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Mixed Reviews

Shops that participated in the test of State Farm’s parts ordering program have widely differing views of it.

Kathy Hults gives a big thumbs-up when asked about the electronic parts ordering system she has been using for several months as part of State Farm’s test of a new parts program.

“I love it. I think it’s a lot easier,” said Hults, who along with her husband owns and operates Pike Collision Center in Indianapolis, Indiana. “We now use (OE Connection’s) CollisionLink for everything, not just State Farm jobs. It’s a lot easier to track.”

A San Diego shop owner has a decidedly different take on the whole State Farm electronic parts ordering test.

“For us it’s a lot more cumbersome,” said the shop owner, who didn’t want her name used. “It doesn’t cost us any money out of pocket but it costs us money as far as employee time. And we’re not getting anything out of it. We’re not more efficient. And our cycle time has suffered. It has actually delayed some jobs.”

Such widely disparate views were what INSIGHT heard as it spent several days talking to shop owners and managers in the two markets in which State Farm tested the new program over the last couple months of 2007 and first two months of 2008. Slightly more than half the shops we spoke with had generally positive things to say (albeit often with some reservations), while about 40 percent gave the program an all-around thumbs-down.

Here’s the good, the bad, and the ugly of what they had to say.

Nissan ends discount for now

Under the test, Select Service shops in the San Diego and Indianapolis markets were required to order parts for State Farm jobs electronically using two systems: InfoMedia’s Auto Parts Bridge for Toyota parts, and OEConnection’s Collision Link for all others.

State Farm had negotiated discounts of about three percent from at least six of the largest auto manufacturers, and had said that each discount was arranged in such a way that it would not eat into the shop’s profit percentage (nor in actual dollars on any given part).

When State Farm announced in late February that the test was concluded and that an evaluation period of several months had begun, the shops were told they should continue to use the electronic parts ordering systems for State Farm jobs.

They were also told, however, that Nissan would not continue to offer the State Farm discount – a move that State Farm has characterized as not necessarily long-term. State Farm’s George Avery said each automaker had the option of halting the discount after the test while the program was being evaluated and before deciding how to proceed.

With the impact of the program on parts profit as a key concern for many collision repairers in the industry, that was among the first topics we discussed with the dozen or so shops with which we spoke about their experience with the program.

Did it impact your parts profit?

Although they varied in the degree to which they were verifying this, all of the shops INSIGHT contacted were relatively confident that they were ending up with the same profit dollars (not just the same percentage on a lower list price) on their parts ordered through the State Farm program.

“I would not let the guy from OEConnection leave our shop until I understood how the State Farm discount is being paid for,” one San Diego shop owner said. “We do not lose.”

What can be challenging, some shops in the test markets said, is that different OEMs/ dealers show that discount in different ways – line-by-line on the parts invoices, for example, or as a single line-item discount at the bottom.

How do the two electronic parts ordering systems compare?

Many of the shops said they could definitely tell they were part of a “test” in that the technology wasn’t always up to the task. Many shops mentioned that the Toyota Parts Bridge was not functioning during part of the test period.

“It was a fiasco,” one California shop owner said. “It wasn’t reading supplements.”

Despite that, shop owner Hults seemed in the minority in saying she preferred the CollisionLink system. Most of those INSIGHT spoke with found more to like with Parts Bridge. It was faster, they said, and as Greg Carter of Carter Collision in Santee, California, pointed out, it is particularly helpful in that it offers direct access to Toyota’s parts catalog.

Well over half of the shops INSIGHT spoke with said they have used the systems only for State Farm jobs, preferring traditional parts ordering methods for the rest of their jobs. One problem with this, they said, is that Parts Bridge uploads information on all Toyota jobs in the shop’s system, not just State Farm jobs.

“For non-State Farm jobs, I’ve been asking the dealers how they’d prefer to get our parts orders,” said Brian Orr, second-generation owner of Jack Orr’s Autobody in La Mesa, California. “They don’t ever tell me to send it through OEConnection. It’s more work for them.”

Did switching to electronic ordering force you to change parts vendors?

Every shop INSIGHT spoke with said all the dealers they had previously done business with were set up to accept parts orders electronically by the time the State Farm test began. Only one shop manager said the test led her to switch vendors.

“A couple of them we did switch because they just weren’t checking their CollisionLink often enough and I pretty much had to baby-sit them,” Crystal Abele, assistant manager of Collision Repair Specialists in El Cajon, California, said.

How did it impact your shop’s efficiency?

State Farm has contended all along that electronic parts ordering is as much about helping shops improve efficiency as it is about the parts discount. A few of the shops INSIGHT spoke with said that argument has some merit.

“It’s an efficient tool,” Carter said. “Even if State Farm stopped, we would still want to use it for parts ordering. Our accuracy has gone way up and returns have gone down.”

Carter, whose company has two locations (one in a dealership) and annual sales of about $6 million, said he was able to eliminate one parts-related position within his company because estimators can handle more of the parts ordering using the system.

“I have to tip my hat to State Farm because I think it has helped our operations,” Carter said.

Hults, too, said she liked being able to use the system to check the status of orders at any time. She sensed the system has been more frustrating for dealers than for her eight-employee shop, and said she had not seen much change (up or down) in the number of incorrect parts the shop has received.

But aside from Hults, Carter and one other shop owner, the others said electronic parts ordering had, at best, a neutral impact on their shops’ efficiency.

“We still get just as many wrong parts and double orders,” Abele said. “It didn’t fix anything.”

Like others, she has also seen it add a day or two to some repair jobs.

“If the dealer doesn’t have the part but another does, they won’t go get the part there because they can’t get that three percent because that other dealer is not part of the program,” she said. “So they have to order it from Los Angeles or the warehouse, and we end up waiting for that part.”

One San Diego shop owner complained that the OEConnection system requires that supplement parts be ordered from the same workstation used for the initial parts order.

“So now we have to mark down which computer we ordered it on,” she said. “Overall, it’s a lot more steps for us. State Farm is the only one benefiting. They’ve put a burden on the shops, whether they believe it or not.”

An Indiana shop owner who asked that his name not be used said he had been bordering on the need for a full-time parts person but that the State Farm program made it a necessity.

“Always before the file handler did it all,” the shop owner said, saying he prefers that system because it ensures the customer can speak with one person at the shop who knows everything about the status of that job. “C’mon, State Farm: You’re really worried about us being more efficient?”

Shop owner Orr agreed the system is not as efficient as he would like, but compared it to the early days of computerized estimating.

“I see this an inevitable part of progress,” he said. “And I do believe at some point it will work.”

Although State Farm has said the program is not tied to any decision it may make about once again calling for the use of non-OEM parts, Orr said that issue makes him willing to invest extra time at the shop to use the electronic parts ordering.

“Because when it comes to the extra time it takes to deal with aftermarket parts, and the reduced quality of repairs with aftermarket parts, a little bit of extra time dealing with a parts system so that State Farm can get their discount is something I’m willing to put up with,” Orr said.

Where next?

State Farm’s “evaluation phase” of the program is expected to last several months. Although many industry observers predict the program will then begin to be implemented in other markets, State Farm says no decision has been made about whether, when, or where that will happen.

“I think people are starting to realize that electronic ordering is the way we need to go,” State Farm’s Avery said. “The trouble is not everybody is ready to do that.”   o

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