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Thursday, 09 August 2012 19:10

CAA Has Concerns with State Farm's Parts Bidding Program; Will Shops Only Choice be to Adapt & Survive?

The California Autobody Association released the following statement on August 8:

The California Autobody Association's (CAA) Executive Board has been evaluating the State Farm Parts Bidding program over the last few months and has concerns with the anticipated roll-out of their parts bidding program in California. This program is currently in a pilot test in four small regions, Grand Rapids, MI; Tucson, AZ; Birmingham, AL; and Charlotte, NC. (but not in California as of yet).

For CAA members that are not aware of this program, State Farm launched a parts bidding pilot program earlier this year with 158 of their Select Service direct repair shops. These shops are required to source parts from vendors through PartsTrader, using their web-based parts procurement program in which vendors bid for the order. State Farm has stated that their new program should improve parts availability, process efficiency, order accuracy, and create a better experience for the customers.

Although it is still in a pilot test, all indicators show that this program will affect profitability on parts purchases, additional administration time, and will affect overall shop efficiency. George Avery, Auto Claim Consultant for State Farm, stated "the pilot is still being evaluated and State Farm and PartsTrader are working to correct problems and mitigate concerns."

This new program would be part of a shops Select Service direct repair agreement. Since State Farms pilot test announcement, this program has created strong controversy from both the shop side and the parts supplier side.

Although shops and suppliers have little control in how this program will eventually roll out, there is a larger issue to address. There has been a strong commitment from the collision side over the last few years to focus on better business practices and stronger efficiencies. At some point, the reality sets in that this is as far as it can go. Shops have worked hard over the years to develop strong parts vendor relations that benefit both sides. To implement a new program that changes this could hurt everyone involved. The CAA believes that shops know their marketplace and are working with the best vendors available to provide quality, safe parts for their customers. Up to this point, nothing has come out to show that the shop will benefit by participating in this program.

The CAA's state executive board feels that the current State Farm parts bidding program, although part of a shops DRP agreement, takes away from the shop's right to manage the efficiency and profitability of their business and the overall operation of servicing the customer. No matter how you look at the current proposed program, the shop will be the one to adapt and figure out how to deal with reduced profits, higher overhead, and the loss of long time vendor relations.

In the end, shops make tough, challenging decisions every day on how their business adapts to changes. Some shops will be faced with evaluating this new program and making a business decision on how this fits into their overall business model.

The CAA will continue to evaluate this program and provide members valuable information.

For additional information, contact the CAA state office (916) 557-8100 or check the website.

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