behavior. For our shop, this was a new way to run our everyday activities.”
The process changes for the body shop’s team ranged from fundamental to advance. To begin, the team was challenged to begin every morning by checking out inventory for the day. By fully stocking their workstation, the team avoided the need to constantly return to the shelves to pull product–upping efficient around cycle times.
“Being a very high volume production shop, every minute for our technicians counts,” explained the general manager. “Having the product available to them at their workstations at all times is key to ensuring we are not adding additional time to our repairs. It also holds them very much accountable for what products they are utilizing.”
“When the minimums are set and the inventory adjusted, the shop is prepared to complete 99% of the jobs repaired during the week,” explained Bonnell. “We trained the technicians to check out what they need utilizing individual pieces or sheets. Technicians do not need an entire box—it encourages waste, and in some shops theft.”
Managing individual units rather than boxes forces technicians to be more conscious of their process and the individual products’ useful life, resulting in reduced cost and waste.
The general manager further explained, “We increased productivity when we switched to this new inventory management system. It allowed us to address and resolve product waste and usage problems.”
Comparing the material used to labor hours billed allows us to set performance goals that identify challenges earlier, and that lead to action plans to replace products or improve processes.
Finally, the FinishMaster team develops performance benchmarks for each technician, which are reviewed each month. Training sessions are scheduled to support the set Standard Operating Procedures (SOPs), and to work with underperforming technicians.
“It is remarkable to witness a decrease in usage and an increase in gross profit by applying a little management to a shop’s inventory,” said Bonnell.
In the three months following implementation of this inventory management process, this large independent collision center experienced a reduction in inventory and a reduction in material usage and cost, all of which increased gross profit on refinish materials. Another benefit was the creation of SOPs for each repair process promoting a positive influence on cycle time.
“FinishMaster helped us identify the opportunities available in changing our inventory management system," explained the general manager. "They were there through every step of the implementation process to ensure our managers and our technicians understood the changes and the impact they had on our shop.”