KPI: Cycle Time

By: Chris Sheehy - Auto Body Consulting Group
Published: Damage Report magazine & ABRN “Top Favorite” weblog

Cycle Time, the golden-standard by which collision repairers are measured from both the customers as well as insurer’s point of view. Currently the standard CT is 10-days; in other words, it takes ten-days from keys-in-hand to seeing tail-lamps to repair a vehicle (bumper scraps to train-wrecks, all repair times get averaged). Getting this value lower will increase the ability for greater production throughput producing greater earnings.

This is undeniably one of the most vital key-performance-indicators (KPIs) to measure.

To define Cycle Time (CT) I must first state that Cycle Time is often perceived in two measures, production biased and customer biased.

DEFINITION:
Production Biased Cycle Time: The average number of calendar days elapsed from the date the vehicle was received at your business, to the date the repairs were completed.
Formula: Date Received / Repairs Completed

Customer Biased Cycle Time: The average number of calendar days elapsed from the date the vehicle was received at your business, to the date the customer took delivery. This is also commonly referred to as keys-to-keys.
Formula: Date Received / Date Delivered

Production CT is the traditional (read: “old school”) method of calculating the average calendar days for auto repairs. Since a shop cannot control when a customer will take delivery of their vehicle, this method calculates the part of the repair cycle a repair shop has most control over. Or so it seems – read on. This is a key measure for KPI management.

Customer CT is a more contemporary measure, and one that, when managed well, is more focused on the vehicle owner receiving a positive customer experience. Managing this measure has a direct impact on CSI. From an insurance perspective, this measure also has a direct impact on loss-of-use (LOU) severity (insurance lingo for rental expense) as well as having a proportional, although indirect impact on bodily injury severity. In a nutshell – this is the Cycle Time measure both the customer and insurer “feel” and is most important to control.

So which measurement should you use? I say measure both!

Analyzing the variance in Cycle Time between Production and Customer biased formulas could target process waste in your business that you can eliminate and be working more “lean.” More specifically (in LEAN terms), it could identify SMED waste – the time wasted in between jobs; like ending one job and getting onto another – or processes, like the transition from a quarter panel repair to door-skin replacement. When analyzing the differences you should ask yourself, “Could we have done anything differently to get the customer back into their vehicle sooner?” Often the answer is yes.

Here are some ideas you could use to cut Cycle Time: blueprinting repairs, change from the in-Monday/out-Friday schedule madness, proper technician allocation, transparent SOPs, deliver the car to the customer’s home or work (drive or tow), pick up the customer at home or work, open early or stay open late on advertised day(s) of the week, or change how you schedule the intake of vehicles.

These KPIs are easiest to measure when working with a management system. Ed Rachwal from Designer Systems confirmed Cycle Time could be easily measured on Mitchell ABS and ABSe. For businesses operating without a management system, these measures have been difficult to calculate. Autobody Consulting Group has copyrighted tools enabling their clients to measure and manage these most important KPIs.

Managing Cycle Time effectively is a great way to increase CSI, and being proactive in marketing your Cycle Time ratio to prospective or existing business partners just might bring more cars to your door, too!

You are not alone in setting repair Cycle Time expectations. Here is an interesting story about CT from a different perspective. Not too long ago while in a meeting with a major Massachusetts insurer, Cycle Time was the very topic of concern with several of my clients. At some point it became apparent to me that the insurer never looked inward at their systems to see if they had any control of cycle time. “And why would they,” you ask? (Funny – they asked the same thing).

Knowing what I know of the process, I had a hunch the insurance company had some (albeit, to a small degree) influence on setting the initial CT expectation with the vehicle owner and rental company. Here is what I noted - when an insurance adjuster receives a damage analysis report from a staff appraiser or repairer (network or otherwise), they do the same math to calculate rental days as most body shops do to rough-calculate the anticipated repair days [total hours ÷ some number = expected rental days].

Armed with this information the adjuster simply informs the vehicle owner of the number of days the rental vehicle is covered for, often adding a day for good measure. In doing so the seed is planted with the vehicle owner of the perceived repair cycle time!

After hearing this scenario, the insurer admitted they never looked at the process from this perspective and assured us they will evaluate it in the near future. What I haven’t told you yet was that the time of these extraordinary cycle time lapses coincided with some of the worst weather this area had experienced. In this case the cycle-time “perception,” being set by the claim adjuster didn’t account for the extraordinary increase in claim volume my clients were dealing with – indeed, an honest oversight.

Let’s be realistic. Insurance companies are huge and nothing happens fast, so nobody’s holding their breath for this change to occur. However, having a broader understanding of the process will make all parties work a little smarter in the future.