(306) 229 5254 dir@s-a-a-r.com

Did You Know June 30th, 2021

The new SGI Master Services Agreement (MSA) takes effect on July 1st. Some of you are not happy that they forced your hand to meet the new Safe & Quality Auto Repair Procedures (SQARP) but I’m thinking that they did you a favor – if your goal is to continue in the auto body repair business. You should read their latest SQARP Notice here

On a recent online forum, a shop in the USA posted the picture below with this caption: 

“Has anyone else seen this. VW will not sell our dealer the part we need till we provide all of this info and photos??  What is going on?

A picture containing text

Description automatically generated

Quite frankly as more OEM’s “wake up” I think you are going to see more situations like this in the coming months. The reporting that we currently provide to SGI is getting to be standard procedure in the collision industry and I believe you will see more and more OEMs demand that vehicles are repaired to their standard. Just last week I shared the latest position from GM on Repairs and Inspections Required After A Collision 

Researching and understanding OEM Repair Procedures is clearly a necessary operation – should it be done for free? How much time does your shop spend estimating, looking up repair procedures, blue printing the job and transferring this information to SGI? What is that time worth? This is an issue that all body shops are grappling with and it is SAAR’s hope that in the coming months this issue will be addressed by all Insurance companies. With the reduction in claims due to the pandemic insurance companies could use their savings to properly address the extra costs that shops are incurring to provide Safe & Quality Repairs. 

LOOMING GLASS SHORTAGE?

I received an email from our friend David Ribeiro from the ARA in British Columbia about another COVID induced setback for the Automotive Glass industry

  1. Shortage of transport containers in China – China is paying a surcharge to ship empty containers so as to meet the demands and gets ships into ports. (This is also impacting local supply as the containers are not available for them to ship their product)
  2. Impact on delivery – pre-COVID container transport was approximate 9-10 weeks; it’s now forecast at 20-24 weeks and has the potential to go longer (that’s nearly 5-6 months to have product delivered)
  3. Surcharge on containers – this started slowly with containers receiving a $1500-$3000 per container surcharge, that has now reached $14,000 plus and is rumored to reach $20,000 per container
  4. Suez Canal – broken down ship caused 6 days delay (impacted more than 100 ships in each direction) which adds to the world burden to transport goods

I’ve spoken to the three main glass suppliers and there is concern around having sufficient product to meet consumer needs.

– one supplier will be implementing a policy to sell only on confirmed claims (i.e., not allowing anyone to stockpile) so as to stretch their product to those who need it.

 It’s not a problem with insufficient product (in the country of origin) but certainly a concern with being able to land the required product (taking upwards of 5-6 months to get product…and it’s not just China).

I see three main scenarios to consider;

  1. Customers may need to shop around with different glass companies to see who can supply a W/S to meet their specific needs.
  2. There will be added pressure to use OEM vs NAGS as consumers will be desperate to get their vehicle road worthy.
  3. This could be a great motivator for consumers (and industry) to opt for repairs vs replace
  4. This could be bad for customers driving around with W/S’s that make their visibility compromised.

 Not sure how this will play out…but it looks to be a very challenging year…obviously I’ve focused on glass but I assume this will be the same impact to collision repairs.  Also not known is how these surcharges will make their way to the end consumer and the impact this will have.

 Attached are a couple news reports that help demonstrate the world problem.

https://financialpost.com/commodities/agriculture/the-global-food-trade-has-been-upended-by-a-container-crisis

With the imminent reopening of Saskatchewan, SAAR is pleased to announce that we will be hosting our Fall Conference in Saskatoon at the Saskatoon Inn on September 9th, 10th & 11th.

I am still working out the details but a tentative Agenda would look like this:

Thursday September 9th – Brunch at the Saskatoon Inn followed by a Golf Tournament at the beautiful Legends Golf Club in Warman. Supper back at the hotel followed by a guest speaker / entertainer.

Friday September 10th – Breakfast at the hotel followed by an Industry Seminar. Fall Supper at the hotel followed by an Industry Trade Show with our SAAR Sponsors.

Saturday September 11th – Breakfast at the hotel followed by a number of presenters including SGI, Enterprise Rent a Car, 3M Corporation, Sask Polytechnic, Paul Martin Communications, Betag Innovations and more to be announced.

Mark your calendars and watch for more details over the next few months!

You can book your hotel rooms for $139 a night at the Saskatoon Inn by calling 306-668-9601 or go online to: 

https://reservations.travelclick.com/6876?groupID=3256303

An important part of being a successful business owner is knowing your numbers. I think back to my early days of managing a busy body shop, working hard 60 plus hours a week and not really making any money! In 1986 I attended a management seminar put on by the 3M Corporation called ARMS (Auto Repair Management Seminar).

This was the first time anyone ever informed me that there was a formula to being profitable in a collision repair shop. Essentially you have 4 main income areas in your shop: Parts, Labor, Materials and Sublet. There is a target that shops should shoot for in each of these categories;

Parts 25%

Labor 60%

Materials 25%

Sublet 20%

Depending on your sales mix the objective is to make roughly 40% gross profit after you have paid all the expenses for anyone or anything that touches the vehicle. The 40% gross profit is used to pay your overhead (all expenses that do not touch the vehicle) and you should endeavour to keep those expenses at or below 30% of your total sales so that you can make a profit of 10%.

I will be honest with you, based on our recent SAAR survey State of the Industry 69% of the shops that responded are making less than 10% net. The good news is that 31% are doing better than 10% and I am going to guess that these are shops with larger sales volumes and lots of administrative help. Volume solves a lot of challenges, you have better buying power, you can afford to buy equipment and computers that enhance your productivity and once your break-even profit is hit every dollar drops to your bottom-line net profit. 

On the other hand, as Mike Anderson says “Volume hides a lot of sins” meaning that with so much going on people sometimes get sloppy and wasteful. Take a look through a busy shop and see how much good sandpaper is laying on the floor! Sometimes smaller means you have better control of your resources and processes.

Regardless of the sales of your shop you can and should take the time to see where you measure up. Hopefully, you do monthly income statements but if not, you can take a year end statement and see how your numbers look. You can get the percentage of gross profit for each of your income areas by finding out your sales, subtract your cost of sales then divide your total sales into that number. For example: Let’s say you have $37,000 in parts sales, your cost of parts are $28,860 leaving a gross profit of $8140. You divide the big number into the little number to get your gross profit percentage: $8140 divided by 37,000 = 22% Confusing? I thought so too when I was first shown this but eventually you get the hang of it. If you know somebody that is good with excel you can get them to make a document for you that will do the math for you. 

Once you determine the profitability of your four main income areas you can start addressing them, and getting your shop pointed in the right direction.

The simplest and best way to get these numbers is to invest in a computerized body shop management system and it will do all of these calculations on the fly for you. Eric Danberg, formally from Saskatoon and now the retired Boyd Auto Body VP once told me that if he ever started a body shop the first piece of equipment, he would buy is a computerized shop management system. He has done pretty good, maybe we should take his advice?