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Wednesday, 24 October 2012 18:00

George Avery Spoke on PartsTrader to GCIA Sept. 20: Parts Margins “Not Guaranteed to Remain” As Are

The Georgia Collision Industry Association met on Sept. 20 and hosted guest speaker George Avery, State Farm’s claims consultant. Avery gave information about the PartsTrader parts procurement pilot program to a crowd of approximately 130, some of whom had traveled to the meeting from Birmingham, AL, one of the test markets.

“Mr. Avery gave an overview of the PartsTrader program and why they started the pilot program,” said GCIA Executive Director Howard Batchelor. “He said that they spend roughly $3 billion a year on parts and needed a way to control the cost. The meeting was mainly subdued until the Q&A session at the end. Many of the attendees wanted to know how this benefits the shops. There [was concern about] additional administrative duties for both the suppliers and the shops.”

Avery also talked about some of the enhancements State Farm has created since the pilot began. “The estimating systems have created an interface that will update the prices on the estimate. They have also cut the time to respond from two hours down to 30 minutes.

Several shops from Alabama also attended and said that PartsTrader needed to work out some of the bugs before they implement the program in other areas. Some of the attendees also mentioned they are willing to try the program but asked ‘If this program does not work for me, am I able to quit using it?’ and George replied that ‘This is a business decision that each shop should review and evaluate on its own merits,’” Batchelor reported.

Steve Plier, President of Consumer Auto Repair Excellence, Inc. (CARE), a consulting company based in Birmingham, AL, was also in attendance taking notes. (See interview with Plier this issue.) CARE is a company focused on the auto repair industry with its primary focus assisting repair facilities with basic fundamentals and basic business principals that are often overlooked resulting in diminished compensation and profits for the repair facility.

Plier said the first number listed in Avery’s PowerPoint presentation was “$3 billion” which Avery stated was the amount State Farm ‘gives’ to the repair industry for parts in a year. Later, during the Q&A, a member of the audience spoke up and said he took offense to Avery’s statement of “giving” as the $3 billion actually refers to the amount of parts purchased, not given.

Avery’s slide presentation indicated that State Farm holds 41 million automobile policies and the insurer handles an average of 32,000 claims each day. State Farm had 20,000 Service First repairers at the peak of the old Service First program compared with approximately 10,300 Select Service providers in the Select Service program today.

Avery noted that 63% of all claims are handled through Select Service, with the lowest percentage of 17% of claims being handled through Select Service in Long Island, NY.

“Mr. Avery spoke of meeting with different large providers discussing where the majority of delays occurred and noted the response centered on parts delays and that by assisting the industry and improving cycle time to reduce the time of repairs by one day would reduce State Farm’s rental expense by $43 million for each day of cycle time reduced,” Plier reported.

State Farm originally piloted a parts procurement program back in 2008/2009 but it was discontinued when Chrysler filed for bankruptcy and GM accepted government bailout funds. However, during that pilot they discovered by their numbers a parts return percentage between 14–17%, and based on this fact, the decision was made to search for additional options after shutting down the pilot. Shortly after the program was discontinued, State Farm filed a request for proposal and PartsTrader was selected from this process.

“Per Mr. Avery, State Farm wants to assist the industry (use of PartsTrader and a parts locating/procurement program) by reducing totals because of parts competitiveness reducing repair cost. He says this would be an assistance to all (the consumer, the OE manufacturer, the insurance company, and the repair facilities),” reported Plier.

During his presentation, Avery stated only suppliers nominated by Select Service repairers are and will be on the PartsTrader list. Avery also said that PartsTrader is continuing to make improvements in the electronic process and two of the test market areas now are operating on a 30-minute bid window.

Avery also noted that the number of repairers in the Chicago metro area, the fifth and final test market who are expected to test the PartsTrader program in December, will outnumber the total number of repairers currently on the pilot in the other four test markets combined.

Plier reported that during the Q&A, the first question asked came from a frustrated individual about a slide from Avery’s presentation showing a PartsTrader screen shot that indicated parts, days of delivery and the shop cost, but not  the price that would be listed on the estimate. After several other attempts by members of the audience to get clear answers on list price, “Mr. Avery eventually admitted that the shops’ margins were not guaranteed to remain what they currently are,” Plier reported.

Another sticking point in the meeting centered around whether or not repairers in test markets were giving positive feedback.

“Mr. Avery stated State Farm had received positive feedback from the evaluation from the four current test areas, but he gave no specific examples of positives,” Plier said. The evaluations indicated there must be a better training process and that is being addressed by PartsTrader. “Mr. Avery noted State Farm and PartsTrader are hand-in-hand in this process and PartsTrader must prove and provide a value to the industry.”

As Avery was saying the evaluations had returned positive information, Dave McBroom, director of the Florida Automotive Collision Association, spoke up to disagree. [Editor’s Note: Dave McBroom, passed away on Oct. 11.)

“Mr. McBroom told the participants he had flown in from Tuscon that afternoon so he could be a part of the meeting. Mr. McBroom noted to the group he had been in Tuscon for a week and had spent time in repair facilities on the program and had completed the steps to sending out the bids, and then went to the parts suppliers to see how the program worked on both sides,” Plier said.

“Mr. McBroom then began naming different repairers and suppliers who had removed themselves from the PartsTrader program. At this point, Mr. Avery spoke up and stated he did not feel this was fair. The audience became vocal enough that Mr. Avery allowed Mr. McBroom to continue for a few additional statements.”

In general, members of the audience felt that much of the information provided by Avery was very much the same information that has been published since the pilot program was started, and that the only new information he provided was related to why State Farm was attempting another parts procurement program.

“At no time did or could Mr. Avery provide how this program would benefit a repairer and/or a supplier,” Plier said. He also reported that several of the audience questions were repetitive in nature because Avery avoided giving specific answers. The meeting ended late at 9:45 p.m. Before closing, Batchelor invited shop owners from Alabama to return for another meeting later this year to allow GCIA members to hear their side of the story now that they had heard from State Farm.

Special thanks from Autobody News to Steve Plier for providing notes on the meeting.

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