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State Farm to Expand Electronic Parts Ordering Program

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State Farm Claims Consultant George Avery announced last Friday that the insurance company has decided to expand its electronic parts ordering process that it had only previously been pilot testing.

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State Farm began the pilot test in certain markets in San Diego, Calif. and Indianapolis, Ind. in late 2007 but will now expand it over the next three months to a statewide program in both states.

According to Avery, Chrysler, Ford, GM and Toyota are the OEMs that have elected to continue participating statewide in Indiana. Those OEMs will also continue participating in San Diego, however only GM and Chrysler will participate in markets in California outside of San Diego.

“It’s going to take some time to roll this out because the OEs have to get to their dealers and we need to have our business meetings with the shops involved in the expansion in the two states,” said Avery. “That will take a little while and then we’ll run it for I don’t know how long. We’re not saying. We’re taking the same attitude we took toward the initial test – we just want to get enough information to help us evaluate the scalability of the electronic ordering system, because we did run into some issues but they were fixed. My guess is there was some learning from them and that we could possibly see some enhancement in the software.”

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“We think there’s enough there but we want to get some more data,” Avery added. “We’ll continue to collect input from the repair industry, and we still have our advisory council which we’ll keep in the test areas for more feedback.”

When the pilot program was first announced, repairers’ biggest concern was that their profit margin on parts would be reduced. But State Farm assured them it absolutely would not be, saying the program was designed to enhance service to customers without impacting repairers’ parts profits. The deal involved a three-percent reduction for State Farm on the manufacturer’s suggested retail price, the savings of which would be passed along through the parts departments and Select Service shops, both of which keep their margins the same.

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After listening to feedback from the pilot, Avery believes profit is no longer a concern as much as the new process itself is.

“Some repairers had no problem with it. They were like, ‘This is easy. I had to learn a new software program but that happens to my staff a lot anyway,’” Avery said. “Others said it was just a little extra work.”

Avery said that State Farm has seen improvements in efficiency and the lowering of parts return rates thanks to the VIN-scrubbing capabilities offered by the computerized service providers participating in the program.

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