A parts solution or one big problem?

NACE 2007 is a big event in Las Vegas every fall, but this year another huge event has cropped up in early November. Nov. 5th begins the test phase of State Farm’s new parts procurement procedures in Indianapolis and San Diego. I ask you to remember this date, as it may do more to change our industry than any other recent event.

There have been many unanswered questions and concerns of what exactly this “test” will entail. One initial puzzling component is why a new agreement is being required. If it is simply a “test” and not a permanent rollout, why is a new agreement even necessary? I am a firm believer in technology and how it can positively impact our industry to address a number of inefficiencies that cause vehicle delays and poor communication between all parties. We need to work on these problems and I can’t blame State Farm for focusing their attention on parts, since parts issues often are blamed for delivery delays. Repairers should not be surprised that the “parts” excuse for delays has turned into a problem State Farm wants to “fix.” If it is costing money, someone will fix it, or at least think they can.

The new “test” program is expected to run through February 2008 in Indianapolis. Included in the program is a “parts rebate” of 2.8 percent to 3.4 percent, depending on the OEM. It’s evident that State Farm has spent some time with select manufacturers, such as General Motors, Ford, Chrysler, Nissan, Honda and Toyota, to get their agreements in place. My question is, why was there no thought given to having rebates handled directly, rather than imposing additional administrative processes on the shops? And if a vendor will not agree to the additional discount, how is this really a no-cost program to the shops? Shops will still be required to give the discount, right? Will this affect future vendor discounts?

Is the goal really to reduce inefficiencies or just to provide for a parts discount? It looks like an average claim will net $35 to $50 in savings. Will this offset the time delays that will occur since the new “bidding process” does not do any of these transactions in “real time.” It reportedly takes up to 3 days to get a response, only to then need to order from another supplier? What additional costs over and above the increased training and administrative tasks will be a burden to the repairers when ordering through their current management system?

Did anyone think to ask the users about the issues that are currently present? What about the challenges by local dealers attempting to interface with their parts inventory systems? And what about the management system developers that, for some time now, have attempted to interface with these processes, with little success? What promises have been given to make the necessary changes so that such actions improve the process and don’t just hinder it further?

Years ago the nation’s top shops sought solutions to assist in parts ordering and processing. Many have since dropped the current programs available as well. The new “bidding” process is going to include inherent time delays. How is this going to improve the efficiency of the parts process?

Endorsing any system in this manner and requiring it nationwide will certainly make an instant mega-profitable entity of anyone. But what will be the cost to the repair industry? The repair industry has been trying for years to improve the supply chain. The issues with damaged parts, wrong (or forgotten) parts and mislabelled parts will be affected very little by a software solution. These problems will only improve with better training and properly implemented processes by both the suppliers and repairers.

There are certainly many flaws in the current system. State Farm’s new “test” program may ultimately cost repairers and insurers time and money. As a repair industry it is time to provide honest and constructive feedback of the issues that are occurring. I will certainly volunteer my time to provide feedback and support to review the programs and needed processes to integrate this technology into the industry. How about you?