By John Yoswick
A panel of representatives from a number of multi-shop collision repair operations at the “MSO Symposium” in Las Vegas during SEMA discussed how disruptions in the parts supply chain are impacting their business. All agreed the parts challenges are not limited to any particular parts segments, including new OEM, used and non-OEM.
“I think we have problems in all categories,” said Marty Evans, an MSO operator in Washington state who also is chief operating officer of the Certified Collision Group banner network.
Shawn Hezar, chief client officer for Caliber Collision, agreed that all the parts industry segments are facing the same challenges, in terms of labor and logistics.
“I live in Los Angeles where we can actually see the ships lined up, waiting to be docked,” he said. “And of course once they get docked, you still need trucks and people to unload them. It’s evolving, and it’s pretty painful.”
Darrell Amberson, president of operations for LaMettry’s Collision (which has 10 collision repair shops and three mechanical shops in Minnesota), concurred.
“We’re seeing it among Asian manufacturers, Europeans, domestics,” Amberson said. “It often feels like we can build three-fourths of the job or even more, but too often there’s that one critical part — even a common part, like a bumper cover — that we’re waiting months for.”
Hezar said that type of situation now means that Caliber has “somewhere about $50 to $60 million of work-in-progress…with cars sitting in parking lots, waiting to be finalized.” Amberson, too, said his company has seen an increase of between 10 percent and 20 percent in his company’s work-in-progress compared to pre-pandemic.
“It’s a mixed blessing, because in today’s world we almost have to have more work-in-progress to keep our people busy,” Amberson said. “Because there are too many jobs for which we’re waiting for insurance authorization or parts. But the downside is it creates a lot of chaos, and delays for the customer, more cycle time for the insurers.”
In some cases, other panelists acknowledged, it is impacting their customer satisfaction.
“As a general rule, yes, we are seeing CSI going down, and that’s very painful,” Evans said. “As much as we try, as much as we be proactive and communicate, you sometimes get the head nod or yes, that they understand, but the survey goes out and that conversation never took place. We’re all doing everything we can to communicate, but you’re not going to win every time.”
Parts supply chain challenges, the panelists said, are impacting their costs in various ways — increases they will likely need to pass on. Parts delays, for example, can lead some jobs to expand beyond a customer’s rental car allowance, a cost repairers can’t always bear in the name of customer service.
“I want to be clear: We’ve picked up a lot of rental car expenses. Our rental car expenses have gone up by millions of dollars,” Hezar said. “At some point you have to say, ‘It’s just no longer feasible. We can’t do that.’ You’re hoping the end [to the parts delays] is in sight, but based on everything we hear, these challenges are going to continue well into 2022. At some point, you have to stop.”
Amberson said he sees parts prices increasing overall but not changes in his agreements with suppliers. That wasn’t the case among other panelists. Hezar said parts margins get squeezed when a part has to be sourced from a supplier with which his company has not had a long-time relationship.
“It’s very common that it’s not going to be the same discount. So in a lot of cases we do see it costing us more,” he said. But suppliers have also come to Caliber this year to say their costs are escalating and they “have no choice but to lower” Caliber’s discount. “We’ve seen that from time to time,” Hezar said.
Are supply chain issues leading collision repairers to repair parts they might otherwise replace if the parts were more readily available? The multi-shop operators said yes, though Amberson said that’s not necessarily a change from the past.
“When there’s a parts lack of availability, we want to look at repairing that part. We’ve always done that, looking for best solutions for the car,” Amberson said. “We focus on doing the right repair for the car, in the best interest of the customer.”
Hezar of said Caliber Collision will “absolutely do that” if there’s an opportunity to do so.
“But in some cases, just to be completely candid, there are audit tools in place that raise red flags when you go over a certain number of hours to repair a particular panel,” Hezar said. “Some insurance companies utilize these pre-determined rules. Once it goes over the pre-determined labor hours, there’s a red flag. It creates a lot of commotion, a lot of friction, calls back and forth, additional documentation.”
That can disincentivize those looking for the best options to get a vehicle completed and back to the customer, he said.
“They’ll instead just wait to replace the part [when it’s available],” he said. “So the system works at times against itself.”
Do MSOs see insurers changing or being more flexible in terms of direct repair program key performance indicators (KPIs) given current business conditions?
“It’s all over the board,” Evans said. “Early on [in the pandemic], I think there was a lot of consideration. Our carrier partners made accommodations and were working with us. They were negatively impacted as well. We have to work together for the best possible solution. Some carriers are more accepting than others.”
Hezar said it’s not just parts delays slowing repairs. He said shops that need a particular OEM scan tool or calibration equipment may have to wait four to 10 months to get it, and shops can’t just take a vehicle to a local dealership if the dealership is waiting for that tool or equipment as well. He sees those at the senior levels of insurance companies understanding the current situation. He said he’d apologized earlier in the day at the symposium to a representative from an insurance company that he knew had been hearing from more of Caliber’s customers because of repair delays.
“He said, ‘Hey, look, those things happen. What really separates you is how quickly you respond. You take care of things,’” Hezar said of that conversation. “I really appreciated that. That means a lot. That’s a very understanding partner.”
But he said the people at the “day-to-day” level of claims within insurance companies are more likely to be feeling stressed and “their behavior changes.”
“It’s probably impossible to expect to get five hours a day, or even four hours a day, in this environment,” Hezar said, referring to one KPI. “Those are difficult conversations that we have to have. We kicked the can down the road [early in the pandemic], because we felt we were going to come out of this quickly, that maybe it’s just a blip. Who knew that people would decide to drop out of the work force? We didn’t know all this when this all started.”
Amberson said the shift to photo-estimating and remote claims handling offers some efficiencies but also has “slowed things down in many ways.”
“We no longer have those personal relationships at the grass-roots level,” Amberson said of repairers and insurers. “You’re dealing with people all over the country…and often these people are, frankly, not as well educated on collision repair as some of those claims people we used to see in the past.” •
