(Editor’s note: Repair-Tech Publishing, Inc. is INSIGHT’s licensee in Japan, providing a translated edition of INSIGHT each month to the Japanese collision repair industry.)
The Japanese collision repair industry has experienced many changes in the past 30 years. The number of registered vehicles in Japan now exceeds 70 million, second only to the United States. Collision shops repair over 16 million vehicles annually, which generates more than US$13 billion in repair volume.
According to our estimate, there are approximately 45,000 collision repair shops in Japan. Among these, 11,000 are members of Japan Auto Body Repair Co-operative Association (JABRA). JABRA members are usually the larger, better equipped, well informed and managed shops. Collision repair shops are predominantly independent. OE dealer owned shops account for only 2% of all shop population. But they produce 8% of sales. Among independent shops, many also provide mechanical repair services.
In Japan, there are more than 84,000 repair shops approved by the Ministry of Transportation for mechanical work. About 23,000 of these shops are authorized to run the "Sha-ken" program, the detailed mandatory mechanical inspection required for vehicle registration. In 1995, as a part of a government "de-regulation" campaign, the program was simplified, cutting the number of inspection items by half. This has had a major impact on mechanical repair shops that had been dependent on the revenues associated with the "Sha-ken" program. Most of them are now experiencing sales reduction of about 20%. In order to make up for this loss, many shops are now planning or have started collision repair services.
In Japan, most collision repair technicians are full time employees on regular monthly payroll. The annual income for an average technician is US$37,250. This figure has increased by 15% since 1992. As a reference, the annual income made by a first year Japanese university graduate is currently about US$25,000.
As the land is of premium value in Japanese metropolitan areas, shop space is usually very small - so small that it drives productivity. As a result, collision repair shops are forced to pay closer attention to space efficient shop layouts in order to maximize productivity. Many shops are divided into multiple floors with elevators to move vehicles from one production area to another.
Almost all shops are equipped with some kind of rack or bench with appropriate measuring systems. It is estimated that about 25 to 30% of all shops are currently using at least one bench, rack or jig type frame machine. However, due to the limited shop floor space, many are still using floor mounted type systems such as the Blackhawk Korek. In recent years, some of the more popular machines include: Car-O-Liner, Dataliner, Cellette, Global Jig, and Wedge Clamp.
The concept of industrialization, as defined as a combination team labor and process production, is being used effectively at some larger shops in Osaka and Tokyo. (Editor’s Note: See INSIGHT article, January 1997.)
At these larger shops, (e.g.: 40+ technicians) a team labor approach coupled with careful scheduling allows quick completion of small to mid-size repair jobs. Thruput in these shops is quite high, with some of the larger operations completing 30+ units per day, with an average number of technicians approximately equal to the day’s output in units.
The industry is relatively slow to adapt to computer technology. There are approximately 5,600 shops writing estimates with some kind of non-P-Page logic computer estimating system. There are currently three major collision repair estimating systems in Japan, each providing collision repair databases on CD-ROMs.
Since there are in Japan very limited insurers’ referral programs or DRP programs available, the demand for electronic data interchange (EDI) is minimal. However, once DRP claims handling schemes are introduced, it is anticipated that all information providers will be rolling out a communication software module to integrate with their estimating products.
The average collision repair shop hourly labor rate is about US$52.50. JABRA’s local chapters discuss and set a guideline labor rate every year. However, as in the U.S., insurance companies also have a great influence in setting the rate for a particular locality.
When writing an estimate, almost all collision repair shops and insurance appraisers use Labor Time Index published by Japan Audatex Co., Ltd.
Panel beating, frame straightening, and other mechanical repair works calling for "judgment time" are calculated by repairers and are subject to negotiation with the insurance adjuster. Usually, the times submitted by repairers are fairly objective and are incorporated into the estimate without negotiating.
Overall productivity; e.g.: ratio of "flagged" hours to clock hours is estimated to average 150 percent in efficiently run shops.
In Japan, most drivers bring their damaged vehicles back to the dealership where the vehicle was originally purchased or mechanical repair shops where the Sha-ken inspection was performed. Almost 75% of all repair orders are referred from OE dealer and mechanical repair shops.
Independent shops’ dependence on OE dealer and mechanical repair shops is resulting in another serious consequence. In addition to not being able to make any profit on parts sales on OE dealer referred repair orders, independent shops are expected to pay back 30 to 35 % of labor sales as a referral commission. As the competition to secure repair orders from OE dealers and independent mechanical repair shops become more intense, it is not uncommon to find some independent repairers agreeing on commissions as high as 45% on labor sales.
In next month’s installment, I will discuss the latest on the Japanese insurance industry’s rapid transformation and possibly drastic effects brought to collision repair industry through extended DRP operations.(Junnosuke Inoue can be reached via e-mail at: email@example.com.)
Reprinted from the September 1997 Issue of Collision Repair Industry INSIGHT.
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