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State Farm claims there is no data to date demonstrating that PartsTrader application is negatively impacting parts profit.
Members of the Automotive Service Association’s (ASA) Collision Division Operations Committee, board of directors and staff met with staff members of State Farm Sept. 27 in Bloomington, Ill.
The meeting continued discussions started previously by the participants concerning State Farm’s electronic parts ordering pilot currently being tested in Grand Rapids, Mich.; Tucson, Ariz.; Birmingham, Ala.; and Charlotte, N.C. It is scheduled for further testing in the Chicago metropolitan area by the end of 2012.
At the meeting, ASA participants stressed repairers’ core concerns, which center around parts profit, administration, agreement expectations and data collection.
State Farm participants acknowledged ASA’s concerns and said they appreciated the level of accuracy ASA has provided to the industry so far in reporting on the pilot. State Farm’s representatives at the meeting also expressed a willingness to continue conversation with ASA’s collision leaders to address repairer concerns.
As part of last week’s onsite discussion, State Farm provided an in-depth look at why they’re piloting an electronic parts ordering application. “Why’s” included State Farm’s analysis of repair delays related to parts ordering, relating a $43 million-per-day expense for rental vehicles, and details on their future expectations for the overall collision industry, based on a decline in driver’s license registration, increased crash avoidance technology, ride-sharing and claim frequency.
According to State Farm, “Electronic parts sourcing and ordering is one of many efforts State Farm is pursuing to provide customers with an exceptional experience. Customers and repair facilities benefit from efforts to repair more vehicles (less total losses), improve the distribution of quality recycled parts and improve cycle time.”
Hearing this, ASA repairers provided questions centered around the inefficiency of the current State Farm system of “priced perfect” recycled parts and how this is to be addressed in the future. The ASA team also raised questions about the current decline of claims handling efficiency at State Farm and asked how this is being addressed.
An important takeaway from the meeting was that State Farm officials said the size of the Select Service community is not expected to grow. Another important takeaway was that this application is not the conclusion of recommendations to come from State Farm to their Select Service shops, but rather a part of a larger global strategy.
During the meeting, ASA representatives also emphasized their concern centering around discounted MSRPs and the potential negative impacts of this application on a repair shop’s bottom line. State Farm acknowledged this concern, stating: “MSRP pricing has not changed, and the margins have not been affected, during the test. In fact, the MSRP discount price column has been removed from the tool. State Farm is not collecting data on MSRP discounts.”
State Farm also said similar to its earlier exploration of parts procurement involving the original equipment manufacturers and OEConnection it is cognizant of the parts profit concern and, to date, there is no data from the pilot demonstrating that this application is having a negative impact on parts profit.
“What is vital here,” said Denise Caspersen, manager of ASA’s Collision Division, “is that ASA continue to press State Farm for data on this point and advocate for greater assurances against any negative impacts on parts profit. It is also vital to get a clear understanding of data collection and the implications of the usage of the data on the repair community.”
The ASA team also discussed State Farm’s use of repairer data and its effect and implication on the Select Service scorecard, including the relationship between repairers and their local State Farm claims representatives. According to State Farm, “Repairers are under no obligation to purchase the least expensive part(s). Select Service repairers should continue to balance the scorecard components quality, efficiency and competitive price when servicing State Farm customers.” What ASA believes is critical and was stressed by ASA repairers at the meeting is the negative psychological effect of the repairer selecting the appropriate part for the job, and that choice potentially having a negative impact on their Select Service scorecard. This, followed by a conversation between the repairer and the local State Farm claims rep about parts selection after the transaction has occurred, creates greater confusion and mistrust between the repairer and State Farm. At the end of the day, ASA stated, it’s the repairer who is responsible for providing the best possible repair and making judgments on what part to pick, not State Farm.
ASA collision leaders then asked State Farm representatives, "If ASA were to join others in opposing this pilot today, would that stop advancement of the pilot?" State Farm replied, “No, this is a pilot, and the testing of the application will continue. Because many acknowledge the need for electronic parts sourcing and ordering, State Farm does not see value in stopping this test.”
“As the industry has seen, a ‘no’ to the pilot will not stop it, nor is ‘no’ changing the pilot,” said ASA’s Caspersen. “It’s not a ‘yes’ from ASA; it’s engagement. And, in order for repairers to bring forth their concerns and negotiate positive outcomes including a reduction in the two-hour processing time (now lowered to 30 minutes); more efficient integration with the three major estimating systems; additional controls within the quoting process (supplier quote placeholders); and the removal of the discounted MSRP column (our biggest accomplishment to date) it’s essential that the ASA team continue to address State Farm, PartsTrader and all others willing to participate in analysis of the pilot.”
ASA commends the many collision repair members speaking up on behalf of repairers nationwide. Caspersen said, “It’s not one person speaking to State Farm; what State Farm reps hear from ASA represents the consensus of ASA’s collision repair leaders, all of whom are shop owners and managers.”
Caspersen added, “Accomplishing removal of the discounted MSRP column is a prime example of the importance of repairers being at the table of discussion. I cannot over-emphasize the value of the engagement of the ASA collision leadership a diverse group of shop owners representing businesses large to small, from independent to MSO, and from non-DRP shops to Select Service shops as ASA navigates through the piloting of this application.”