State Farm release_notess PartsTrader update
Sept. 14, 2012—State Farm Insurance this week sent a letter to each of its Select Service shops to offer the latest updates and answers to common questions surrounding the company’s parts procurement pilot through PartsTrader.
In the letter, State Farm said it believes customers will benefit from competitive pricing, high quality parts and a strong parts supply chain for auto repairs. The company said the PartsTrader platform will ensure that State Farm can work with repairers to fix more cars rather than total them.
“State Farm believes technology is changing the driving experience and customer expectations. While we don’t know what the future holds, trends suggest changes are ahead for insurers and repairers,” State Farm said. “We understand that the ideal ordering solution for repairers will leverage the benefits of technology to provide the opportunity to locate the highest quality parts, at the most competitive prices, as quickly as possible.”
State Farm offered the following information to its Select Service shops in attempt to address “misunderstandings and misgivings” that many people have developed regarding the program:
• Pricing information: State Farm said it cannot see repairer costs or part margins within the PartsTrader tool.
• Efficiency: State Farm said repairers have commonly asked how PartsTrader can increase efficiency after hearing that it takes longer to order parts through the program. The company said that information is inaccurate.
“The process to create a quote takes only a few mouse clicks. While there is a waiting period to allow suppliers to submit their available parts and pricing to the tool, that time is not ‘active’ for the repairer, unlike the phone calls, faxes and follow-ups common to the industry today,” State Farm said. “Like many new technologies, it takes time to gain efficiencies. A racecar may not turn its best time on the first lap. When computerized estimating first appeared in the industry, many thought it would take longer than handwriting an estimate—and for a time, it did. In time, electronic estimating technology increased efficiency. We are convinced that over time, repairers will also gain efficiency with the use of the PartsTrader application.”
• Quote pricing time: State Farm said the default time for parts suppliers to respond to price quotes is two hours, but repairers can reduce that to one hour. State Farm said future program enhancements based on feedback from pilot participants will allow repairers more flexibility with quote times.
• Supplier selection: State Farm said it does not require shops to use certain suppliers, and there are no requirements to purchase the lowest priced parts.
“The repairer will always maintain control over which supplier is selected for parts purchases,” State Farm said. “Among the many options available in customizing the tool, you can include or exclude suppliers as you wish, including selecting a single supplier with whom you prefer to do business.”
State Farm added that shops are also able to work with parts suppliers that do not participate with PartsTrader. The tool includes an option for shops to send faxes to any designated supplier.
• PartsTrader impact on Select Service scorecard: State Farm said overall performance of Select Service shops will continue to be monitored using its existing Repairer Performance Management (RPM) report—which focuses on quality, efficiency and competitive price.
“To the degree that repairers utilize the PartsTrader application to improve these elements, the technology can improve their overall performance,” State Farm said.
• Supplier access to price quotes: State Farm said parts suppliers cannot see price quotes and information provided by other organizations.
“Further, repairers can only see the pricing information after the quote period has closed. Protecting the integrity of the quoting process is an important aspect of the program, and at no point does the PartsTrader tool involve a ‘reverse auction’ or bidding process,” State Farm said.
State Farm’s letter went on to state the following:
“As we introduce electronic parts ordering, it may be helpful to review the tenets of the Select Service program. As you know, the pillars of Select Service are quality, efficiency, and competitive price. Select Service repairers are encouraged to balance these three important considerations in serving our shared customers.
“The electronic parts ordering pilot does not change the basic components of Select Service; in fact, we believe the process will aid repairers in optimizing performance and repairing more vehicles. Now and in the future, measurements of performance will continue to weigh these important considerations in evaluating repairers, who will continue to manage their performance to demonstrate this balance.
“With several billion dollars of policyholders’ premiums spent on repair costs every year, we continue to manage our business effectively and efficiently by seeking out those repairers who will work with us to meet the needs of our customers.
“As you know, State Farm has chosen to work with PartsTrader as a technology vendor for electronic parts ordering in Select Service facilities in four pilot markets. Feedback from these markets continues, and discussion of the pilot has spread industry-wide.
“Along with PartsTrader, we are working with many collision industry participants on further development of the application, addressing concerns and making improvements. We look forward to many resulting enhancements. While we believe the pilot demonstrates our commitment to meeting changing marketplace conditions and customer expectations, we also understand that this process has resulted in some misunderstanding and misgivings on the part of many.”