Collision repairers were loud and clear in voicing their displeasure with the State Farm pilot parts procurement program based on the PartsTrader platform. About 20 industry members spoke against the program.
Avery kicked off the CIC Parts and Materials Committee meeting by summarizing and defending the pilot program.
“We give $3 billion to purchase parts (every year),” Avery said. “We handle 35,000 claims per day. We are a mutual company, which is owned by the policyholders. We have a moral and legal obligation to make sure that money is spent in a prudent manner. We are not interested in short-term gain for our customers. We are interested long term for our customers.”
Avery said that State Farm did not expect a dramatic decrease in cost of repair or dramatic changes in cycle time. He said that State Farm is not a company that routinely asks repairers for discounts on repairs.
“We did not expect open arms,” Avery said. “We know change causes ripples. We know we are getting into your business. However, in a previous test with OEConnection, we maintained the repair facilities parts margin. We know how important that is.”
Avery said that after putting out a request for proposal and selecting PartsTrader, they spent over a year developing the format. “We asked repairers, dealers and suppliers to help us build this tool, and they did. We just concluded our feedback phase last week with repairers and are evaluating that now.”
Avery said he was surprised by some of the harsh feedback.
“We did not expect emails, calls, and faxes with inaccurate and misleading information. We did not expect press releases from groups beyond select service repairers. We did not expect to lose 17 repair facilities in one of the pilot markets (Birmingham, Ala.)" Those 17 did not use the tool, they just did not feel it was good for the industry, Avery explained after the meeting.
Cooper followed up with a detailed explanation of the PartsTrader program, emphasizing its user-friendly features designed to put repairers in control of the parts purchasing decision. Among the points he made is that repairers can buy from whatever supplier they want, repairers don’t have to buy the cheapest part, and parts suppliers get in the system through recommendations from repairers.
But repairers were not buying what Avery and Cooper were selling. Lines formed quickly during the open microphone session as many attendees waited to ask questions. About 20 repairers, association leaders and consultants spent the next 90 minutes questioning and criticizing State Farm’s pilot program. None of them spoke in favor of the program.
Aaron Schulenburg, executive director of the Society of Collision Repair Specialists, said other parts vendor companies chose to compete by providing a value proposition, and let the customers choose to use their service based on merits and value.
“The real issue is how they came to the market,” Schulenburg said. “A large insurer hired them to create a solution that they designed to address a perceived problem. We see no benefit to repair shops being forced to use this. When insurers mandate solutions that benefit only them, that’s bad for the industry and a step backward for State Farm.”
Dave McBroom, president of the Florida Auto Body Collision Alliance and also representing the Florida Automobile Dealer Association, said the program is a failure.
“I’ve spent extensive time with shops and vendors, some involved with the pilot program and some not, that are trying to make a decision on what to do,” he said. “I spoke to many who have said it is inefficient, cumbersome, creates additional work, and requires additional personnel at shops and at vendors. Most are losing gross profit dollars. Some refuse to participate in the bidding process. Used parts bidding is a total disaster. This is not good for this industry.”
Rick Starbard, president of the Alliance of Automotive Service Providers (AASP) of Massachusetts and president of AASP National and owner of a Boston area body shop. “When insurers meddle in relationships between us and our customers, they cause irreparable harm to our industry. This product is redundant. We can do everything shown today through our own management systems. We survive on parts profits. What we get for labor is peanuts.
Tony Passwater, president and owner of AEII Consulting, said the program is not needed because the parts procurement model in the United States is efficient and repairers have trusted relationships with existing suppliers. He also said that although it is only a pilot now, it could evolve into a big problem for repairers, likening it to the evolution of the direct repair program model.
Denise Caspersen, who leads the collision repair group at the Automotive Service Association, said State Farm has failed to explain how the new program will benefit repairers. She asked Avery that question and he did not have an immediate response, but suggested competition in procuring parts would make the industry stronger. When contacted after the meeting, Avery answered the question by saying, "We think it's a win for the repairers to be able to choose from a wide variety of parts suppliers with the ability to edit preferences quickly."