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Planning for Parts Shortages

Autosphere » Collision » Planning for Parts Shortages
J.R. Martino. PHOTO J.R. Martino

Currently, one of the biggest issues facing many collision centres is the problem of ongoing parts shortages.

And if the situation isn’t handled properly, it can cause a real issue with your business, especially when it comes to cash flow. 

In essence, what we’re facing right now is further amplifying the challenges that many shops had to contend with during the COVID-19 pandemic. A dramatic decline in the number of repairs, followed by a gradual increase to normal levels, required many to rethink their business model and operational practices. 

 

“It’s absolutely critical right now that you can effectively manage supply chain disruptions. It’s also important to understand that these are affecting everybody, including the OEMs.”

— J. R. Martino

Completing repairs

Today, while we’ve seen repair volumes back to pre-pandemic levels in many cases, the problem is getting them completed due to the lack of parts. Even if a vehicle is missing a door handle or an exterior mirror, customers will refuse to collect the vehicle. This causes an issue for the shop because they can’t get paid until that file is closed and the repair is signed off as complete. As a result, the shop ends up burning through cash to stay operational, because so much money has already been tied up in that repair including labour, materials, and parts. That’s why it’s absolutely critical right now that you can effectively manage supply chain disruptions. It’s also important to understand that these are affecting everybody, including the OEMs. 

Due to a shortage of items like semiconductor chips and wiring harnesses, a number of OEMs are still struggling to manufacture vehicles, or if they are able to do so, require customers to take delivery without certain features such as heated seats and steering wheels. And because the OEMs are struggling to build vehicles, dealers are struggling to obtain them and retail them to their customers. The point I’m making is that this is an ongoing issue that is likely to persist for the foreseeable future, which means as collision centre owners and managers we need to factor this into our strategic and operational planning.

One way of doing so is by performing a complete pre-dismantle on every drivable vehicle that comes in, right down to the last bracket. This won’t solve every problem, because you’re still putting costs in on the parts you need. What it will do, however, is reduce the amount of money the shop is bleeding, since you’re not paying out in labour or materials until that vehicle is allocated for repair. In reality, doing this requires some very careful considerations, because firstly, your technicians still need to make hours, and secondly, more than 90 percent of vehicles that are currently being brought into shops for collision repairs are suffering from replacement parts shortages. This is why it’s so important to inform your staff, technicians, and customers of the situation and that it is something the whole industry is facing, not just your particular shop. For the most part, we’ve seen that when you explain to people what is going they are understanding about it; but you need to be consistent in your communication.

Communication with stakeholders

Besides our staff and customers, we also want to make sure we are regularly communicating with our other key stakeholders including the insurers and the OEMs. Over the last decade, with OEMs taking an ever more active role in the repair process, by adding specific procedures and parts requirements, there are more restrictions when it comes to the actual repair. The problem many of us are facing right now is that we can’t get these parts and in order to get the vehicle repaired we have to use alternative parts, such as aftermarket or used/salvage items. It then becomes a question of what the priority is for a particular vehicle and customer. Does it need to be repaired as soon as possible, or can they wait until we receive all the parts before beginning the repair? Granted, as businesses, we need to make a profit, but we also need to weigh in short-term revenue projections with longer-term goals. This is why it is so important that we regularly communicate and collaborate with all our key stakeholders so that collectively, we can determine the best possible outcome for everyone.


J.R. Martino is Vice President and Managing Partner of Budds’ Collision Services, one of the most progressive facilities of its kind in North America. He can be reached at [email protected].

 

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