Industry Trends — Mitchell makes predictions about electronic parts procurement
Greg Horn, author of Mitchell’s Standard Bearer industry report makes predictions regarding electronic parts procurement
State Farm’s recent announcement that it would be piloting an electronic parts ordering and procurement program in select areas in the United States with its Select Service repair partners formalizes the ideal that several insurers have long wanted to achieve. To date, State Farm has not commented on when or if the program would be adopted in Canada, but the pilot is just beginning in the United States. Shops have been opposed to previous parts procurement attempts either because the insurers required them to use unfamiliar vendors, or the carrier asked shops to sacrifice profits. Shops also shied away from previous programs, indicating that they were not consulted before the programs were launched. The State Farm program is different according to George Avery, State Farm claim consultant. “As this process developed, we asked for and considered input from members of the collision repair industry,” Avery said. “We believe Select Service repairers will have an enhanced ability to obtain quality parts that allows them to provide customers with the best combination of quality, efficiency and competitive price. And as always, our customers are free to choose which repairer will fix their vehicle.”
This program is also different than some of its predecessors because
it does address one of the key objections of collision
repairers — keeping the profit margin in place. If the repair shop orders parts while enrolled in the program, they will not be
required to sacrifice profits and will potentially see a parts-buying process that will build efficiencies and cut cycle time. However, if the shop chooses to obtain parts outside of the program, it will be required to match the price of the retail parts cost to State Farm.
OEM part makers, on the other hand, favor the program because the electronic ordering process is more efficient and reduces misordered parts, benefiting them by easing the parts ordering process and potentially increasing OEM part utilization. The industry has long needed a wide adoption of an accurate, electronic ordering mechanism that will reduce the hours spent ordering and returning parts.
If the program is successful in the test areas, two things are certain. First, State Farm would likely expand the program to Canada through its Select Service Program, and second, other carriers will use State Farm program as a model to craft their own similar programs.
