Although OEConnection has to be disappointed that State Farm this past summer did not choose to require its “Select Service” shops nationwide to use electronic parts ordering, the company said it still sees plenty of benefits for shops and dealerships in the OEConnection “CollisionLink” product.
“Certainly the expansion of the (State Farm) program would have driven the technology into thousands of body shops,” said Bill Lopez, collision segment director for OEConnection. “But we’re still very much on that trajectory; it’s just not turbo-boosted.”
CollisionLink enables a shop to send parts orders to a dealership electronically. Lopez said the system “scrubs” the parts numbers provided by the estimating system against the VIN and OEM parts information to improve order accuracy.
It also gives the dealership-–which pays for the software, making it available at no charge to the shop-–an opportunity to compete for parts sales listed on the estimate as being filled with non-OEM or salvage parts, he said.
In addition to gains in office productivity and parts order accuracy, it’s the ability to obtain new OEM parts at competitive prices that drives shop interest in CollisionLink regardless of whether an insurer requires its use, Lopez said.
Indeed, Chrysler, Ford, General Motors, and Honda–-and Lopez said he expects a fifth automaker to be onboard this fall-–offer specific programs administered on CollisionLink to make new OEM parts pricing more competitive.
Under such names as “Match the Estimate,” “Bump the Competition,” and “Body Shop Rewards,” the programs offer incentives to replace non-OEM or salvage parts on estimates with new OEM parts, he said.
“These parts programs now are allowing body shops to buy more OE parts but at competitive prices,” Lopez said.
Although shops can participate in some of the programs, such as GM’s, through means other than CollisionLink, others such as the Honda and Ford programs are available exclusively to CollisionLink users, he said.
Lopez said he recognizes that some shops are concerned about meeting insurer key performance indicators (KPIs) regarding parts use, but he said CollisionLink can enable a shop to have higher use of OEM parts without jeopardizing insurer relationships.
“A shop may have 90 percent OE content, which might be 10 to 15 percent higher than his peers, but the shop’s average severity could still be in line,” he said. “So how could that be? It’s a shop using CollisionLink that’s taking advantage of all these different programs designed to compete on price with the non-OE alternatives.”
A half-dozen automakers had offered a parts discount program directly to State Farm as part of its test of electronic parts ordering (using CollisionLink and, for Toyota parts, InfoMedia’s Auto Parts Bridge) launched in the San Diego and Indianapolis markets in 2007.
The discount was arranged in such a way that it would not eat into the shop’s profit on a percentage or actual dollar basis.
The program was rolled out in 2008 to all State Farm “Select Service” shops in the two states, but the number of automakers offering discounts continued to decline until State Farm halted the discount portion of the test earlier this year.
In announcing in July that it was suspending the electronic parts-ordering requirement altogether in the two states, State Farm's George Avery said the test demonstrated that electronic parts ordering "has value."
Avery also noted that although the insurer had no plans to roll such a program out nationally, the Select Service agreement still gives the insurer the right to require electronic parts ordering.
"We encourage the repairers to use it if they would like," he said. "It works. It has advantages. Now that the test is done, we know moving forward that we have already tested that functionality."
Select Service shop owner response to the announcement was mixed. Debbie Moore of Diamond Collision Services in Avon, Ind., said that despite some glitches with the system over the past year, it eventually worked well for the shop.
“We've been using it on all our orders, not just State Farm jobs, and will continue to do so at least for now," Moore said.
Kathy Hults was also giving electronic parts ordering a big thumbs-up even just a few months into the State Farm test.
“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. She said she liked being able to use the system to check the status of orders at any time.
But a Southern California shop owner who asked not to be identified said State Farm's decision came at an ideal time; he said his shop's server had just crashed and he didn’t plan to reload the OEConnection parts-ordering software on the replacement computer.
"It's kind of been a pain, and some of my dealers really didn't want to mess with it," he said of the parts-ordering system. "You almost always had to do follow-up phone calls (to the dealer) with it, so if I have to do that anyway, I can do without it." Lopez said OEConnection was certainly prepared for resistance from some dealerships and shops to the idea of a change in electronic parts ordering but said that overall, the company sees the industry as ready to adopt e-commerce.
“What we have found through the test with State Farm and the growth of our technology and our OE-sponsored programs is that more and more shops are jumping onboard and taking advantage of these OE discount programs as well as the efficiencies that come with e-commerce, in terms of reduced returns and all the things that come with that: improved cycle time, higher CSI, and things like that,” he said.
For the automakers and dealerships, he said, the technology is “designed to help stem the tide on the erosion of their market share,” as the non-OEM and salvage parts industry use technology to increase visibility and accessibility of their parts.
For shops, Lopez said, the automaker discount programs available through CollisionLink are “an opportunity for body shops to buy more OEM parts while managing their average severity.”
