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Certified Aftermarket Parts – Part of the Puzzle

Source: Chris Daglis | PARTnered Solutions

ABPA Editor’s Note: The following story was shared with us by Chris Daglis, a strategic advisor to the collison, alternative parts and insurance industries. Although it is about the Australian market, it’s still an interesting read. The ABPA supports all certified parts.

It was 1991. I was in Taiwan being taken to a manufacturer a few hours outside of Taipei up in the mountains. The forest was just beautiful, although the weather was hot, humid and wet. Suddenly, in among this beautifully lush, green landscape, there it was. An old, battered building, not so big, but jam packed with old, greasy machines stamping out parts. They were Nissan Bluebird guards/fenders, their edges sharp as razors.

Move forward to 2017. Facilities larger than you could imagine. Clean as hospitals, more safety systems and process than I’ve seen anywhere else. Brand new tooling being produced using the latest German technology worth hundreds of thousands of dollars each lined up in rows of 20 or 30, 4 rows deep. Robots used to move products around the production floor or in sealed spray booths applying primer with precision to bumper bars. Beautifully designed and air-conditioned offices full of engineers working on their designs for both the aftermarket and OE markets.

It is clear. These are some of the best manufacturing plants you will see anywhere in the world using the latest technology to produce high quality components. Everyone I take to visit these facilities walks away in disbelief. The aftermarket product has come a long way from that first trip in 1991.

Yet, usage of such product remains low in the collision repair industry, in Australia and New Zealand at least. You see in the USA, the insurance and repair industries have embraced this product, especially over the last 5 years since NSF International began certifying product in large volumes. Usage levels have increased from 13.72% in Q2 2014, to 21.14% in Q2 2017 according to Mitchell. [1]

Now, I’ve written a few articles about the opportunity to harvest sensors, computers and other tech parts off vehicles in automotive recycling yards and putting them through a certification process to give the end user the confidence that the component is in good working order. It is this exact process that has driven the surge in use of the aftermarket part in the USA. A testing process that ensures fit, form and function.

As stated by a senior manager at Suncorp Insurance, “Feedback from repairers has been overwhelmingly positive about the quality of the NSF International certified parts, which have improved the general standard of the automotive aftermarket in Australia. We are extremely supportive of a quality product that has been independently certified and that delivers direct benefit to consumers and our policyholders.

Currently there are approximately 400 part numbers that have been certified by NSF International for the Australian market, all high volume components and many of them also suitable for the New Zealand market. These include bumper covers bonnets/hoods, guards/fenders, head lights, tail lights and grilles. All have gone through the NSF process and been tested on Australian vehicles for fitment then taken through the rigorous material testing process. These have all been manufactured in those state of the art manufacturing facilities and independently tested by NSF International.

We must acknowledge though, that the NSF certified part is not going to be the right application for every repair. Nor is the OE dealer part or the recycled part the right way to go on every repair.

What the industry has failed to recognise is that co-existence is not only possible, in fact, it is crucial to the future of the repair, insurance and parts industries. The MIX of parts in any repair is what we need to focus on.

So, let me explain:

  • The OEM’s argue that their part is genuine and therefore should arguably be the part used in the repair process, every time, BUT it is also the most expensive part and as a result, trying to repair all cars using only new OEM parts will mean many repairs will become uneconomical – total losses.There is no winner in that deal.
  • The recyclers could argue that all parts should be recycled because they are after all, genuine components harvested off vehicles and are a more environmentally responsible option to the new part.While this is true, there are some components that may not be suitable because of the nature of the part, for example, hazed head lights whose UV coating has been damaged.Or, there simply isn’t enough availability to meet demand.
  • The aftermarket suppliers also want to sell all their parts because they are new, BUT without being certified we are not sure which of the aftermarket parts are of high quality, and past perception still plays a role in the repairer and insurer decision making process.

The future lies, not in one or the other, but in all the above categories.

By embracing a coexistence and acknowledging that by providing a ‘best mix’ option in the repair of vehicles –

  • Repairers will repair more vehicles rather than then being written off,
  • Insurers will have them repaired at a more competitive price while also saving on total loss payouts,
  • Policyholders will have their vehicle returned to the highest quality and in pre-accident condition and
  • The parts supply chain will sell more parts.

The Goal

What is it that we all really want?

  • Repairers – want to have as many repairable vehicles available for us to repair with at a fair margin.
  • Insurers – want to repair as many of the accident damaged vehicles, safely, at the highest quality and at costs that are sustainable so that insurance premiums are as cost effective for the consumer as possible.
  • Parts distributors – want to have as many opportunities to provide components for the repair of these vehicles with as little friction as possible and at a fair profit.
  • Policyholders – want our car repaired safely and restored to its pre-accident condition without it impacting on our policy cost next year. (Surveys have found that >80% of vehicle owners would prefer their vehicle repaired and returned to them as quickly as possible rather than have it written off).

This is a recipe for success! We all want the same thing – more repairable vehicles. We don’t need to have a winner or a loser in this deal, we can all win, but we do need to be singing from the same hymn book.

How do we achieve this?

A great start will be by getting the product mix right and ensuring that we give every accident damaged vehicle that can be repaired safely, the opportunity to be repaired. My work with insurers and repairers has exposed me to some startling data. In fact, all you need to do is walk into a repair shop or automotive recycling facility to see that some vehicles deemed uneconomical repairs, are often not badly damaged at all. I use the term uneconomical with purpose – these vehicles are repairable. They do not have large amounts of damage, but the economics just do not make sense.

Often, the parts component of the repair has created a commercial equation that simply does not make sense for the insurer to repair the vehicle. When we look a little deeper into the data, so many of these uneconomical repairs have been tipped over the edge because the repairer has chosen all new OE parts when a more effective, safe, quality repair would and should have included a mix of NSF Certified and OE recycled components. This single-minded approach to vehicle repair must change!

I urge all stakeholders take a bigger picture view and recognise the need to co-exist. If we can get the mix of parts right and have more vehicles repaired, does it not make sense that we will ALL benefit?

Insurers globally are trying to get the parts mix and therefore parts costs right. Although some insurers have taken an OEM only policy over the past few years, the message is now ringing loud and clear that such a narrow view of parts in the repair process comes with its cost burdens. This restrictive approach is exaggerated further by the fact that others are embracing the whole product solution, along with the cost and quality benefits of it.

What if we could show a better way, where insurer costs can be reduced and repairer margins increased? This is possible and its possible NOW!

If you enjoyed this article please leave a comment – I would be interested in your thoughts and ideas. Don’t forget also to share it with your friends and associates and like me on Facebook/Linkedin.

[1] Industry Trends Report, APD Edition, Vol.17 no.3, Q3 2017, Published by Mitchell International

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