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Parts Procurement’s New Era

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Don’t worry, Darren Huggins has the answer. 

But, first, picture this: An estimator standing next to a vehicle, tablet in hand, tapping away at an electronic inspection. He checks off the damaged areas, he takes the necessary photos, he finalizes a parts list, and he hits the “order” button.

“And in 27 minutes, your parts are delivered and you can get started,” Huggins says. “How cool would that be?”

That’s not his answer—more of a dream, really—but it does help us get closer to what many see as one of the largest obstacles facing shops today: The inability to get the right parts at the right time in order to make accurate, safe and profitable repairs.

When it comes to pushing work through, “parts procurement is a hassle,” Huggins says.

And throughput is one of his specialties. Huggins’ dealer-owned shops in the Van Tuyl Group topped $200 million in total sales in 2014. That’s a $5.4 million average across 37 facilities, and marks a 125-percent revenue increase from when he took over as national collision director in 2007.

The Van Tuyl shops use a wide variety of procurement tools, from OPSTRAX to OEConnection to PartsTrader to the old-fashioned telephone. It does not use anything remotely close to Huggins’ previously described parts-ordering fantasy. No one does. It doesn’t exist—yet. 

So, here’s the question Huggins has the answer to: How does an industry bogged down by years of old-school habits kill the status quo and allow technology to help break its bottlenecks?

“It would be like taking us from the Flintstones to the Jetsons,” he says, laughing at his own outdated reference. “See? That’s the mindset we’re in.

“If we’re looking at how we fix parts procurement, it’s not going to happen tomorrow. We don’t have that solution yet. But the answer isn’t [whining] about what we have. We need to try what’s there, we need to give feedback, we need to be a part of it. The answer is for this to be repairer-driven.”

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Fighting the Phone

The way Jim O’Leary sees it is that there are two drastically different ends to the spectrum when it comes to the way shops have adapted to modern parts procurement methods.

O’Leary is the vice president of product management for Mitchell’s Repair Solutions division, and part of Mitchell’s daunting task today is to help connect shops to suppliers through the company’s management system (RepairCenter ToolStore is the program).

“On one end of the spectrum, there are a lot of shops that are still ordering all their parts via fax or phone,” he says. “Then, there’s the complete opposite—shops are using certain [computer-based] programs ... to handle all of it, and making improvements in the workflow and cycle times and overall profitability as a result. Of course, you also then have everything in between.”

There’s no consistency from shop to shop, O’Leary says. There is often not even consistency within the same shop. 

“It’s crazy, because as a parts procurement company,” says Alex Adegan, founder of newly formed uParts, “our biggest competition is still the telephone; it’s still a 100-year-old technology that we’re trying to compete against.”

“Change is scary for people,” Adegan adds. “At least, until they can see the value in that change.”

Adoption has been slow moving so far. According to FenderBender’s inaugural Tech+Tools Survey, which analyzed data collected from 509 shops nationwide, just 54.3 percent of respondents utilize an electronic parts procurement system. But, of the 55 percent who say they use an electronic management system, 74.2 percent use an advanced parts procurement tool. 

It’s a mindset issue, Adegan says, and slowly repairers are beginning to take notice. 

It’s been more than a decade since OEConnection launched its first system for procuring OEM parts. OPSTRAX started up in 2005. And a number of others have followed them—uParts, which will be available nationwide in 2015, is the latest. In November, General Motors attempted to throw its hat in the ring, launching—and then “pausing”—its MyPriceLink.com pricing guide for GM parts.

But, 2012 was the year this issue took center stage.

“Parts procurement has suddenly been a very hot topic in the last couple years,” O’Leary says. “PartsTrader certainly helped that. They’ve been the most notable lightning rod.”

The True Cost of a Parts Return Pt. 1

Steve Trapp​, North American strategic accounts manager, Axalta Coating Systems

The first thing we have to do is ask ourselves, why are we returning the part and what can we do to eliminate it? Before we can calculate the cost of having to return a part, there are two absolutely crucial steps that need to be a part of any parts order:

Step 1: Be judicious when you click—and by that, I mean really think about what happens when you click “order” for a part. Imagine that click sends an order to a plant in Detroit to create the part; then it gets shipped to a dealer; then it’s processed, stored and filed; and then the employees at the dealership take that order and go through the process of delivering it to you. Have you really done everything to ensure that it’s the correct part and it’s really needed? Or are you wasting that logistical system when you pull the trigger? Be completely sure of your orders.

Step 2: Mirror-match correctly, and immediately. Go through the process of checking-in your part and ensuring it’s correct before the delivery person leaves. If the part is damaged or wrong, you can simply hand it back to your delivery person, the vehicle isn’t thrown into process, and there are no delays. 

These two steps will eliminate just over 50 percent of all parts returns that shops see on a regular basis, and it eliminates the wasted time and labor costs. 

The PartsTrader Phenomenon

“No one likes being told what to do, we get that,” Dale Sailer starts. “We’re very sensitive to that. We understand that, even if they recognize a product has great value, they’re going to push back on principle as an ‘I’ll show them.’

“Well, all we’re trying to do now is show them that value we can provide.”

To many, Sailer is the bad guy, the president of business development for the collision repair industry’s most controversial company, PartsTrader. He’s out to change that perception—or, at the very least, help industry professionals better understand what it is PartsTrader actually provides.

“It’s a product, a product that can help your business,” he says. “That’s all.” 

PartsTrader has undoubtedly been the industry’s most talked about company since it first arrived in the U.S. in 2012. But that’s more for the way it arrived: The U.S.’s first introduction to PartsTrader was through State Farm’s mandated use of the program for its Select Services shops.

PartsTrader used the same tactic when it first launched more than a decade ago in New Zealand, partnering with insurance giant IAG in a similar fashion. Today, nearly 90 percent of all New Zealand shops use the program, a large portion of which do it voluntarily. 

Roughly 8,500 shops in the U.S. are using PartsTrader today, about 90 percent of which are Select Service shops.

PartsTrader CEO Rob Cooper says that pushback was inevitable in the U.S. Building “critical mass” is essential to being effective and efficient in a marketplace, though. The idea, Cooper says, was to make sure the product gets in front of people. Then, it’s their job to convince everyone of the value.

“Once you accept electronic parts procurement as a reality—and it is—the status quo of the industry is going to change,” Cooper says. “So, now it’s finding as much value in a system as you can to help your business succeed. We feel that our product provides the best value.”

Boots on the ground is the approach of the company today. They want to help the industry push forward. 

While not wanting to comment on the merits of PartsTrader or its business plan, O’Leary did say that the company has indirectly done the industry a service. 

“In the end, it could be a positive in that it motivates the industry to improve the possibilities around the supply chain,” he explains. “It’s woken a lot of people up.”

The True Cost of a Parts Return Pt. 2

Steve Trapp, North American strategic accounts manager, Axalta Coating Systems

Now, despite those first two steps, things can still go wrong that can cause a part to be incorrect or unneeded after the delivery person leaves your shop. If that is the case, there’s a basic way to look at how much this will cost you.

There are three main stages in a parts return; each takes time and costs you money:

Identifying the Line on the Invoice. You have to locate the actual invoice, photo copy it, highlight the line, attach it to the part, and log it back into your management system. It can sound simple, but by our research, it takes a shop roughly 14 minutes to complete this.

Filing the Pending Credit. You have to call the dealer, go over the statement and make sure the credit to your account shows up—and that the process for ordering the correct part is put into place. On average, that comes out to just over 20 minutes.

Reconciling the Return. Now, you have to make sure everything matches up, make sure everything is updated and is back in order to proceed with the repair when the new part comes in. That’s, at minimum, another 20 minutes of time.

When looking at those steps, your technician has lost at least 54 minutes of work time—and that’s saying nothing else hindered this process. Let’s say your labor rate is $50–75, that’s a lot of money being lost. This is also saying that the vehicle is not in process yet or that the customer doesn’t have a rental vehicle, and it doesn’t take into account the risk of it being labeled as “work billed, not performed” by an insurer. A single returned part can cost your shop far more than many people realize.


The Vendor Take

Every parts order affects multiple segments of the industry, a clear stakeholder being one of every shop’s most important partners: vendors. FenderBender spoke with two vendors from different regions of the country to get their respective opinions on the current state of parts procurement and what matters most to them.

Vendor 1: [Jacksonville, Fla.]

Alan Rudolph, parts director, Tom Bush Regency Motors

HOW WOULD YOU DESCRIBE THE CURRENT STATE OF PARTS PROCUREMENT?

“Well, it’s a dog-eat-dog world out there. You have State Farm running its own [program] out there, and that’s something that neither dealers nor collision centers like, and it puts parts suppliers in a price-matching war, where we have to try to get every dime that we can. Instead of putting aftermarket parts on things, you’re trying to match as much as you can. And already the profit margin—and I don’t know about every OEM, but it’s definitely true with BMW—seems to be shrinking. … That 24, 25 percent gross profit is just hard to achieve today.”

WHAT IS YOUR PREFERRED METHOD OF PARTS PROCUREMENT?

“The good, old-fashioned way. Knock on doors, word of mouth, giving the best service that you can for the best price you can offer. I’d rather not give my parts away. I’d rather sell my service. That’s what we believe here at Tom Bush is that we sell our service—our ability to get parts quickly from our local facility. … Ultimately, you’re selling yourself as being good, dependable parts people and professional.” 

Vendor 2: [Brunswick, Ohio]

Jeff Boone, wholesale parts manager, Brunswick Auto Mart

HOW WOULD YOU DESCRIBE THE CURRENT STATE OF PARTS PROCUREMENT?

“Honestly, with today’s software and various systems, it seems to work very well if the shop stays up with all the advancements that are taking place. Most online catalogues are VIN-driven now, and most of the software will scrub right to the specific part number of the specific vehicle. It helps a lot, and eliminates a lot of the going back and forth. But, not everyone uses it. We still have a couple shops that don’t even have a computer and handwrite everything. … When systems are put in place, and used correctly, things can go pretty smoothly.”

WHAT DO YOU SEE AS THE FUTURE OF THE PROCUREMENT PROCESS?

“I see more and more of the PartsTrader-style systems coming—the bidding software. I think what we have now could just be the tip of the iceberg for a larger trend of bidding systems. I’m not saying that’s better; it’s just the way I see it going. … All electronics and software advance so quickly, and all the various systems today will always be updating and getting better. More than anything, as long as it helps us better do our jobs and helps with communication between us, the supplier and the shop, that’s what matters.”


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Technology’s Turn

The most significant obstacle preventing shops today from adopting electronic parts procurement as the new norm is a lack of “operational discipline,” says Michael Quinn, the president of uParts. 

Quinn has seen it at every turn in his lengthy career in the collision industry. As the former co-owner of 911 Collision Centers, his then seven-shop MSO in the Southwest, he says the only way to create consistency across a company—whether in one shop or 50—is to have that discipline.

“For example, think of primary vendor utilization,” he says. “In 2011, I had seven locations, and making sure I carved out the best possible deal with each vendor was critical. But then you might find that at one shop, there’s another vendor bringing in baseball tickets to our parts manager and getting them to buy from them, despite our mandates company wide. That’s a variable you can’t have.

“These systems allow for efficiency gains, as it gives a consistent platform. You can take one parts manager from any location, plug them into another, and you’re going to get the same results.”

And Quinn feels the industry is ready for these types of changes. Increased constraints and demands from insurance partners are all but requiring it in order to remain profitable. It’s time, Quinn simply states.

Shops want parts quickly, they want them at the best price, and they need them to be accurate, Huggins says. That’s his focus with his Van Tuyl shops. 

Cycle time improvements and other advancements based on use of electronic procurement are mostly anecdotal, Cooper says. Although, shops using PartsTrader as a primary source for parts ordering have seen return rates drop from far below the industry-wide average of 12 percent to below 6 percent. 

“There are merits to a lot of these systems—good things and some not so good things,” Huggins says. “Either way, the technology that’s out there has really brought this entire thing to the forefront—it’s something shops are discussing now. But no one’s quite found the answer yet.”


A Few Parts Procurement Options

There are many electronic parts procurement options available in the industry, but many industry professionals point to three companies as leading the way in terms of producing an all-encompassing (which would include OEM, aftermarket and recycled parts) solution that provides all-in-one sourcing-to-delivery features. Each can integrate with any management system, each provides sophisticated analytical feedback, and each claim similar repairer-focused intentions. But here’s a brief breakdown of what separates them:

Parts Trader (PartsTrader.US.com)

Differentiator: PartsTrader’s system is predicated on a “bidding” format, in which a parts manager can provide a list of needed parts to a shop’s preset list of suppliers. It provides price, availability, delivery time and supplier reputation ratings, allowing shops to weigh a number of factors in making a purchasing system. 

uParts (uParts.com)

Differentiator: The new kid on the block, uParts will launch nationally in 2015 and will provide a simple, “one-click” solution to the parts procurement process through, what is on the backend, a complex and sophisticated cloud-based system. It can be used on a tablet, smart phone or desktop computer. 

OPSTRAX (OPSTRAX.com)

Differentiator: Founded in 2005, OPSTRAX is the first to the space in the U.S., providing an all-encompassing procurement process. Its DeliveryTRAX program helps to add an additional level of sophistication to its delivery tracking and allows for quick turnaround times from order to delivery.


Finding the Shop Solution

Adegan, who says uParts already has “a couple hundred” Southern California shops testing its program, believes 2015 will be a turning point in more shops turning to electronic procurement programs. 

O’Leary says Mitchell has witnessed an increased interest, as well. And he thinks adoption is a must for shops that want to progress.

“It’s not just parts, the world is moving faster and faster, and what worked 20 years ago will certainly not work 20 years from now,” he says. 

And Huggins is still dreaming of when parts procurement won’t be the bulky bottleneck that bogs down efficiency. Repair professionals need to enter the conversation, though, to push these programs in their favor. They can’t let insurers decide what’s best; they can’t wait for the OEMs or suppliers to figure it out. 

Sitting on the sidelines won’t help shops find a solution that best fits their needs.

“The only way for it to be repairer-driven is to get involved with it, use the programs, give feedback and try to push it forward,” Huggins says. “That’s where the answer will come in.” 


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