Collision Industry Facts - A former insiders view.

Although standard estimating systems are critical for the industry to ensure like quality and as a commerce platform, they are crushing the industry with their simplistic labor and cost models that counteract free-market forces. By using these estimating systems along with regional rates, every shop creates essentially the same repair estimate when presented the same damage. Although this seems like a benefit it also means there is no competition, because no shop has to be better, faster or cheaper to gain competitive advantage.

Implicit not only in the design of the estimating systems but the complete acceptance of them by the industry is tacit consensus that repairs done at any one shop can never:

Be done more efficiently by one shop over another since they all share a common number of labor units for each operation

Be done cheaper by one shop over another since shops share the same flat door rate by region

Have operations performed by more than one technician at a time since operations can only be assigned to one role

Have operations charged at a rate less than the highest paid technician (even simple tasks) since they are paid a flat rate based on their role (BODY, REFINISH, MECHANICAL) regardless of the skill level required for the operation.

The automotive repair business (like any service business) needs the ability to:

Flexibly distribute operations and activities between resources and charge and pay rates commensurate with capabilities provided

Alter the sequence that activities are performed, in order to optimize workflow for maximum utilization and throughput

Competitively price their service in the marketplace according to resources expended, service level provided and value received

Circumvent the single-price paradigm of the door rate so they can compete on price and service and win business on their results.

Though designed to facilitate ease of claims processing for insurers, these estimating systems have bred mistrust between insurers and shops due to the fact that every estimate is essentially a “fixed bid” unless it is more (supplement) for a repair.

When repair costs seldom go down, insurers’ only option for cost containment is to disallow activities, and when shops perform activities without pay to ensure quality, they tend to offset it by charging for activities not performed.

One rate for all types of repairs based on the most expensive labor rate and skill requirement is the cause. Shops seek the most out of every insurer repair with little thought to offering insurer or consumers’ savings on the least expensive repairs causing the slow decline by the industry today.

To breathe life into the industry requires a competitive environment that allows the best performers to earn the lion’s share of the work and the worst performers to go the way of the old industry model.