Questions about State Farm's newest test

Jan. 1, 2020
As the industry's largest annual event, the International Autobody Congress & Exposition (NACE), was winding down this past November, another huge event began on Nov. 5. I ask you to keep this date in your memory as it may do more to cha
As the industry's largest annual event, the International Autobody Congress & Exposition (NACE), was winding down this past November, another huge event began on Nov. 5. I ask you to keep this date in your memory as it may do more to change our industry than any other recent event. This date marked the beginning of State Farm's new parts procurement "tests" in San Diego and Indianapolis.

At press time, there remain many unanswered questions and concerns of what exactly this "test" entails. Of course, a great deal of information leaked out before Industry Week in Las Vegas. Many of the mandatory informational sessions for current select service facilities were just reinforcements of what already has been expected. However there are several points that were unclear, but now have been "clearly defined" with a great deal of fuzziness and uncertainty.

One initial puzzling component of these tests is why a new agreement is being required. If it is simply a "test" and not a permanent rollout, why is a new agreement necessary? I am, and always will be, a firm believer in technology and how it can positively impact our industry to address a number of inefficiencies. These inefficiencies do cause vehicle delays and poor communication between all parties, and as an industry we need to work to improve them.

I also can't blame State Farm for focusing their attention on parts first, since it probably comes up too many times to count why a specific vehicle does not meet promised delivery dates. It simply has been too easy for collision repair shop operators to just blame it on parts. So repairers should be careful what they wish for (or blame in this case), because if it is costing money, someone will fix it — or at least try to fix it.

The new "test" program is expected to run through Feb. 29, 2008, in Indianapolis. The concept of receiving a "parts rebate" from 2.8 percent to 3.4 percent based on the vehicle manufacturer is evidence that State Farm staffers spent some time with select manufacturers, such as General Motors, Ford, Chrysler, Nissan, Honda and Toyota, to get their agreements in place.

Apparently there was little-to-no thought given during these discussions to include a provision for directly handling rebates, which would avoid imposing additional administrative processes on the shops. If a vendor will not agree to the additional discount, how is this really a "no cost to the shop" program if they still are required to give the discount? And will this in the future affect the vendor discount structure to the shops?

I also wonder about the "sales pitch" and promises included from the vendors of the ordering software? One vendor currently has marginal acceptance due to many technical, reliability, support and usability issues with their program. The other is new to the market. What promises have been made to actually improve the process and demonstrate benefits to repairers who use the system? Or was this even a consideration?

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

Did anyone think to ask the users about the current issues they see? What about the challenges by local dealers attempting to interface with their parts inventory systems? What about the management system developers who have attempted to interface for some time now with little success? What promises were given to make sure these changes improve the process and don't just hinder it further?

Many years ago the top shops in the country sought out 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 I know is looking for improvements to the current supply chain issues. Little work has been done by the supply chain to address the needed service components to improve the parts process. The issues with damaged parts, wrong (or forgotten) parts, and mis-boxed parts will be affected very little by a software solution. These will only improve with better training and process implementation by both suppliers and repairers.

There are certainly many flaws in the current system and also in this new "test" program that may cost both the repairers and insurance industries time and money. As a repair industry it is time to provide honest and constructive feedback of the issues that are occurring. I hope these comments will be taken seriously and not ignored to just save a few more dollars at a cost to our repair industry.

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. I have offered this a number of years ago and was not contacted.

Please send your comments, questions and potential discussion topics you would like to see addressed in future columns to [email protected] . For additional information you can also visit www.aeii.net.

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