In the collision repair business, cycle time has become more important than ever. Cycle time is a key performance indicator that affects customer service, profitability, and length of rental. Understanding Little’s Law will give you the knowledge needed to make significant cycle time improvements.
Little’s Law was named after MIT Professor, John Little, and is a mathematical formula used to calculate cycle time. In the case of collision repairers, we usually measure cycle time from the point a customer drops off their vehicle until it is finished and picked up (keys to keys).
Check it out…
(You can also measure using Dollars or Labor Hours instead of Units)
Let’s take a look at the same shop again, only now they have been grabbing a lot more keys! What would the average cycle time be now? You do the math.
In order to reduce cycle time, you often first must reduce your WIP. The trick is to not lower the WIP to the point that technicians are standing around and your revenue begins to suffer. Conversely, if you have too much WIP and feel your cycle time may suffer, you may need to consider a temporary increase on production hours in order to return to Optimum WIP levels.
To choose an Optimum WIP Unit number for your shop – reverse the math:
- Find your average number of repairs produced daily (total vehicles delivered divided by days in the month)
- Choose your goal cycle time (keys to keys days)
- Multiply repairs produced daily X goal cycle time days = Optimum WIP Units
Example: ABC Body Shop produces 4 cars a day on average and wishes to reduce its cycle time to an average of seven days per RO. 4 X 7 = 28
ABC Body Shop must maintain a work in process (WIP) count of 28 cars to achieve it cycle time goal of 7 days. However, if ABC Body Shop does not have the systems and resources available to effectively process the reduced number of ROs quickly, they run the chance of damaging revenue. I recommend that you set your goals to reduce WIP incrementally as your system improvements allow.
You can see the important role that work-in-process plays in cycle time performance. The path to Optimum Performance, must involve Optimum WIP, and it all begins with good scheduling skills and habits. Understanding Little’s Law will get you started in the right direction.