State Farm expands parts ordering pilot to Chicago

Jan. 1, 2020
State Farm is expanding its electronic parts

procurement pilot program.

State Farm is expanding its electronic parts procurement pilot program. According to the insurer, Select Service shops in Chicago will begin using the PartsTrader solution in December.

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"The Chicago metro area was selected because it is so much larger than the other four markets where we are using the program now," said State Farm spokesperson Dick Luedke. "We wanted to try scaling the program and the technology in a larger market."

There are approximately 450 shops in the Chicago area, compared to 150 shops in the other four markets where the program has been deployed. Those locations include Tucson, Ariz.; Grand Rapids, Mich.; Birmingham, Ala.; and Charlotte, N.C.

Last week, State Farm also issued a letter to its Select Service members providing updates about the electronic parts ordering program, as well as a "frequently asked questions" document that addressed some of the elements of the program that have caused the most controversy among shop owners.

Among the issues addressed: whether the insurer can see pricing and margin information (the company says it doesn't have visibility into those figures), efficiency issues, quote timing, supplier selection, and supplier access to price quotes.

While State Farm has touted the Web-based ordering system as a way to improve efficiency and reduce costs in the parts procurement process, many shops have complained that the program actually introduces inefficiencies, causes delays while shops wait for price quotes, and gives the insurer too much control over parts ordering and parts margins.

As far as the inefficiency, the insurer says that those claims are "inaccurate."

"The process to create a quote takes only a few mouse clicks," the letter states. "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. Like many new technologies, it takes time to gain efficiencies. A racecar may not turn its best time on the first lap … We are convinced that over time, repairers will also gain efficiency with the use of the PartsTrader application."

The letter goes on to emphasize that State Farm does not require shops to use specific suppliers, or to accept the lowest priced parts. The repairer will always maintain control over which supplier(s) is(are) selected for parts purchases. 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.

Suppliers that do not participate in PartsTrader can be contacted via fax from the solution, and participation in the program does not affect a shop's Select Service scorecard, outside of the impact the system may have on other metrics (like efficiency and pricing).

Since suppliers cannot see other suppliers' quotes, and because the pricing information is not available to shops until after the quote period has closed, State Farm also stated that "at no point does the PartsTrader tool involve a 'reverse auction' or bidding process."

In its letter, State Farm stated that the company is "working with many collision industry participants on further development of the application, addressing concerns and making improvements."

On Monday, PartsTrader announced upgrades to its solution that were made, in part, as a result of feedback from the State Farm pilot and that address some of these complaints.

"Our product users, Advisory Council and additional independent researchers have helped us to incorporate creative, solution-driven enhancements to the PartsTrader platform", said Rob Cooper, PartsTrader CEO in a press release. "Through the feedback and participation of our industry, we're co-creating a more productive product for collision repairers."

First, the solution provides more flexible time windows for pricing quotes. For State Farm participants, the default quote time is two hours, although shops can reduce it to one hour. According to the company, the PartsTrader system can now support a quote window as short as 30 minutes. The modification, now being tested in two markets, will allow repair facilities to proceed with the repair process in "half the elapsed time previously required."

The system now also allows a repairer to extend the time window in 30 minute increments if they did not see as many quotes as they expected, or to include placeholder quotes for favored OEM dealers. These improvements allow repairers to consider other supplier options without delaying the process, and can "produce additional opportunities for suppliers to present their available inventory."

"These latest changes to the PartsTrader application reflect our commitment to ensuring that collision repair personnel are as efficient as possible during their busy day," said Dale Sailer, PartsTrader's vice president of business development.

Pending updates include two-way estimatic integration, repairer and supplier management reporting, and a new feedback/ratings system.

According to Luedke, State Farm does not plan to extend the pilot to any additional locations in the near term. "There is no timetable for further expansion," Luedke said.