In my last column we identified the lack of a consistent implementation of a system designed to communicate accurately the "real condition" of any used part that is published, how this is a key factor in the inefficiency with parts procurement, and that the software we currently use is not the real issue.
Whether you are an advocate that looks to "peel the onion" one layer at a time, or a Kaizen student, we will now begin to lower the water level to reveal more rocks. Let’s examine another root cause of efficiency loss when dealing with used parts procurement.
Like this article? Sign up for our enews blasts by clicking here.
First let’s look at online inventory systems, which are intended to create an interface to a "live" database for part inventories of the hundreds of vendors selling used parts across the country. They are supposed to include a consistent grading system with damage codes to clearly and accurately identify condition since we are currently stuck on this "new and damaged pricing methodology." But unless this first step is policed and enforced, it renders the information in the database worthless.
Another issue involved relying on the database of vendors is the accuracy of the data being listed, and time in which it is "really" being updated. This includes whether the part is in an estimating search, or with database driven third-party search programs being sold. The updating of a vendor database is completely reliant upon the parts supplier, and is found often to be very lacking in a number of possible ways.
It happens on a regular basis that once the supplier is called about a specific part, that it is not available (and wasn't at the time it was selected in the database). Some suppliers keep parts listed to generate calls. A number of times, once the call is made the reply is, “it is not ‘insurance quality,’” even though no indication of such was listed with the part in the database.
This one issue must be addressed before any database system is reliable. One simple solution is that if a supplier does not provide accurate inventory and accurate damages, they are banned from being listed in any database system used by this industry. Unless this is policed and enforced, it will not change. This should be a primary focus by insurers, again not, a bidding software. There is already software available that provides for communication directly to the shop's preferred used part vendors that do not rely on the accuracy of database system pinging, why not use them?
Along with the above is another "masked issue" that if was brought out in the open would go a long way in exposing another root cause for inefficiency in used parts procurement. In a very high percentage, used parts received require a price negotiation with the supplier for repairing damages on the part. What is "masked" is that the repairs required are hidden to the consumer and buried in the "New and Undamaged Pricing Methodology," and at the same time, the repairer comes out on the losing end.
Typically the pressure to meet delivery deadlines, cycle time and hours per day key performance indicators often does not allow the shop to "reorder" the part from another vendor when it really should have been rejected. Many times due to this pressure, the amount of repairs is under valued. For some reason in these situations most part vendors believe they are only responsible for a "partial labor rate," or a less than accurate time to repair the damages to the part received. They are not, and should not continue this practice. These short falls are not only immediately felt by the technicians who are being paid on a commission/flat rate system, but also the shop's profitability is always affected.
To ignore the damages that are being repaired with no indication on the estimate or the repair order is a travesty (or committing fraud) to the vehicle owner. Why is this ignored by insurers and placed on the shop to be buried in with a price for "New and Undamaged?" "Writing it Right" would expose how bad what is received really is – but does any one really want to see it? Simply put, the actual price plus its markup of the actual part received should be reflected on the final bill and final estimate, along with the repair operations itemized that were required to make the part serviceable. No more smoke and mirrors please.
Let’s focus on the root causes of efficiency losses and not the software being used.
Subscribe to ABRN and receive articles like this every month….absolutely free. Click here.
