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A FEATURE ARTICLE FROM

AUGUST 2001

Value of Value:
To Get the Best Takes Some Figuring

By John Lamade

    Have you ever noticed that certain words and concepts become fashionable? Several years ago, the word "paradigm" was popular - especially when coupled with "shift." Who could ever forget "paradigm shifts?" Well, the paradigms shifted and found their way into the memory attic with the sharks, and other catch phrases that make popular business writers famous. "Value" is popular now.
Value is a curious word because it has so many meanings. When I entered the word on a web browser, I received over 16 million hits. Apparently, people have much to say about value. Perhaps this is why value has staying power. Value has so many meanings and applications that it has become an integral concept - it explains both rational and emotional concepts. As a result, whenever you want to indicate "how much" or "what," you use the term "value." Eventually, popular writers found their way to "value" and the word became visible. Now you see the word in business plans, advertisements, and annual reports. Value is everywhere! Like truth, justice, and presumably "the American Way," value is always present.
    I am guilty of using this term. Over the last three months, I have harnessed the term to communicate the importance of knowing the value of products to you and the value of your services to your customers. Two months ago, I told you that the most important value is the value to you and that you should base your decisions on how much the product meets your needs. However, is this really a useful approach?
    The best way to answer this question is to say that I may have only given you part of the answer. There should be an objective way to express value. By objective, I mean a way of attaching a number or rating to a product and then comparing two sets of numbers. For example, consider two car wash products: One product is sold in five-gallon pails for $104 per pail and another product is available in drums for $692 per drum. When diluted the two products perform equally well. Which one is a better value? Here is where having a numerical comparison makes sense (see Table 1).
    Product B is a better value, because you have data that confirms a difference in RTU (Ready to Use) cost. Choosing B could produce significant savings during the course of a year. For example, if the shop uses two gallons of cleaning solution per vehicle and washes 10 vehicles per day (50/week or 2,600/year), the shop would save $0.132/vehicle or $343.20 per year.

COMPLICATIONS

    The above example is interesting, and it does make a point. However, such comparisons are usually not as easy as this. For example, if it takes two minutes more to rinse a vehicle washed with Product B than with A, would B still be a better value? In Table 2, below, we look at the savings of B over A at different labor rates, assuming 2,600 vehicles per year:
    Well, the "obvious" savings offered by Product B are not so clear. In fact, if the shop can use the lost productivity of 86.67 man-hours, then Product A has a much higher value than Product B. This is why you should be careful about looking at numbers on a RTU basis. You can miss important aspects of the comparison. Remember that data can be misleading.
    In the above example, I showed that Product A offered superior value, but that was based on an assumption that the time savings of 20 minutes per day could be used on other productive tasks. Now, what would happen at various levels of labor recovery? Table 3, below, illustrates the savings at $10/hour and various percentages of labor use (20 percent of the 86.67 man-hours used; 40 percent of the 86.67 man-hours used, etc.).
    Once again, Product B looks like a better value unless the shop can find a way to use the time saved using Product A. Product A becomes a better value if at least 40 percent of time savings can be used for other productive tasks.
    I will not use another table, but I think that you can see the effects of these variables on the value ratings. Moreover, there are many other variables to consider. This makes comparisons much more complicated. For example, diluting a product 1:256 is fairly easy; that's one-ounce in two gallons of water. If you make an error of 10 percent (you probably wouldn't notice any difference in performance), your cost per gallon would increase to $0.054 per RTU gallon. This would produce a material savings of $0.122 per car wash or a material savings of $317 rather than $343. Well, this is not much of a difference at 10 percent, but what would happen if the concentrate was diluted at 1:128?

TIME HAS VALUE

    I have spent too much time already on showing ways you can produce a number that can guide you in selecting a product that offers the best "value." The most important factor appears to be the effect of labor savings and using the gained time profitably. The choice of product should really be based on how well you can capture and use time savings rather than material cost. Real productivity improvements have a major impact on value.
    If you can use the time, consider the time savings as a means of computing value.
    If we realize that time savings is important, is there anything else? We assumed equal performance in the first example, but what if products are not equal? What would happen if one product had a high pH and the other was nearly neutral? How would you compare the products then?
    To answer this question, you must realize that a number is a number and you must understand how the number was obtained before you can compare. This is why I suggested you compare products in their Ready-to-Use state. Issues like color, pH, and safety become less of an issue when the product is diluted.
    RTU comparisons make sense, but what happens if you are comparing a
solvent-base dressing to an emulsion dressing? Now we need to consider risk and associated costs.

ADJUSTMENTS

    In the car wash soap comparison, I stated that the primary difference between the two products was the amount of time needed to rinse the vehicle. Product B required two more minutes than Product A. To obtain a value like this, you must know your processes and be able to make accurate time studies of each step in the process. This means that you must get a feel for what is happening in your shop and then proceed from there. If you were doing a study of the value of emulsion vs. solvent-base dressings, you would need to know the difference in application rates (is one faster than the other?), and costs of use.
    "Cost of use" is an adjustment to the material cost. For example, if during the course of a year you have two problems with "sling" arising from moving a vehicle before solvent-base dressing has an opportunity to "dry," then the cost of repairs should be factored into the material cost. If you used 3 ounces of dressing per vehicle during a year in which you did 2,600 vehicles, you would have used about 60 gallons of dressings. If a pail of dressing costs $100, then you would have spent $1,200 for dressings. Now if you paid $900 for damages to paint from the sling during the year, your
cost for using the dressing would be $2100. When you calculate value, you would make an adjustment of cost per application from $0.46 to $0.81. This revised cost more accurately reflects the cost of using the dressing on a vehicle.

WRAPPING IT ALL UP

    Quantitative approaches to determining the value of a product do make sense. These techniques can provide a way to express the value of a product or technique. While product properties
can produce varying results, risk and productivity changes should influence the value determination process more than minor variables such as color, scent, and viscosity. Adjusting variables to reflect the real cost of using the product makes sense and is the best way to understand the costs of using a particular product. A primary assumption of this discussion is your knowledge and ability to understand the impact of using different products in your detailing process.
    This is fine, you might say, but I am not a math whiz and I do not want to perform time studies. What can I do? Well, if a product produces the results you want and there are two or more products available, I would first compare the costs per ready-to-use gallon and then determine if there is a difference in the amount of time required to use the product. If you can use the time difference, go with the time saver if RTU costs are similar. If there is no difference in time required and RTU costs are similar, go with the supplier you like better - i.e., let another variable influence your decision.

MICROFIBER TOWEL CORNER

    To get the most benefit from your microfiber towel investment, check and see how the edges of the towel are hemmed. Cheap towels start to unravel after a few washings. A good towel should be able to withstand 500 washings without fraying. Frayed towels create lint, which you want to avoid. To control your cost of using microfiber towels, consider investing in a quality towel with a heavy-duty hem around the edges.

    Washing Microfiber Towels:

    Microfiber towels are a great innovation. To ensure outstanding performance and longevity follow     these tips:

• Wash microfiber towels separately from other towels. The fine fibers can catch lint.
• Soak microfiber towels in hot, sudsy water for 30 minutes prior to washing.
• Wash towels in hot water and rinse twice to ensure all detergent is removed.
• Dry in moderate or "perma-press" heat settings

    Choose wisely from a distributor you trust.

John Lamade has extensive experience in the marketing of detailing products and is a contributing editor to Auto Laundry News. Contact John via e-mail at john.lamade@gte.net.

 

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