BodyShop Business
ASA Reports Info Uncovered in Study of State Farm's Parts Program
6/1/2012

The Automotive Service Association (ASA) has been busy gathering facts about State Farm’s plan to mandate the use of an electronic parts ordering application in collision repair facilities participating in the insurer’s Select Service direct repair program. Discussions continue as ASA’s staff, volunteer leaders and collision members interview representatives from State Farm, PartsTrader LLC, dealer suppliers, independent suppliers, participating pilot shops, manufacturers and recyclers.

With its focus on repairers, ASA understands that any comments on this program directly affect the more than 10,000 shops currently in the program (which ASA claims is approximately 25 percent of the repairer market) and indirectly affect the 75 percent that are not in the program.

ASA recognizes the importance of this industry development and the need for research and fact verification. On behalf of ASA members, the association has obtained the following data thus far:

• Pilot areas are Tucson, Ariz.; Grand Rapids, Mich.; Birmingham, Ala.; and Charlotte, North Carolina.
• Approximately 10 percent of State Farm Select Service shops are participating in the pilot.
• Suppliers are recommended by Select Service repairers only.
   – Default OEM suppliers – is the primary OEM dealership the shop would like to source parts from the     majority of the time.
   – Repairers select their “default” list when setting up their facility in PartsTrader.
   – Preferred OEM suppliers – are the secondary OEM dealers a shop would like to source parts from on occasion, expanding the “search” to the original list of suppliers provided by the shop.
   – Any other suppliers the shop would like to source parts from. This includes recycled and non-original equipment parts suppliers.
   – A participating shop can request the quote from their “default” OEM dealer by selecting that option when sending out a request for quote. This is the default selection on each request for quote.
   – A participating shop can also request a quote from their secondary OEM dealers by selecting the “preferred” supplier option, expanding the “search” to the original list of suppliers provided by the shop.
   – A participating shop can also request quotes from all participating OEM dealers by using the “any” button. This expands the “pricing option” to all OEM dealers listed in the market area.
   – When a participating shop requests quotes, all relevant alternative suppliers will be invited to quote.
   – All suppliers recommended by all Select Service shops in the market area can take part in parts pricing if that option is selected by the Select Service shop.
   – There is a “fax only” ordering option for those suppliers that choose not to participate, or have other reasons they cannot communicate electronically. PartsTrader is involved in the “fax only” transaction as well.
• Select Service shops can go directly to any of their preferred suppliers for the purchase of all parts without entering into the parts price process. (Note: This decision may affect the net results on their Select Service scorecard.) The direct-buy option can also be used for the supplement process or for drive-in estimates.
• Suppliers are contracted with and trained by PartsTrader LLC.
• PartsTrader LLC is a privately funded shareholder company.
• State Farm does not have access to any facility buy pricing/parts margin data of new parts or alternative parts, except for recycled.
• State Farm can see the MSRP list price. This is the same as the process in place prior to the application.
• State Farm can see the quoted buy price of recycled parts. This is the same as the process in place prior to the application.
• State Farm can currently see the discounted MSRP prices provided by dealerships. ASA’s research shows this to be one of the largest concerns from the repairer’s perspective. State Farm was made aware of this during the pilot process and reports it is seeking ways to address this.
• Suppliers cannot see “price quotes” made by other suppliers.
• During the part selection process, the shop can see the list price and the shop buy price of each part.
• If the Select Service shop selects “all,” then all suppliers recommended in the market area can elect to take part or not take part in the price quoting process of each estimate uploaded.
• The time frame for “parts pricing” is set at two hours as a default. This can be adjusted to one hour by the repairer, or the repairer can set a custom close time greater than one hour.
• Pricing remains open for the allotted time, and during this process, shops are unable to execute on the estimate.
• Parts selection is made by the collision repair facility.
   – Impacts on the Select Service dashboard are affected by what other Select Service repairers are selecting in the marketplace, along with part type, part list price, cycle time, overall estimate total, customer satisfaction, Select Service pricing (rates/discounts), photo quality, supplements as percent of original percent of final bill, audits/inspections, average labor rates, repair vs. replace percentage, and paint and materials. This is the current system of measurement.
   – According to State Farm, this system does not directly “talk” to the State Farm dashboard. The end results of the transaction do affect the Select Service scorecard, as they do today.
• Regarding data privacy:
   – PartsTrader uses CIECA BMS data extraction – extracting only data that is related to the parts procurement process.
   – PartsTrader does not sell data, read data or provide data to unrelated parties.
   – PartsTrader has a privacy policy and will provide that to ASA and others.
   – PartsTrader will not share buy price data with State Farm or any other party with the exception of recycled parts.
   – PartsTrader will notify the industry of any changes to its privacy policy.
• PartsTrader has written contracts with State Farm.
• PartsTrader has contracts with participating suppliers and participating repairers. It is an online agreement that participants review and accept as part of the registration process. All users must accept the agreement electronically before they can log in to PartsTrader.
• Currently in the pilot, shops are experiencing initial increased administrative costs at an estimate of 30 minutes daily. This is being evaluated within the pilot. PartsTrader states that this is true with any new system, but that over time, it will be more efficient and save time. PartsTrader intends to contract an independent study to validate this.
• Pilot shops have reported experiencing increased cycle time delays as related to “Priced Perfect” recycled parts – based on inaccurate description. This is not a new issue. PartsTrader believes that a combination of supplier education and the planned feedback and ratings system can help address this.
• A line item comment has been added in the recycled parts area that allows for the repair shops to record any repairs to recycled parts but does not include a value amount associated with those repairs.
• Prior to any registration or use of the application, 17 Select Service shops in Birmingham, Ala., removed themselves from the program.
• The application fee structure is under development and, as stated by PartsTrader, will be applied to the supplier.
• Participation in the Select Service program is a collision shop decision.
• Participation in the PartsTrader program is a supplier decision.
• According to ASA’s findings to date, the majority of repairers making comment are not in favor of the new State Farm application. While the majority of sentiments are coming from non-participating shops (which make up approximately 75 percent of the facility market), the actions of some of the Select Service shops (removing themselves from the program) also demonstrate lack of support for the application.
• For the Select Service shops, this is a serious business decision as it relates directly to their current personal business model. For those not participating, this application adds additional skepticism to this type of business arrangement and requires analysis and disclosure of specific application results.

ASA states that what is yet to be determined is how this program actually affects the bottom line of participating repairers, and in turn, collision repair professionals as a whole. These factors must be identified by those repair businesses participating in the pilot.

“ASA is striving to provide as much verified information on this pilot application as possible," said Denise Caspersen, ASA Collision Division manager. "While this pilot is underway, it is vital for ASA to continue to engage with as many industry segments as possible, collect the concerns, verify the research and communicate directly with State Farm and the collision repair industry to ensure this application benefits collision repair shops and the motoring public.”

As ASA’s discussions continue with the various third-parties involved in the pilot, updates will continue to be shared with ASA members and the industry at large.


More information:

ASA asks members to share their concerns, comments and experiences regarding the pilot program by contacting Denise Caspersen at [email protected], (800) ASA-SHOP, ext. 106, or (817) 514-2906 (direct).

ASA



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