Electronic Parts Procurement on the Rise
As more and more shops look to move away from phone, email and fax in their parts ordering processes, repairers nationwide are turning to voluntary electronic procurement methods to improve the accuracy and efficiency of their parts deliveries.
Use of electronic parts procurement methods are on the rise among collision repair shops, says Jim O’Leary, vice president of product management and repair solutions for Mitchell International. The technology has been available for years, but more shops are just jumping onboard. In fact, nearly 50 percent of Mitchell’s RepairCenter shop management customers signed up to use the company’s electronic ordering function through its ToolStore portal by the third quarter of 2013, up from 7 percent in the second quarter of 2012.
“Shops are becoming more comfortable with the technology, and are considering it to be more part of life,” O’Leary says. “Smart application of technology can lead to higher profits, more effectiveness and less waste in the system. The part-ordering process is absolutely part of that cycle.”
Several other providers of electronic parts solutions are witnessing increased interest among shop operators, too. Michael Quinn, vice president of uParts Inc., says the company now has 300 Southern California users in its database—a “15-fold” increase since April 2013. And the company has plans to expand nationwide this year. David Boden, vice president of CCC Information Services’ parts services group, reports weekly increases of shops signing up for its online parts portal.
“If you look at fundamental flaws in shops, one of the biggest offenders is parts solutions due to mistyping or miscommunication. Electronic systems are integrated directly with shop systems, so there is no chance for data translation errors. We’ve already seen improvements in reduced returns,” Boden says. “We see more [users] every day. Week over week, there is a constant increase in the number of parts ordered electronically versus ones that aren’t.”
It’s a trend that O’Leary, Quinn and Boden all believe will continue to increase moving forward. And it’s one that shop operators nationwide must pay attention to as the need to efficiently monitor quantitative business metrics and supplier performance increases in the industry.
The Shop Perspective
Randy Stabler, president of Pride Collision Centers Inc. in California, says using the phone, email or fax does not allow your shop to measure supplier fill rates, order accuracies, return rates or delivery cycle times—all of which significantly affect repair quality, efficiency and cycle times for repairers.
“We need to be able to track data to expand our businesses so that we can build replicable models that don’t get out of hand,” Stabler says.
Stabler implemented an electronic ordering process through uParts in April 2012. He says the ordering system now provides him with metrics on every supplier key performance indicator (KPI).
“It’s all about having the most efficient system to get the right parts as quickly as possible,” Stabler says. “We are now collecting data on the efficiency of our suppliers, and have better data to manage our suppliers.”
Stabler says the ability to track supplier KPIs will give him more freedom to source parts from suppliers of his choice. When insurance companies make requests to purchase parts from a specific non-preferred supplier, he has specific data to prove why it could be more costly in the end due to performance issues.
In addition, Stabler says his shop is now receiving more accurate price quotes up front, fewer communication errors, and reductions in accounting and administrative parts functions due to the ordering system’s direct integration with the shop and dealer management systems.
The PartsTrader Effect
The concept of electronic parts procurement isn’t anything new. Both Mitchell and CCC have provided the services for years, in addition to other tools such as APU Solutions, OPS Trax, PartsCheck Live and OEConnection.
Still, the idea wasn’t a prominent topic of discussion until State Farm Insurance mandated its PartsTrader initiative in April 2012. Although PartsTrader has sparked heated debate around several sensitive business issues, O’Leary says the attention it has received could ultimately prove to be a good thing to move the industry forward.
“For all of the animosity generated among industry participants, it has gotten people to think about ordering parts electronically, being more in control of their parts process, and having better visibility to that,” O’Leary says.
Pushing Online Procurement Forward
O’Leary acknowledges that every shop has its own set of habits, preferred vendors and personal business relationships, which can cause reluctance to accept and adopt a new ordering process. But it will eventually become the main strategy the industry uses for parts acquisition, he says.
“It’s not a question of if, it’s a question of when,” O’Leary says, noting he expects the next generation of shop owners, managers and estimators to widely accept the technology. “As the next generation continues to enter the industry, they will expect to be able to order these things online because they do everything else online.”
Even if your shop has great ordering processes in place right now, Stabler says this is a concept that every shop operator should start investigating and testing. He believes the industry will soon see a wider adoption of electronic parts procurement requirements among several insurance partners.
“We had better understand it. This is part of evolution. The future is going to be different from the past. The more you embrace the future, the more you can set yourself up for success rather than becoming extinct,” Stabler says. “It’s funky and it slows you down a bit to learn, just like when you first went from pen and paper to computer. But in the long run, it’s progress. It’s going to be a more efficient, holistic method.”
More Shops Using Mitchell’s Online Parts Portal
Jim O’Leary, vice president of product management and repair solutions for Mitchell International, says usage of electronic parts procurement strategies started rapidly increasing in 2012. The rate of adoption among collision repair shops has been “striking,” growing each quarter, he says.
The data below reveals the percentage of Mitchell’s RepairCenter users that registered for Web-based parts procurement functions through the company’s ToolStore application from the second quarter of 2012 through the third quarter of 2013.