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E-Commerce Has Arrived

Can e-commerce solutions truly improve dispatch, load leveling and cycle time to impact throughput and profits? In a word, yes.

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In the past decade, the World Wide Web has created high expectations, low patience levels and middle-of-the-road indecision. And while launching a Web site, developing proprietary software and going online doesn’t guarantee improved claims management, enhanced productivity or flawless dispatch and load leveling programs, more and more shops and insurers are getting (in some cases, pushed) off the fence – and going online – as consumer expectations rise.

An Idea Is Born
On a hot, humid Monday morning in August 1962, J.C.R. Licklider wrote a series of memos describing a revolutionary concept that would eventually send shock waves through the collision repair industry, insurance community and all other commercial enterprises linked to the business of vehicle repair.

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What was Licklider’s notion? A simple solution to track the complexities of cycle time? Early blueprints for the first DRP? Secret codes for CSI documentation? Introduction of OEM service specifications?

Nope.

Licklider – a computer researcher at the Massachusetts Institute of Technology – described the early concept and visions for a worldwide interconnected computer community that would allow everyone to rapidly send and retrieve information from millions of global locations.

Yes, Licklider described the Internet. The World Wide Web. The e-commerce crossroads of quality, service, security and profitability.

Though Licklider’s collision repair connection was likely limited to typical consumer experiences such as the occasional repair, the subject of his candid comments now impacts our entire industry – from consumers, insurers and state regulators to third-party vendors, suppliers and, perhaps most importantly, estimators, customer service reps and body technicians.

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Today, hundreds of innovative Internet-based products and services are sweeping the marketplace, promising to resolve long-standing difficulties with dispatch, load leveling, cycle time, productivity and claims management.

But can inventive software solve tough problems? Will Web sites unravel the complicated maze of forms, policies and procedures that define our relationships with insurers? Can we combine the best effects of personal service and professional quality with the benefits of electronic commerce and online communication?

While it’s too soon to predict the long-term outcome of collision repair e-commerce, a quick glance through recent newspaper and trade journal articles reveals that Internet-based products and services do enhance relationships between consumers, insurers and the collision repair community.

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“It isn’t entirely clear what will rise with the new day, but many analysts believe that unrealistic hype and extreme pessimism have given way to a clear-eyed view of the Internet,” says Alex Salkever in a special “Business Week” report, “The Net’s Next Era.” “The Net’s potential is still great and it will continue to merit major investment, but it will have to prove itself according to the traditional measures of business success – such as sales and profits – rather than measures made up by Wall Street analysts with a flair for fiction and salesmanship. The Net may no longer be revolutionary, but it still holds the promise of ample rewards for consumers and businesses alike.”

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Rewards, Risk & ROI
Like any innovative idea or groundbreaking concept, e-commerce comes with baggage. Some early supporters, burned by unexpected failures and unforeseen difficulties, are now outspoken critics, promoting a doctrine of traditional, paper-based processing to avoid the technical nightmares of their isolated experiences. But level-headed observers and leading industry experts know the truth: e-commerce is the future of our industry, and it can deliver impressive rewards and return on investment for those who venture ahead with strategic plans and realistic expectations.

At their most fundamental levels, e-commerce solutions save time and money for repair shops and networks, insurers, third-party vendors and consumers. With industry-specific information-management systems, collision repair shops and networks are using Internet-based solutions to manage a range of basic processes including:

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  • Importing/exporting data over the Internet;
  • Managing inventory through parts ordering, receiving and costing;
  • Tracking and processing estimates and claims;
  • Managing job costing;
  • Routing workflow and scheduling employees;
  • Communicating with insurers, third-party vendors and consumers; and
  • Making payments and transferring funds electronically.

With its wealth of valuable benefits, e-commerce also brings a fair share of risk and consequences. First of all, developing proprietary systems or purchasing Internet-based solutions from third-party providers is an expensive proposition. For many shops, the familiar experience of rapid results may not mesh with the new world of online business.

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“Repair shop owners have to be willing, at times, to invest in technology that may not have an immediate ROI,” says Larry Siembab, owner of CARSTAR Berlin in Berlin, Conn., and a 19-year veteran of the collision industry. “For example, the value of ordering parts electronically may not have obvious benefits to the repair shop but could have long-term benefits to the overall process. Because these systems provide one point of contact for our trading partners, they allow insurance companies to consolidate applications and consumers will be able to check the status of their vehicle online, anytime, instead of waiting for a phone call or making repeated calls to the repair shop. In the end, the rewards and return on investment will be measurable and meaningful for every shop and network that incorporates e-commerce into its processes.”

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Getting Started
For shops and networks now standing at the e-commerce threshold, what’s the first step toward online success? Essentially, most industry experts recommend that owners and management teams use the same rules that apply to any major investment, acquisition or venture:

  1. Document current processes to identify opportunities to streamline.
  2. Explore the marketplace and learn what’s available.
  3. Understand how these solutions will impact your processes.
  4. Prioritize opportunities based on their return on investment.
  5. Don’t always believe what you hear in a demo. Always conduct a thorough pilot to confirm that the results are what you expect. And, whenever possible, perform a baseline analysis before the pilot to identify where your operation stands today with regard to the areas of your business that you expect to be impacted by the implementation of Web-based solutions.

This caveat is shared throughout the industry. After watching e-commerce sites come and go, Siembab and others suggest a realistic, educated approach. “Shops have to be very cautious about what’s available,” Siembab says. “Carstation.com was huge last year. Now they’re gone. You need to carefully evaluate e-solutions in terms of true cost- and time-savings before you make the investment.

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“Technology solutions that work as promised will build stronger levels of confidence and trust in the collision repair industry for consumers and insurance carriers. Technology will qualify the data that we submit to insurance carriers and allow them to benefit from a reduction of costs through reduced loss ratios, reduced numbers of field staff, reduced independent appraiser costs, reduced benefits and payroll taxes, and reduced transportation costs.”

Enhanced Satisfaction & Improved Service
Once a shop or network launches an e-commerce solution, it will quickly impact three primary groups:

  1. Consumers.
  2. Insurers.
  3. Third-party vendors.

For consumers, going online generally produces two results: enhanced satisfaction or enraged senses. When transactions are smooth, hassle-free experiences and consumers receive their requested product or service -including updates on vehicle repair and delivery – in a timely manner, they’re happy campers. They feel that their insurance carrier and collision repair center are taking care of their needs and providing quality, consistency and service.

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On the other hand, when unexpected technical glitches occur – including servers that fail to respond, outdated or incorrect Web site information or any number of other delays or disappointments – our happy camper quickly becomes a grumpy, gloomy customer. Despite the fact that the glitch may be due to circumstances outside of anyone’s control, the negative experience can erode the consumer’s trust in our ability to provide consistent quality and customer care.

Today’s consumers expect access to information 24 hours per day, seven days per week. And they expect to have information about the repair of their vehicle without making phone calls and leaving messages. Consumers also will come to expect – if it’s not already available – online access to information regarding the repair of their vehicle.

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Greg Hammond, general manager of CARSTAR Plaza in Kansas City, also sees e-commerce as an opportunity for customer education. “Consumers are more educated about collision repair and insurance benefits because they have access to this information on the Internet,” he says. “They can go online to research repair shops in their area, check the status of their vehicle once it’s in the shop and answer their own insurance-related questions with online resources. When it works as planned, it’s a win-win for everyone.”

The benefits of e-commerce also enhance the repair process. “Consumers will receive more consistent repairs because the speed that information is available to the repairer is much greater through the use of technology,” says Siembab. Consumers are at the mercy of the shop in terms of getting updates on the vehicle repair status. But Internet-based software systems allow consumers to check vehicle status online, anytime, instead of waiting for a phone call or making repeated calls to the repair store.

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And convenience is perhaps the single most important advantage e-commerce solutions provide to consumers. “A significant number of consumers already make purchases on the Internet,” says Jeanne Silver, co-owner/vice president of Butterfield Bodyworks CARSTAR in Mundelein, Ill. “And online retailers expect the number to rise. It’s a great solution for many people because they can shop in the privacy of their own home, information is readily available at any time, and they can compare products and services without contacting the various companies.”

As for the insurance industry, it’s been investigating e-commerce solutions and adding online resources to its standards and policies for decades. From simple services like newsletters and information resources to high-end Internet-based sales and fulfillment packages, insurance carriers are among the most vocal supporters of e-commerce solutions.

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The end result? Business transactions that are quicker, better, and faster than ever before. And that’s music to the ears of every insurance industry professional whose foremost goal is attracting and retaining customers. Insurers see the new technology impacting claim processing costs, cycle times, customer satisfaction and policyholder retention. And through e-commerce capabilities, insurers will know which shops are producing the best combination of cost and service.

Insurance companies are streamlining the claims process and reducing cycle times by automating manual tasks, business decisions and workflow. Communication with the repair facility that used to take place by phone is now occurring via Web-based claims processing solutions. And all of these factors add up to lower claims costs, a reduction in cycle times and happier customers.

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Besides quicker, better and faster, e-commerce solutions are also creating new levels of mutual interest and service between body shops and insurers. “Since collision repair shops and insurance carriers are even more closely connected in the claims handling process, the repair shops and Web sites can answer consumers’ questions that usually had to be answered by the insurance company,” says Hammond. “This reduces the number of phone calls being made to insurance companies, which allows for more efficient processing and greater customer satisfaction.”

Another benefit for insurers is reduced expenses associated with managing millions of claims. “[Internet-based] software … will reduce some overhead expenses for insurance companies,” says Silver. “Electronic Fund Transfers will also allow cost savings. The most attractive feature … is consolidated billing, which will save insurance companies tremendous amounts of money. Also, the cost of doing business over the Internet is very inexpensive compared to sending faxes, mailing materials and making telephone calls. For example, with the Internet, you can submit electronic photos to the insurance carrier instead of sending hard copies in the mail. And this will save you time and money.”

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Managing Claims, Productivity & Profitability

While each collision repair shop, insurance company and third-party vendor will embrace Internet-based tools and resources that match their company culture and strategic goals, the ideal Internet-based information management systems will share similar components and connectivity characteristics.

For example, everyone agrees that speed, convenience and an easy-to-use system are essential. Whether you’re talking about consumers, shop management and technical teams, or insurance agents and claims processors, every e-commerce solution must enhance the experience with rapid response, expedient design features and comprehensible commands.

When CARSTAR began working on its Internet-based software system called ClaimsLink, the company created a list of necessary features and capabilities. These included “front end” functionality to impact productivity and profitability as well as customer service, and they include:

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  • Information intake;
  • Repair assignment;
  • Load leveling;
  • Connectivity;
  • Vehicle status; and
  • Cycle time/status reporting.

In addition, the information management system was designed to provide substantial “back end” capabilities, including:

  • Producing repair order invoices;
  • Consolidating invoices for electronic billing;
  • Receiving electronic payment; and
  • Warehousing and reporting data.

Does it work as planned? It does, according to Silver, who adds that e-commerce is more than a good tool to impact dispatch and load leveling – it’s essential for survival.

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“If your collision repair shop isn’t connected to the Internet, very soon you may not be able to do business with insurance companies at all,” Silver says. “Insurance claims processing for all major insurance companies is headed toward e-solutions. We’re already seeing EFT, electronic transmission of digital photos and electronic dissemination of estimates.

“Insurance claims processing that takes place on paper today will be an e-commerce transaction tomorrow.”

Hammond agrees, saying that e-commerce is a must for everyone in the collision repair community. “Individuals who don’t have access to online solutions will be at a disadvantage,” he says. “When consumers realize the benefits of working with one point of contact for their repair and claims handling needs, they won’t want to work with a company that can’t offer this service.”

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A Formula for Cycle Time Success
Can e-commerce solutions truly improve dispatch, load leveling and cycle time to impact throughput and profits? In a word, yes. Since some of the greatest challenges with cycle time can be more effectively managed through online resources, enhancing throughput will be a more attainable goal for greater numbers of shops. Technology solutions available to the industry today make it much easier to manage significant factors in the cycle time formula, including:

  • Parts options and availability;
  • Rental car coverage and support;
  • Towing and storage;
  • Report measurement tolerances and review schedules;
  • Call center and dispatch performance; and
  • Volume expectations and forecasts.

Claims processing e-commerce solutions are already helping to reduce cycle times. On the collision repair side, organizations are starting to use Web-based solutions to communicate with customers more effectively, manage workload among multiple locations, deliver timely mission critical information to the right people and streamline operational activities.

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In the end, of course, e-commerce alone won’t resolve every issue that impacts cycle time, throughput and profitability – including recruiting and training qualified techs, marketplace visibility and competition, comebacks and re-dos, consumer expectations and insurer demands. But e-commerce can help create an environment in which Internet-based tools sharpen each shop’s productivity and profitability.

Integration & Value
Like traditional processes designed to enhance cycle time, e-commerce solutions require their own exclusive set of principles. And the fundamental expectations with any e-commerce solution begin with the same hallmarks of any good product or service: standards and procedures.

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Standards play an extremely important role in streamlining the insurance claims process. The market needs effective systems to facilitate the claims process, but if the systems are unable to integrate with each other, their effectiveness can be adversely affected.

Every system, including e-commerce or other formats, must provide a sensible value proposition to the user. The system may be good at solving a problem in a certain area of your business, but does it integrate with other areas? How does information enter and exit the system? How does it impact the overall process of your business and the other systems you use to run your business?

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Most new systems will impact other processes and systems within your business. The key is taking advantage of these new opportunities to streamline the process and to ensure that the new systems integrate with each other as well as existing legacy systems through the implementation of industry standards.

In addition, e-commerce standards will help ensure a greater return on investment. It’s important that e-commerce solutions operate in an open environment through the use of standards. Shops and networks should make sure that any agreement they sign provides full access to their data and the ability to integrate the e-commerce solution with other systems they currently use to run the business. Also, participation in organizations like CIECA and CIC will help users understand data standards more readily, and this, in turn, will help promote healthy standards for the marketplace.

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The $13 Billion Hub
While some in the industry like CARSTAR are developing propriety e-commerce solutions, many other networks and individual shops are turning to third-party providers for their Internet-based tools. Though there are clear differences between customized solutions and an off-the-shelf product tailored to integrate with existing systems, the goal is identical: Save time and money while increasing productivity and profitability.

And it’s been estimated that the future of e-commerce claims management could mean as much as $13 billion in savings to the industry and related businesses – approximately $5 billion of savings potential on the improved claims handling side and another $8 billion on the loss expense side.

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Recent trends in collision repair are paving the way for Internet-based solutions, as well as the significant savings that result from efficient, effective e-commerce programs. Insurers are facing rising costs, flat premiums and combined loss ratios in excess of 108 percent on average. Shops are facing additional responsibility for estimate and supplement generation, increased administrative burden and increased costs due to mandated use of specific products. In addition, labor rate increases are barely matching inflation, and shop owners continue to see recruiting and workforce-retention challenges.

So what’s the optimum solution for the collision repair industry? Some say the e-commerce models that utilize a “hub” system. Utilizing the Internet to transmit data, all trading partners can connect via a common hub, and the hub can be run by a vendor who’ll provide data translation, functional tools, management information and connectivity.

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Besides a hub system having substantial economic impact, many also predict that such a system will deliver significant benefits for consumers, repair shops and insurance companies. Shops will be able to:

  • Automate dispatching and volume control;
  • Reduce training costs;
  • Satisfy estimating and imaging requirements for lower volume insurers; and
  • Have instant access to real time CSI measurement.

For insurers, the hub system will mean improved DRP management, cycle time reduction and improved CSI.

Regardless of all these benefits, Internet-based products and services alone will never replace the basics of good old-fashioned quality, service and convenience. A continued focus on high-quality repairs and customer satisfaction will always be a requirement. It’ll also always be a requirement that the shop repair the vehicle well, as economically as possible and to the customer’s satisfaction. Technology without service behind it is useless.

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Looking Ahead: Efficiency & Satisfaction
What will tomorrow hold for e-commerce solutions in our industry? While it’s impossible to predict the future, we can rest assured that online products and services will continue to evolve and play an integral role in the success of each shop.

In recent years, several organizations have formed to provide recommendations and guidance to Internet newcomers and online veterans. From the Collision Industry Electronic Commerce Association (CIECA) and the 6,000-member Internet Society to the Aftermarket Council on Electronic Commerce (ACEC), these groups are playing an important role in the future of our industry and the success of e-commerce solutions.

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Erick Bickett, CIECA founder and a longtime member of the collision repair community, is a leading advocate for seamless integration between technology, repair shops and insurers. For years, Bickett has predicted that “the solution that adds value to its users will win.” And many in the industry echo that sentiment today.

What’s the single greatest benefit of incorporating e-commerce into the mix of customer care policies and procedures? Saving money through more efficient processes and more effective communication with customers is nice, but enhancing customer satisfaction is a huge benefit for any business.

Writer Roger Wright is vice president of insurance relations for CARSTAR.

For more articles on e-commerce, log on to www.bodyshopbusiness.com and search past issues of BSB using the key word “e-commerce.” You’ll find an article written by Erick Bickett called “Getting Savvy with E-Commerce” and an article written by Tony Passwater called, “Jumping on the E-Commerce Bandwagon.”

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SIDEBAR

An e-Commerce Snapshot: Facts, Figures & Future Predictions

  • More than 600 million people worldwide will have access to the Internet by the end of 2002, and they’ll spend more than $1 trillion shopping online. – Taken from a study conducted by IDC, a global technology research firm based in Framingham, Mass.
  • The total number of online customer service contacts will explode from 870 million in 2001 to 4.7 billion by 2006. – Jupiter Media Metrix, another provider of Internet and new technology analysis and measurement.
  • Twenty-six percent of U.S. companies plan to spend $500,000 or more on customer relationship management (CRM), including e-commerce solutions. – Jupiter Media Metrix.
  • Sharing quality information, supplying continuity with third-party vendors and managing relationships are among the most significant e-commerce factors for most companies. – Center for Research in Electronic Commerce at the University of Texas at Austin.
  • Businesses predict that they’ll increase their spending on Internet-based initiatives by 30 percent. Despite recent economic conditions, analysts expect the future of e-commerce to remain at consistent levels. – Taken from a 2001 survey of 15,000 companies conducted by tech consultants IDC.
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7 Internet-Based Processes Used by Repair Shops

Using industry-specific information-management systems, collision repair shops are currently using Internet-based solutions to:

  1. Import/export data over the Internet;
  2. Manage inventory through parts ordering, receiving and costing;
  3. Track and process estimates and claims;
  4. Manage job costing;
  5. Route workflow and schedule employees;
  6. Communicate with insurers, third-party vendors and consumers; and
  7. Make payments and transfer funds electronically.

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