State Farm – Parts Trader: It’s about losing profit, control, and your very survival

The following is an Op-Ed piece from Scott Biggs with Assured Performance outlining his take on the new State Farm parts
bidding process currently being testing in four markets.

State Farm’s latest entry into the parts business is more threatening, robust and all consuming than anything attempted in the past. In my opinion, this program will destroy the OEM list price, funnel all of the shop and dealers confidential pricing, discount and profit information to the insurer, undermine the OEM parts distribution network, wipe out thousands of OEM wholesale parts dealers, give control of parts pricing to State Farm and other insurers, and eventually eliminate the shops profit on parts. The shop’s and OE wholesale parts dealer’s survival is now in serious peril. This is a crisis of unequaled proportions. And, that prediction is mild compared to my worst fears!

After researching and listening to the explanation of the program, I came to the conclusion that this is the biggest overreach in auto physical damage (APD) insurance history. I drew the conclusions not because of what they have said or what they will show you today, but rather what they didn’t want to say, and what they try to avoid saying. Based upon 28 years of watching how these things go, I speculated about the logical next steps these initiatives always take. I also looked at what they are doing in the construction industry where contractors only get a 10% material handling fee if they are doing work under state farm’s version of DRP in housing rebuild.

As I heard the State Farm spokesperson say they would continue with their roll out of the parts “Trader” program regardless of the market reaction, it sent a shiver up my spine. I could just hear the quote “Resistance is futile, you will be assimilated,” depicted in the movie Star Trek Universe. The evil Borg took over as they linked the humans into their “one-mind” machine. The parallels are obvious. The Borg were soul-less cybernetic organisms and used forced “assimilation” onto everyone they conquered. They forced electronic connection to the “hive mind” and mother-ship where all control was maintained. Their mission was to “achieve perfection” by eliminating anything they interpret as inefficient. They did it on behalf of their perception of the greater “good.”

Read the rest of Scott Biggs’ commentary. Click here.

3 Responses to State Farm – Parts Trader: It’s about losing profit, control, and your very survival

  • Brian Couch says:

    They tried the first version in Indiana and California not long ago. As a guy with five employee’s, I hated it. I didn’t need the organization rammed down my throat since I could handle what I had quite well. Eventually, the co-operating oe parts suppliers bailed. Experiment failed.It was just another time wasting trick by the latest greatest young minds they could hire to figure it out. They can afford those types of gambles.And….. they used a system that was already in place.The parts industry had the upper hand and it won out once they saw no advantage sresults from being on the program. The people at Honda never joined in. Some of the other oe’s never got on it either. The money isn’t in fixing the cars. Its supplying the parts and material to do it. Allthough thats an industry you couldn’t give me. The failure to provide good parts service stemming from large takeovers the of used and a/m parts suppliers proves once again that providing quality with quanity has short limits.But we get that rammed down our throat too.At 55 with 30 years into owning my own shop I’d like to see some retirement just over the horizon. But the horizon constantly changes, like insurance companies………Fight it? Absolutely. But its the parts industry that will have to defeat it. Not the body shops. We don’t have the monetory clout, even collectively.The Insurance industry can wait a little longer for us independant types to finish retiring out of the body shop industry. Doctors around here have to team up in groups to survive, so as my doctor described the doctoring business to me. I don’t know why the parts gods still think they can improve profits by playing ball with the insurance industry. You can survive, but you can’t grow. Since staying imployed is now the biggest issue rolling down the highway I guess anything goes!

  • Chad says:

    State Farm’s Parts Trader program is just another attempt to get into our pockets and control our business. Don’t believe for one minute that we will have a choice in our suppliers. They may not make us choose what supplier but they will control the price. If your supplier doesn’t concede to their price then that will come out of our profits. We currently do not have a parts issue or delays ordering and receiving parts. Most delays in repairs are caused by insurance companies trying to save themselves money. Insurance companies will spend dollars to save penny’s in reality. I’m so tied of hearing the crap that comes out of State Farms mouth. State Farm used to be one of the better insurance companies to work with. They have become one of the most difficult insurance companies out there to deal with. They are not interested in our business or our customers, they are only interested in their profits. We need to take back our industry and tell these insurance companies where they can stick their ideas.

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