Evaluating Electronic Parts Procurement
Electronic parts procurement has become one of the collision industry’s most widely discussed topics since the implementation of State Farm’s system through PartsTrader. But while the increasing presence of insurance companies in the procurement of parts has dominated discussion, the Collision Industry Conference’s (CIC) parts and materials committee recently announced a new initiative to look at electronic parts procurement systems from a more objective perspective.
The committee has planned an electronic parts procurement system grid-style matrix that will allow repairers to compare and contrast the features of various parts procurement systems. The committee hopes to create a practical tool that allows shop owners to better educate themselves about the systems.
Karen Fierst, principal of KerenOr Consultants and co-chair of the CIC subcommittee charged with developing the matrix, discussed the new initiative and the benefits of the matrix and electronic parts procurement at large.
What is CIC’s past involvement in the electronic parts procurement issue?
The topic of electronic parts procurement has been ongoing at CIC. In January of 2011, the CIC body indicated a desire to learn more about electronic parts procurement. At the time, the topic was assigned to CIC’s parts & materials committee, which had an alternative parts sub-committee. Together with Mike Kunkel of Team PRP, I was one of the co-chairs of that subcommittee. Julian Hart of 1-800-Radiator and Mary Lou Lubrano of Car-Parts.com also expressed an interest in this topic and we started talking about ways to educate the body about electronic parts procurement.
—Karen Fierst, principal, KerenOr Consultants
In our discussions, we talked about the fact that it would be really good to compare and contrast the different features of the companies and systems that are involved. We came up with the concept of a survey and we developed a number of questions to survey the various companies.
Once we had collected all of the information and we started to analyze it, we realized that we probably were not asking the right questions to provide a benefit for the body. While we were analyzing, we realized it was important to be able to identify the companies, not just the trends. In January of 2012, we presented our findings at a CIC meeting and recommended that a follow-up survey should be conducted.
In April of that year, electronic parts procurement exploded into a very hot topic as a result of State Farm’s implementation of PartsTrader. At that point, our subcommittee’s work was shelved in the interest of what was going on with CIC in regard to the larger issue.
How did the idea for the matrix come about?
At the end of last year, a number of us were just talking and we realized there really is an appetite to understand these companies better than we do right now. We proceeded to identify people to work on the subcommittee to further explore this issue. The group includes Mary Lou Lubrano, Mike Kunkel, Michael Quinn of uParts Inc., Ken Weiss of PartsTrader, and Aaron Lofrano of Lofrano & Sons Collision Centers. We wanted a diverse range of members with the intent of understanding and collecting the type of information relevant to repairers.
The idea of doing a matrix seemed like the logical next step after the first survey. We want to identify the companies and we want to compare and contrast the features of the different systems offered. Based on our previous experience, we realized we needed to develop an effective survey tool. We have spent a lot of time developing these 30 questions as part of the survey and polled CIC attendees in July to verify the direction and relevance of the categories and the types of questions.
What kind of information will the matrix include?
There are seven categories of questions:
1.) Participation. What’s necessary for a company or shop to participate in the program?
2.) Parts request/lists/quotes. How is that done within each of these systems? Who gets the repairers’ parts request? Is it only the vendor or does the insurance company see it too?
3.) Data reliability. This is a significant issue with companies that present a catalogue that is not updated live. So a product may appear on a parts request and the distributor says it’s in stock, when in reality, it’s no longer on the shelf. In that case, it is not uncommon for the shop to receive something that is not exactly what they ordered. For example, there is a lot of confusion in the marketplace about aftermarket parts and certification programs, which is mainly due to a lack of education both on the shop and the parts supplier level. This can cause problems in terms of properly and effectively understanding, communicating and delivering the part that is actually needed. Receiving the wrong parts is a big deal and it can affect cycle time, KPIs, rental car days, etc.
4.) Transactions. How are the transactions being conducted? How do the parts search and other processes work? How are returns handled?
5.) Audits and feedback about the suppliers. Does the product allow for user feedback? Is there a periodic audit of suppliers and if so, what are the criteria for that audit?
6.) Integration. Does the system integrate into existing management systems? Can it return search data back to the estimating system? Is it CIECA-compliant?
7.) Payment. Who pays for the service?
What is the goal of the matrix? How will it be beneficial for shop owners?
We believe that by creating this matrix, it will allow them to choose an electronic parts procurement platform that is best suited for their particular operation or help them identify the types of questions they might want to ask as they shop for an e-procurement product.
Right now, electronic parts procurement is a much bigger topic. It’s far broader than this matrix, but there are already multiple players out there and we felt that development of a tool to understand the marketplace is very valuable.
When will the matrix be available?
The information will be available at the next CIC at SEMA this fall. After that, it will most likely reside on the CIC website and will be available for public use.
Why did the committee not include the insurance involvement and free market issue in the survey process?
As we indicated, the PartsTrader initiative has created a lot of emotion surrounding this issue for repairers. We chose to continue an unemotional discussion about electronic parts procurement. That doesn’t minimize the fact that there is huge concern among repairers about insurance-mandated programs, whether they are Customer Service Index, information providers or vendors. Repairers have a real concern about insurer involvement in the day-to-day business of running a shop.
Having said that, we decided we were not going to address that issue. We felt that, in addition to the very understandable emotional side of the issue, there is also a marketplace side that should not be ignored in the heat of the moment.
How do you see attitudes toward electronic parts procurement evolving?
Historically, it has taken a long time for shops to adapt to new technologies. For example, it was a challenge going from ordering parts using the telephone to ordering via the fax machine, or going from writing estimates by hand while referring to the estimating manual to electronic estimating based on information provided by the information providers. There are a lot of shops that would prefer not to use electronic parts ordering. They are concerned that using an electronic procurement product may result in them not being able to use their trusted vendors.
However, if you look at other industries and other products, there are proven efficiency gains when two parties have the appropriate system that allow them to more effectively communicate.
It is very clear that electronic parts procurement will become more and more pervasive. When you look at the introduction of electronic estimating systems into the industry, there was also a lot of emotional debate and pushback.
Electronic parts procurement is another evolutionary step in the industry. I don’t want to minimize the emotion or concern that shops have, but their emotion seems to go beyond the actual software tool, and focuses more on the way the tool can be mandated. We’re trying to shed light on the greater issue of the product and usage of the product. We want to give repairers the information and the knowledge to make more informed decisions.