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Wednesday, 18 December 2013 23:14

CIC Panel Sees Benefits of Electronic Parts Ordering, but Not Mandates for One System

If the recent Collision Industry Conference (CIC) panel was representative of the industry, many repairers and suppliers see upsides to electronic parts procurement—but are also less enamored of the “insurer mandate” part of the issue.

 

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“We’re always looking for solutions to make things better,” panelist Andy Dingman of Dingman’s Collision Centers in Omaha, NE, said, noting that he doesn’t know any repairer who is opposed to electronic parts procurement if it’s efficient. “But there has to be a value proposition. When there’s not, and there’s only a mandate, you’re left with a very difficult question to answer for your business.”

Like Dingman, most of the panelists spoke positively about electronic parts procurement itself. Darren Huggins, national collision director for of the Van Tuyl Auto Group, which operates 37 body shops and 75 dealerships in 10 states, said parts procurement systems give shops for the first time a transparent tool to measure vendor performance.

“When was the last time we really focused on holding parts suppliers accountable for our customer satisfaction, quality, cost and speed? It’s never happened,” Huggins said. “My own dealerships struggle sometimes to get parts off the shelf and to me in a timely manner. The insurers are mandating that we perform. But we’ve never ever made the parts supplier perform like they have to perform today. We’re finally putting the parts department on the dime. If nothing else, there’s a silver lining there.”

“As a former shop owner, I know I had only anecdotal evidence of how well my suppliers were performing,” agreed Mike Quinn, now president of uParts, an electronic parts procurement system that went live in Southern California last year.

Quinn said uParts provides objective reporting of performance it offers suppliers, shops and, if a shop wishes, its insurer partners. This “procurement efficiency index,” he said, will help shops improve their performance by choosing vendors with high scores based on objective measurements such things as fill rates, delivery time and order accuracy.

Supplier Sees Benefits

Terry Fortner of LKQ Corporation said that as electronic parts procurement systems integrate with supplier inventory systems, they will reduce the problem of what he called “ghost inventory,” a supplier suggesting they have a part when in fact they don’t or it is “three states away.” It will also reduce the need for companies like his to have 1,400 sales people answering calls because only 10 prevent of the orders it currently receives come in electronically.

“What I will tell you is that the industry, in my opinion, is behind the curve,” Fortner said. “The efficiency [of the systems] is not to a point where we would like to see it, but we know that every electronic order we get, we see our internal credits and allowances dramatically decrease. “That is a big win for us. It’s a big win for the industry.”

Randy Stabler, who operates six Pride Auto Body shops in Southern California, agreed that he sees an upside to the industry ferreting out those shops that order parts to get an invoice only to return the part. He said he chose an electronic parts procurement system that would best allow his company to “get all the right parts but also be able to demonstrate which of our suppliers are more efficient.” He said he’s anxious to have the systems better integrate with his company’s accounting and other technology systems (as well as those of his suppliers) but he likes the idea that the systems may shed some light on “the costs that our industry has absorbed” when using alternative parts.

“I’ve got no problem with alternative parts as long as they work on the car, as long as I get them in a timely manner, and as long as if something goes wrong with them, someone else pays the costs to rectify that problem rather than me,” Stabler said. “The electronic parts procurement engines will allow for us to have transparency on that.”

Mandates Questioned

But the panel was less positive when it came to the subject of insurers mandating the use of a particular system. Without naming the companies involved, Jim Sowle, body shop director of Sewell Lexus in Dallas, Texas, said he recently chose to drop a direct repair program because of its mandated use of a particular system.

“Running a system that we’re forced to use that’s going to add additional time and has no value-added just doesn’t make sense to us,” Sowle said, noting that his shop orders most of its parts from the dealership’s own parts department.

During the panel discussion,  between 50 and 75 repairers at the meeting responded to several survey questions about electronic parts procurements systems. Although 12 percent said they don’t currently use such a system, 40 percent said they use a system of their choice, 4 percent said they use a system only based on agreements they have with insurers, and 44 percent said they do both.

Of those using a system of their choice, 78 percent said it has had a positive effect on their efficiency (another 12 percent said they have seen no change in efficiency). But 92 percent of those using a system due to an insurer agreement said they have seen a negative impact on efficiency.

Nick Bossinakis of Overall Parts Solutions said that 92 percent fits with his experience of not being able to locate a shop or vendor with much positive to say about PartsTrader. As the developer of a competing parts procurements system, it may not be surprising that Bossinakis predicted it will “take another three or four years…and millions and millions of dollars” to get PartsTrader “to where you (repairers) want to get it.”

But Bossinakis did praise State Farm for pushing for a needed change in the industry.

“How are we sitting here in 2013 and still phoning and faxing orders,” Bossinakis said. “At some point, whether we agree or disagree, you have to respect the process of change. My hat is off to State Farm and to PartsTrader, because the way I look at it, sometimes you have to regress to progress. Maybe I’m idealistic and maybe I’ll be out of business five years from now. Who knows? But there is value to what has happened.”

“My personal opinion is we’ve been regressing for far too long in this industry, and I think it’s time to stop,” shop owner Dingman said, drawing applause from some CIC attendees.

John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at: jyoswick@SpiritOne.com

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