At the meeting, with approximately 60 CAA members and visitors in attendance, Sailer provided perspective on how PartsTrader came to the market, a demonstration of the product, shared data regarding activity in the five initial markets, and answered questions.
Sailer described the PartsTrader product, which he said is an “easy-to-use, online marketplace.” About half those in attendance said they were on State Farm’s select service program.
Sailer, whose background includes working for CCC Information Services, said PartsTrader’s “new long-term home” in now located in Chicago, IL.
Sailer opened his presentation by saying he was “making sure that the goals and objectives of the independent collision repairer are absolutely protected and they have a wonderful opportunity to grow their business. If we don’t do that, we are being disingenuous with what we are trying to do. I’m not going to sell out those values,” he said.
“We represent a marketplace. At the end of the day, PartsTrader is marketplace that brings together buyers and sellers of collision parts in a fair, equal opportunity for all channels to participate, so that collision shops can make an informed decision on what parts they want to order. That decision is always in the hand of the repairer,” Sailer said.
Sailer pointed out that the software product being piloted in the United States is very different than what is used in New Zealand. In New Zealand, there is a 24-hour quote waiting period and the insurers see costs on every single part and approves every line item parts purchase. “We fundamentally disagree with that approach. It’s not our product over there,” Sailer said. “We don’t like the solution they are using in New Zealand. We rebuilt the product from scratch, we built it for this market.”
The root of the program began in 2008 when State Farm “wanted to get a better handle on all the parts they were funding,” Sailer said. State Farm put out an Request for Proposal and PartsTrader won it.
In March, 2012, the pilot was introduced in Tuscon, AZ, to 25 shops. In April, 2012, the pilot rolled out in Charlotte, NC, and Grand Rapids, MI. It then went to Birmingham, AL, in May, 2012, and hit Chicago, IL, in December, 2012. In the last 11 months, the product has been revised nine times.
Sailer described the five core principles of PartsTrader:
1) Repairers choose which OEM dealers they invite to quote.
2) Repairers chose who to order from after considering quality, service, availability, delivery time, part types, the reputation of suppliers, and price.
3) Repairers choose when to order. Sailer said repairers are not forced to quote and that repairers can order directly without having to go to the marketplace.
4) Suppliers are given a fair and equal opportunity to quote.
5) Repairer’s buy prices (other than for recycled parts) are not provided to anyone other than the repairer.
“These are the five things we will never yield on,” Sailer said. “If we ever bend on these five things, if the company itself doesn’t shut down, I am out of here. Because if we don’t do these five things, we aren’t being fair to you.”
Sailer compared the PartsTrader software to Expedia or Travelocity in concept, then demonstrated on the following steps:
1) Repairer creates an estimate
2) Repairer sends a request for quotes
3) Supplier submits quotes
4) Repairer reviews quotes and orders based on his parameters
5) Supplier confirms orders
6) Repairer’s estimate is updated
“Repairers create the marketplace,” Sailer said. “Nobody is pushing suppliers on you that you don’t want to do business with. You build the database.”
As the pilot was being introduced in its test markets, many body shops complained about the quoting time period. Sailer said the quoting time period goes down to 30 minutes after suppliers get used to the new tool and today all five test markets are at 30 minute quote time.
“A tighter procurement process works for everybody,” Sailer said.
As of today, there is no cost to the vendor. However, that will change in 2014 when suppliers will start to be charged a fee to use the program. When asked by a dealership owner how much the fee would be to parts suppliers in the future, Sailer declined to give a specific answer, but said, “It will be less than the value being received by the dealer. Here’s the reality. We want this product to be used by everybody. It will not be used by everybody if the fee makes everybody (gasp) and then we’ll only get a small percentage of the marketplace. It’s gotta be a fee that when you look at it you say ‘oh it’s nothing, it’s no big deal.’ By the way, what is the price today? Zero. The reason why it’s zero is because we have not demonstrated the value yet.” He added that “body shops will never pay” for the service.
Sailer was asked about confidentiality of price margins and Sailer said only the suppliers see the screen for default margins by part type.
Others were concerned about what PartsTrader will do with the data it collects from the program. “PartsTrader will never sell data,” Sailer said, but added that it may turn the data into industry trend reports to share with the industry.
Audience members also wanted to know about training. Sailer said the program is so easy that it can be learned in 30 minutes. He said PartsTrader has a series of short training videos, and that shops and suppliers may try online training demos. A small field team will also go out to shops on an as-needed basis. Sailer admitted that the first round of training they provided wasn’t terribly good but by the time they got to Chicago, training was significantly better but not yet perfect.
Coming soon to the PartsTrader software will be a tool where repairers can rate suppliers for accountability, and the suppliers will be able to do the same regarding repairers. Each party will be rated by a star system. “We will begin collecting feedback late Q1 and will begin presenting ratings in Q2,” Sailer said.
Sailer said there are currently 1,000 active suppliers on the program, with 54% who are fully participating and 46% who are fax only, and 18% who are alternative suppliers. According to Sailer, there are 605 are active repairers on the program.
Other statistics Sailer reported include:
● Over $20 million in confirmed orders
● 36,000 requests
● 60,000 orders
● 69% orders processed electronically
● 30% repairers using it for non-State Farm work
Comments from the attendees
An industry consultant commented that he believes the program will benefit everyone. He commended PartsTrader for its efforts because he sees a need for automated parts procurement.
Brian Orr of Jack Orr’s Auto Body, which has been in business for 62 years, said he was concerned about the insurer’s intrusion into his business. “The only thing left for us is parts profits. That keeps us open.” He also complained how the program will change their relationships with their suppliers. His grandfather and father built the business and he came into it at age 16, and during all those years they’ve been building relationships with people. “If we had solidarity in the industry and charge what we need to and not back off, we wouldn’t be here right now. We can’t blame insurance companies for this whole mess. In reality, we need each other. We need to stop being so dysfunctional, stick together and stand up for what’s right.” When asked if his shop would drop State Farm’s DRP program when PartsTrader came to the San Diego area, he said they were not ready to drop State Farm. After Sailer’s presentation, Orr still did not feel that the complete story was revealed. “As the industry changes, it always seems to be for the benefit of the insurance companies. The biggest loser in the process is the customers.”
Curtis Duggan, who has owned his business since 1989, feels the program is an invasion of their profits. He feels people in the industry are letting insurers take control.
Ted Stein from Drew Ford Collision and past president of San Diego CAA said as he opened the meeting, “My big takeaway, and I am split, I am not all about collision repair, as some of you know, I am also concerned about wholesale parts and selling parts to you guys to properly fix cars. It changed my outlook and I see a big win for parts suppliers, believe it or not. You gotta read between the lines. I think there is a big win for repairers also but you’ll have to decide that for yourselves.”
Quick Email Q&A with Dale Sailer
Autobody News: How is this program a win-win for all?
Dale Sailer: We are the only parts procurement tool in the market that is truly neutral as to who should win or lose in the marketplace. We are not trying to drive a particular end result beyond process efficiency and accountability. The winners in the parts procurement process should be those who perform well and meet their customers’ needs across all performance dimensions – part availability, quality, delivery, service and price - better than their competitors. For those who believe the free market system creates optimal outcomes (win-win), then PartsTrader provides an optimal solution.
Autobody News: What are the benefits for body shops?
Dale Sailer: The key benefit is that it put the body shop in control of the parts procurement process, which is where control should be. The body shop is the customer in the procurement process. PartsTrader allows the shop to act like the customer. The shop has a need (actual parts that can be purchased now), it communicates that need to the market in a matter of seconds, and the market responds with commitments as to availability, quality, delivery time and price of the required parts. The shop then makes an informed decision based on all the data available to them in a matter of minutes through a state of the art tool built around the repairer’s objectives.
If suppliers fail to meet their commitments, the shop has the ability to rate the suppliers’ performance, impacting that supplier in the future. If a supplier successfully meets their commitments on a regular basis, they receive favorable ratings, and therefore likely increase their business in the market. For the shop, a procurement process that typically requires an estimator to be actively involved in phone calls and database searches, not to mention being put on hold and leaving messages, for upwards of 30 minutes to an hour per vehicle, can now accomplish the same task in a matter of minutes, with far greater accuracy.
Autobody News: When will the program go live across the country?
Dale Sailer: PartsTrader is in the process of developing a national rollout plan. We can’t specifically provide dates or locations at this time.
Autobody News: Thank you.