Friday, 30 June 2006 17:00

Auto recyclers hope to boost market share

If there was one key message at a recent gathering of auto recyclers from around the country it was that shops and insurers want an easy and reliable way to know exactly what to expect when sourcing used parts. 

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Lubrano

"The bottom line is if you don't use these standard [parts and damage descriptions], the insurance industry is not going to see your inventory data," Mary Lou Lubrano of CCC Information Services told recyclers at the recent Automotive Recyclers Association (ARA) Mid-Year Business Development Conference in Las Vegas. "It's that simple. There's a lot of other really good reasons to use the standards, but the bottom line is, if you don't do it, they're not going to see your parts and you're not going to sell them."

Lubrano's presentation came during a day-long set of seminars that while focused on recyclers also could offer collision repair shops a glimpse of the future.

Don Porter, a property and casualty claims consultant with State Farm, kicked off the morning with a session outlining his company's interest in increasing the amount of salvage parts used in repairs - and what he believes individual recyclers and the industry as a whole can do to increase their sales of parts for use in collision repair.

Based on his company's numbers, recycled parts as a percentage of total parts sales has remained stagnant - at between 12 and 13

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 Porter

percent - from 2003 through 2005, while the aftermarket segment is rebounding to reach a similar market share (after declining to a low of 9.2 percent in 2000).

Porter said in order to increase the use of recycled parts, an automated approach to sourcing those parts is necessary, to provide immediate availability and condition information and to reduce the number of contacts to individual recyclers by shops and insurers. Convincing shops to use more of the parts, he said, will require helping shops identify "best in class" recyclers that use systems to ensure on-time delivery of the correct part in the described condition.

During her session, Lubrano described some of the standards ARA committees have developed that the association believes can help accomplish some of what Porter was calling for.

Lubrano said the only way buyers "see" recyclers' product is through written descriptions. Buyers will gravitate, she said, to those whose descriptions are "honest, accurate, objective, consistent and standardized." Without such descriptions, she said, returns that costs both buyer and seller time and money increase, and neither insurers nor collision repair shops will tolerate that.

She detailed four standards recyclers should understand and be using - and that shops and insurers should begin to expect and demand. All are available at www.a-r-a.org/standardsandcodes.htm.

Parts description guidelines

This details how a part should be described (including standardized abbreviations) in terms of origin, condition and options. It lists the order in which these items should be included in the description.

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Damage locator

Lubrano said this one-page standard shows visually how to describe the exact damage on the part.

"Remember, if you're not honest about the damage, don't complain when you get that part returned," she cautioned recyclers at the event.

Parts grading guidelines

This two-page document spells out how recyclers can give any body or mechanical part or assembly a letter grade of "A," "B" or "C."

"I am working on a project so that if my customer, an insurer, said, 'I don't ever again want to see an ungraded part come to one of my estimators,' I'm going to be able to do that," Lubrano said. "That is reality. That will be coming soon. Will it be every single insurance company? More than likely not. But I can assure you that the large insurance companies want to make sure the parts they are utilizing are the good parts - the right parts the first time to make sure cycle time is not affected by the buying and selling of a recycled part."

The letter grades are based on "units of damage" (not "hours") with one unit defined as "damage not exceeding the surface area of a standard-sized credit card." An "A" body part, for example, is one with one unit or less of repair necessary (or an entire front or rear body sheet metal assembly with three units or less of repair necessary). A "B" body part has two or fewer units of needed repair, and a "C" part has more than two units.

Mechanical parts grading is based on mileage. An "A" grade mechanical part, for example, has less than 60,000 miles, or if more than 60,000, less than 15,000 miles per model year of age.

"This is so important to your industry," Lubrano told the recyclers, adding that virtually all of the inventory management systems for recyclers either have or are adding capabilities to allow grading of parts - and shop and insurer systems will begin to display such information. "This allows your customer at a glance to very quickly understand what kind of part it is."

Recycled Parts Guide

Among the most recently-approved standards, this document spells out what every party involved in the buying or selling or a recycled part - the shop, the estimator, the insurer, the recycler - should expect from the other parties.

"So it's really important to read those and understand what your industry has agreed you should be doing," Lubrano told recyclers. "It's going to be difficult for you to meet expectations unless you know what they are."

Lubrano said any recycler that is going to want to continue to increase the number of parts they sell to the insurance and collision repair industries should be moving to implement these standards.

"People are not going to continue to buy recycled parts if you can't give them parts with descriptions that they can understand and feel comfortable with," she said.

John Yoswick is a freelance writer in Portland, Ore., who has been writing about the automotive industry since 1988.

 

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