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Stop double dipping

Fix inefficiencies, not your software
Friday, May 10, 2013 - 07:41
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I am sure you have seen or experienced the frowns when someone (maybe yourself) at a reception or party double dips their chip, vegetables or chicken in the sauces available. At my house my kids even set the ground rules when a bag of chips are opened at the table by stating before anyone grabs the chips, “No double dipping!”

As I have stated in my last two columns, let's focus on the real issues and not believe that an insurer-mandated software program is the solution. In my last columns, the key issue with used parts is their "real" condition, and that it is completely hidden from the vehicle owner. But why has this become such a huge problem, and what does double dipping have to do with all this? Believe it or not, double dipping is probably one of the key root causes for the present condition of used parts and the inefficiencies it has added when procuring used parts, not the system in which we use to order them.

In the distant past, it was not uncommon for salvage value purchase agreements ranging from 11 percent to 22 percent of the actual cash value (ACV) for the totaled vehicles. These vehicles then entered into the supply chain at a much larger percentage, even though there was still a level of “rebuildables” that were not “parted” out. Today it is much different.

Today, the Internet bidding process has opened a new lucrative business opportunity for insurers that didn’t exist in the past, and they are taking full advantage of it. However, it is causing issues with the parts that are left and available for the supply chain. This has quickly turned the “total loss” department of an insurance company into a formidable profit center, and one of the key drivers in whether a vehicle is going to be repaired today or totaled. This is simply double dipping, and is a key root cause of many of the issues that the repair industry faces every day when being held to requirements set by insurers for usage of used parts, or mandated parts procurement programs.

Today, talking with many recyclers, the purchase prices paid by foreign buyers who simply rebuild them in their country, often with different and lower safety standards and tax advantages for bringing them into their country as “parts” verses the tariffs imposed on imported new vehicles, is almost ridiculous — at times more than 55 percent of actual cash value! The good vehicles with Grade A parts are simply not going into our supply chain. What is left from being filtered by foreign buyers and domestic rebuilders is far from being acceptable to any collision repairer.

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