Automation Key to Future Great Success
In his company’s website, Paul Fazio, CEO of Sonny’s The CarWash Factory, opined that the car wash businesses with the best chance for “great success” in the future would be those that have a brand presence (as in regional brand) and capitalize on changes in the market.
While this is sound advice, we might question whether “regional” will be the spatial extent for great success in the future.
According to the International Carwash Association, in 1998, automatic systems accounted for 73 percent of the U.S. car wash fleet and 79 percent of estimated industry wash revenues. Now, automatic systems reportedly account for 63 percent of the fleet but 93 percent of industry wash revenues with exterior conveyors posting the most gains.
Not only have automatic washes gobbled up more per capita spending on car wash, car wash systems have become more sophisticated. Consider how the operation of the exterior-only conveyor has changed over the last decade.
LABOR VS. CAPITAL
An exterior-only tunnel washing 600 cars a day would typically have two greeters at the entrance, two persons to prep and assist loading vehicles, and two people towel drying cars at the exit end. By comparison, an express-exterior wash is usually operated with two seven-hour shifts, two people per shift.
The reduction in labor comes from substituting capital for labor. In this case, the reduction comes from automation and self-service technologies. If we compare the difference between the two business models (exterior-only and express) and do the math, the marginal capital-labor substitution rate is roughly $3.00 to $1.00. In other words, a permanent $1.00 reduction in labor cost would require a $3.00 capital investment in car wash equipment.
Clearly, the construction trend in washes with low labor cost has dominated the industry for some time. As for regional wash chains, there are many that have achieved great success over the years and decades. However, the largest U.S. car wash chain numbers just more than 100 units.
Let’s assume an automotive retail business with national presence requires a network of stores growing at 100 units per annum and reaching 500 stores five years out. A car wash chain with this presence would need to reach critical mass. In social dynamics, finance, and physics, critical mass refers to notion of reaching a goal — becoming self-sustaining and creating further growth. Reaching this crucial stage in a company’s development requires integrated investment.
Accomplishing this will be a difficult task even for a very successful car wash chain. Consider industry legacy Mike’s Express Car Wash, a 64-year-old privately held company with headquarters in Indianapolis, IN. According to recent press releases, Mike’s has roughly 40 locations and 450 employees or an average labor burden of 10 people per location.
If Mike’s would choose the lofty goal of becoming the country’s first McWash, each new location in the network would add, on average, 22,000 hours of labor based on full-time equivalent (37.5 hours per employee). Even if Mike’s adopted the express format, dropping this to 10,000 hours per location, a growth rate of 100 stores means the organization and culture would need to assimilate, on average, one million additional man-hours of labor per annum. This would be a huge challenge for management and provides some support for Mr. Fazio’s opinion about whom and what will succeed in the future.
However, with the express format, it is not absolutely necessary today to be like a Mike’s in order to have a chance for success in the car wash industry.
We are seeing more new companies with express washes numbering between three and five units popping up across the country. There are also more firms acquiring and renovating distressed self-service properties as express wash. Moreover, some of these companies have managed to build a small network of stores based on $3.00 price, high quality, and free vacuuming and without offering unlimited washing, loyalty programs, public relations, online coupons, or amenities like free wiping towels or window cleaner.
A small network of express car wash sites is not necessarily a signal of great success, but each new small chain created provides more overall properties across the country for consolidation. So, we could argue that the best chance for great success in the future will come to those firms that continue to capitalize on automation and self-service technologies.
According to the experts, the general outlook for the car wash industry today is a continuation of the express-exterior format, expansion of chains, formation of small chains, and modest growth in car washes at convenience stores and petroleum sites.
These trends suggest future development will depend on integrated investment models of network expansion. Private investors and gas sites will require different investment models. The reasons are differences in store size, layout, and implemented services. For example, the installed base of equipment at gas sites is predominately in-bay automatic (IBA) systems. This trend should continue.
Historically, IBAs at gas sites are operated without direct labor, (attendant) and customer service is a shared expense with c-store personnel. Other shared expenses are administration (i.e., fuel category manager) and management (i.e., regional manager). About 50 percent of c-store chains do their own maintenance.
Conversely, as mentioned earlier, the above are direct expenses for private investor sites that increase directly if not proportionally with an increase in number of stores. So, if a firm chooses to expand (i.e., small chain, acquisition target), more stores require more capital and more people. If capital or labor is inadequate, it may constrain or limit the firm from moving forward or achieving its goal.
It is suggested a constraint can be broken by alleviating or exploiting it until it is no longer a constraint. Similarly, experts suggest car wash operators can alleviate employee turnover, absenteeism, and disorganization by
getting better people. However, better people can involve considerable expense for consulting fees; training; materials; travel; employee wages; and the expense, effort, and time to maintain and reinforce guidelines and standard procedures.
Getting better people is sound advice, but the trend in the industry has been capital not labor. Arguably, a continuation of this would pull car washes closer toward the vending-machine category.
For example, the principal tasks for express car wash attendants are opening/closing duties, assist vehicle loading, housekeeping, and customer service. Today, the technology to automate some of these functions is around the corner.
Consider motorists who must negotiate a correlator yoke to board a chain conveyor. This clumsy activity could be eliminated by using a flat belt conveyor to transport vehicles from pay station to a conventional chain conveyor or another flat belt. Completely eliminating operational staff would take a bit more.
For example, RFID is designed to function without direct labor. Similarly, the point-of-sale system in an unattended operation would need to function contemporaneously as machine and person.
Figure 1 – Mobile payment technology
Here, “mashable” technology could help make this possible. For example, smartphones can transfer data by touching cases, and phone apps now allow for mobile credit payment.
Figure 2– POS with Skype™
Technology like Skype holds promise for virtual customer service. Skype is a proprietary voice over Internet service and software application. The service allows users to communicate with peers by voice using a microphone, video by using a webcam, and instant messaging over the Internet.
Here, a PC screen would be embedded in the face of a pay station or mounted on a separate pedestal with PA system in another area. This way a “real time” customer service rep would be available with a push of a button when needed. With an array of surveillance cameras, the rep would be capable of monitoring and caring for customer service needs of several sites remotely.
Another technology that holds promise for exterior washes is robotics.
A robot is a mechanical or virtual artificial agent usually an electro-mechanical machine that is guided by a computer program or electronic circuitry. Today, robotic arms are used extensively in auto manufacturing because they provide six and seven degrees of freedom.
For example, the position of a single car (engine) moving along a track has one degree of freedom because the position of the car is defined by the distance along the track. Whereas, the position of a rigid body in space can be defined by three components of changing position and three components of changing rotation which means it has six degrees of freedom and the traveling motion makes seven degrees.
Figure 3 – Industrial paint robot
The performance of industrial robotics is impressive. In Tianjin, China, Great Wall Motors uses 27 robots to complete 4,000 individual welds in just 86 seconds in assembling an SUV. Also on the forefront of more efficiency through technology is BMW. On BMW’s new “green” assembly line, robotic arms paint vehicles in just 78 seconds using only 3/4 of a gallon of paint per vehicle.
By comparison, when I was an autobody technician in the early 1970s, it normally took about a half hour to 45 minutes to manually apply one and half gallons of paint. Here, the difference in performance is due to the precision and speed of robotics.
For example, the IRB 5500 wall-mount flex painter has a rated acceleration of 24 m/s; weighs only 540 kg (1,200 lbs); has a horizontal work area of six meters; and moves at between 1.5 and 2.0 m/sec or 90 to 120 meters per minute. By comparison, the typical IBA gantry moves at 5 meters per minute — about 12 cars an hour.
Today, there is only one U.S. company that manufacturers a true robotic car wash system. As shown in Figure 4, instead of a robotic arm this system relies on a conveyor and an overhead device that provides six degrees of freedom and washes a vehicle within a 4-foot length. The IBA version of the machine would move, providing seven degrees of freedom, washing 30 vehicles an hour, while using 25 percent less water and energy as compared to a typical IBA.
As shown in Figure 5, a robotic car wash might look like the layout of an automated painting process. Here, a moving belt would transport vehicles in stop-and-go fashion, from pay station to wash bay to exit section. Robotic arms are fitted with multiple hoses and nozzles to apply detergent, high-pressure, and rinse/wax. Contour dryer is freestanding.
A robotic-arm car wash may not be as farfetched as it sounds.
Robotics allows for sophisticated logic controls to provide safety features for arm articulation such as danger monitoring and obstacle avoidance systems. Such systems would allow for greater precision such as safely maintaining the ideal distance between nozzle tip and surface over the entire vehicle thereby maximizing cleaning potential and minimizing material use.
A robotic arm with controller and teach pendant (controls a robot remotely) costs between $50,000 and $80,000. Add $50,000 for application peripherals. Refurbished arms are usually 50 percent less than replacement cost new.
Based on these cost factors, a robotic car wash occupying the same building footprint as a single IBA but with capacities equivalent to multiple IBAs would be an attractive proposition. Similarly, a multiple-robotic unit would be a viable alternative to a conveyor.
Of course, virtual customer service and a robotic-arm car wash would require research and development, most likely by a robotic integration firm, plus analysis of market opportunity and financial and technical feasibility as well as acceptance by motorists and end-users.
Nevertheless, the technologies described above are available and demand for them is rising. For example, some of the larger commercial autobody shops are installing refurbished paint robots to reduce labor and improve quality and efficiency. Recent surveys show that over 20 percent of consumers want to pay with their smartphones — and the percentage is rising rapidly. Most car wash operators should be interested in reducing labor cost.
So improved, each additional unit added to our network of “people-less” express washes would require only 1.25 FTEs or 2,500 labor hours per location. Based on IBISWorld data, average car wash employee wage is $14,500 or $17,000 full-burdened.
Thus, our proposed campaign of 100 stores per annum means the organization would assimilate, on average, 250,000 additional man-hours of labor or $2.2 million. This would be a difference of $6.5 million in labor cost (8.7 – 2.2). Using the capital-labor substitution rate, this reduction would require an annual capital investment of $19.5 million (3 x 6.5).
If this firm chooses to expand in this manner, acquiring more stores would require more capital and far fewer people. Therefore, even if labor is inadequate, the constraint would be less likely to limit the firm from moving forward or achieving its goal.
Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at firstname.lastname@example.org.