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Chicagoland Suppliers Resisting PartsTrader

State Farm’s parts procurement program is getting a cold reception in the Windy City from suppliers that want to know why the insurer is playing on their turf.

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By Kristen Hampshire

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On Sept. 17, 2012, State Farm announced that the pilot program for PartsTrader was being expanded to Chicago, and collision repairers would start actively using it in December. In short order, they reported that 475 of 477 Select Service repairers in Chicago had registered for the program. Today, State Farm says all 477 have now signed up. But supplier participation is another story.

More than a few repairers are reporting that many suppliers are actively resisting PartsTrader. One shop reported that State Farm sent it a letter indicating only 48 percent of its suppliers had completed the registration process. The insurer says 266 suppliers of all part types to date are participating in PartsTrader.

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“Data provided by PartsTrader suggests Chicago suppliers that are actively participating in the quoting process are generating more parts orders overall than those who have opted to only receive fax orders,” said George Avery, claims consultant with State Farm.

And as roll-out continues, Avery says that PartsTrader data also suggests repairers are shifting to participating suppliers from fax-only suppliers.

One repairer says PartsTrader has been shutting down its fax service at 5 p.m. Then, at 8:30 a.m., the fax machine is spitting out pages of parts orders that had been entered via PartsTrader at 3 p.m. the day before. He said PartsTrader has stated the fax service will end in 2014. He also said it seems PartsTrader is “punishing” dealers that have chosen the fax route. Evidence, he claims, is listing one of the largest Chrysler dealers in the area as an Isuzu/Suzuki dealer.

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“That took several phone calls to change, and who knows if it will change back?” he said.

An Intrusion?

PartsTrader has been called an “intrusion” into the business of collision repairers.

“I’m not going to pay anyone to do business with the customers I do business with, and I don’t believe State Farm has any business running vendors’ and suppliers’ businesses,” says Jeff Janicke, parts director at Bill Jacobs Chevrolet Cadillac Mazda Subaru Kia Mitsubishi, a Level III supplier on the Service Select program.

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What about the profit for collision repair players, suppliers are asking. If the margins on parts evaporate, what’s left?

Then, there’s the cost of administering the program that has some supply professionals like Janicke skeptical about who’s winning in this arrangement.  

“There are people I’ve talked to [in other states] who have had to add 50 to 60 hours a week in administrative costs to take care of this program,” he says. “They’re bearing the burden, and that’s not right.”

And State Farm’s assertion that PartsTrader will make parts ordering more
efficient is being challenged, too. One repairer said dealers have told him their accountants are saying participating in PartsTrader is impossible. He claims one Michigan dealer that is on the full program had to double its parts staff, while the sales numbers haven’t changed. The dealer’s assertion was that PartsTrader is a tool to move and monitor data, not to make the process more efficient.

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“Thirty-minute quote times are in the two-hour range. Every line needs to be checked as the part numbers and prices are very often incorrect. Then, in order to maintain [the dealer’s] own measures on parts department sales and performance, the data needs to be secondarily entered into the dealership’s management system,” the repairer says.

Janicke, who manages parts for the 55-year-old supplier that happens to be the Midwest’s largest GM wholesale operation, says there are lots of suppliers out there that will tell the same story. As a player with 23 delivery routes traveling up to 250 miles each day, he’s saying thanks, but no thanks.

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Pricing

Pricing is one of the big issues. After absorbing the Select Service discount, there’s not a whole lot of profit left over, argues one Chicago supplier.

“Why should I have to bid on everyone? I’m not changing my list price,” he says. “I’m not hardly making any money as it is now with the discount we have to give out.”

This supplier’s initial reaction to State Farm’s pilot? “They’re sticking their noses into someone else’s business. Anyway, there are enough estimating and parts ordering systems out there – and they work. Why does State Farm need to get involved?”

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One repairer said a salvage dealer reported to him that they serviced 200 quotes in one day, but only sold two – and both were loyal customers.

A Good Idea?

But involving State Farm isn’t viewed as a bad thing by all suppliers, especially because State Farm is the largest insurer and greatest provider of business to body shops.

“I think [PartsTrader] is a good idea,” says Chuck Turck, service and parts director, The Porsche Exchange. He isn’t thrilled about the fee State Farm announced to participate. (“They didn’t tell us the dollar amount yet.”) But as a Porsche dealer with a “captured audience,” the program will give him more visibility and an opportunity to build relationships with new body shops.

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“It puts my name out there in a different way,” Turck says.

Turck admits the program is appealing because of his dealings with Porsche. In the Chicago Metro area, there are a handful of Porsche dealers. The Porsche Exchange is one of two Porsche dealers on the State Farm program. The dealership where Turck manages parts has an advantage because it’s larger than other competitors dealing Porsche parts. He estimates that there are about five other body shops in addition to his core customers that will come to him for quotes on parts.

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“It’s a part of the business we didn’t go after or cultivate in the past, and now it is given to us,” he says.

Turck isn’t exactly sure how much the business will grow because of the program – “Any increase is a good increase,” he says – and he figures he’ll pick up another half-dozen customers. “That’s all the better for us.”

As for that fee to participate: He’ll wait and see, then make decisions about future participation.

Meanwhile, other states are looking suspiciously at the program, wondering who’s really going to get the cheese if collision repair shops participate.

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“How many more times are we going to let the insurance industry change the rules to its advantage?” asked Jeff McDowell, president of the Alliance of Automotive Service Providers-New Jersey. “Things are hard enough out here. Enough is enough.”


More information:

George Avery to Offer PartsTrader Update at Third Biannual IABA Convention

State Farm Updates ASA on PartsTrader Pilot 

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