Growing from a source for auto parts at a discount for his own 10-Minute Oil Change and Full Service Garage over 18 years ago into one of the industry’s leading auto parts suppliers and inspection businesses, Mitch Rand, president of C&K Auto Parts and Warranty Inspection Services shares an informative Q&A with the readers of P&A Magazine this month.

Tell us about your company and the products that you offer.

I believe I have a unique perspective on the industry, in that I am the president of two major vendors to the VSC Industry, one on the parts side of the business and the other on the inspection side of the business.

C&K Auto Parts (C&K) has been a supplier to this industry for over 18 years. In 2008, we partnered with a private equity company which has allowed us to invest in and significantly expand our business. We now carry all types of parts, from OEM parts for all manufacturing lines, to remanufactured assemblies (both large and small), to used powertrain assemblies. Our warranties are all inclusive (we cover shop labor rate, book time, diagnostic time, rental etc.) and flexible. We will vary the length of our warranty to fit the Administrator’s need for a specific contract. The idea being that the Administrator can purchase one of our parts and feel completely safe knowing that they will not have to revisit that claim again during our warranty period. Since our warranties are so comprehensive, it is incumbent upon us to make sure that the quality of our parts is of the highest standards, and our failure rates are as low as possible. We do extensive monitoring of our failure rates to identify as quickly as possible any recurring failures, and take appropriate steps to correct the problem. Failures are the absolute worst thing that can happen to us – not only do they cost money, but every failure causes multiple phone calls to the Administrator, delays for the installer (who might be a selling dealer), and frustration for the vehicle owner – all of which reflect poorly on C&K and could ultimately result in lower sales. On the positive side, after 18 years of steady growth, we seem to be doing a good job.

Warranty Inspection Services (WIS) is our inspection company. We started WIS a little over eight years ago, at the request of a few customers who had commented that they wished their inspection providers were as responsive as we were at C&K. We simply took the ball and ran with it from that point. This business was particularly challenging for the first few years, in that most every other major inspection company had been around for a long time and offered virtually the same service. We spent a long time trying to figure out how to differentiate WIS from everyone else, short of simply offering inspections for a few dollars less. We finally decided that technology was the answer, and we invested a significant amount of money into developing a proprietary tool that allows the inspectors to provide a faster, more accurate inspection – which are the two touchstones that are most important to the Administrators. One of the additional benefits of this investment into the IT world is that we are in position to do direct integrations with any Administrator to help facilitate easier, faster, more accurate data transfer. Every minute that is saved by an Administrator is another minute that their adjuster can be on the phone with a customer, improving the Administrator’s service level, and often improving their bottom line. It’s obviously a benefit to us, as well.

How does your product offering differ from other providers?

In both of our businesses our goal is to help our Administrator customers in every way possible. This means helping them save money, operate efficiently and make their customers, selling dealers and installers happy.

C&K – Our OEM Parts Portal allows the Administrators to verify not only the List Price, but see their wholesale cost, on every OEM part that they are getting quoted. It saves a huge amount of time, by not requiring the adjusters to call or email for part quotes, and it saves an enormous amount of money by providing them with a negotiating tool on virtually every part, and the ability to purchase every part from us if their negotiations are not successful.

We have also been investing heavily in warehouse expansion. Shipping to the coasts quickly has always been a difficulty for the suppliers in our industry. We have recently opened warehouses in Tampa, Denver and Salt Lake City, and have more planned openings for 2012. We fully expect to be able to deliver any remanufactured powertrain product, which is our bread and butter, anywhere within 1-2 days. Not only does this improve customer service, but also it saves a significant amount of money for the Administrators in rental expense. Additional rental expense has always had a negative effect on our sales potential, effectively reducing the amount of savings that we can provide vs. the OEM option. Expanded warehousing will result in more savings for the Administrators, more sales for C&K, and improved customer service to both the installer and the contract holder – everyone wins.

WIS – We’ve developed a proprietary system that we call VeriScan, which allows our inspectors to essentially copy the information in a vehicle’s on-board computer, and upload that information along with digital photos, video, and the written report while on-site. This has had a tremendous impact on the speed and accuracy of our reports. VeriScan allows us to be different – and better. One other difference between WIS and everyone else is that for years, the inspectors were expected to provide all of their own technology – they bought their own cell phones, cameras, computers, etc. When WIS decided to develop VeriScan and made it proprietary, we felt that we couldn’t expect the inspectors to pay for something that they would only use for WIS, so we decided to provide both the hardware and the data plan to the inspectors for free.

Who are your target markets and what message would you like to give them?

Our focus for most of our history has been the VSC Administrators, although we do work with certain large dealer groups around the country. Our overall message has always been one of flexibility. Every customer, even within the same industry, has unique concerns and needs. If GM, Ford, or any of the OEMs wants to make a major policy change, and they want to be rigid in its enforcement then everyone generally has to dance to their tune. However, we’re not quite that big – and I think one of our strengths is that we recognize that. It’s our job to adapt to the needs of our customers, and recognize that the adage that “the customer is always right” is, in fact, true. If I have a customer that wants a red stripe painted down the side of their transmissions, I will do my best to make sure that we use the brightest red paint possible. There are a lot of businesses, including some of our competitors that have a different philosophy. They think it’s important to do things the way that they think is best. I respect their position, but I disagree with it.

Tell us about yourself and how C&K Auto Parts came to be.

My brother and I started out in the automotive industry in the early 90′s, in South Florida. We owned a 10-minute oil change and a full service garage. We started C&K primarily to supply parts to our own garage at a discount, and sold some parts to some of the other garages around town at a discount. One day a vehicle came into our shop that had an extended warranty contract from US Warranty. We’d never heard of an extended warranty before, but since it was a local company we went up to meet them, and started a wonderful relationship that we have to this day. One thing led to another, and we started to supply parts for them to other repair facilities in the area, the relationship grew from there. Shortly thereafter, an adjuster at US referred us to another warranty company that she had worked for, and we started doing the same thing for them. At that point, the light bulb went on, and I started to research other warranty companies around the country, and sent out some letters introducing C&K to them. A few weeks went by without hearing back, and on the same day, within about an hour, I got called by the managers of Geico and GE Capital. We started to work with both of them (and still do), and we quickly decided that this was the niche that we’d been looking for. We sold our garage and concentrated full time on C&K, and have grown from there. It was just the two of us at the beginning, and now we have about 30 employees.

Looking back over the past five years, how has the industry changed and how do you see it changing in the future?

The last five years have been by far the most challenging years since we got into the business. Not only because of the Great Recession but the industry has grown up and become much more sophisticated. 18 years ago, I could get an Administrator to try us with a quick phone call. There simply weren’t too many companies doing what we do, and our service was needed. Now, every Administrator knows the game, knows our competition, and has certain expectations. There are industry standards of service, if not explicit then at least implicit, that they expect. And after so many years, they may have developed loyalty to the vendors that they’ve been using. To get a new customer today, it’s not nearly enough to simply introduce yourself – you have to be able to show why your service will make them better. This has forced us to evolve, and we are continually evaluating and offering new products and services, improving our IT capabilities, expanding warehousing to improve delivery times, refining our inspection processes (both from a technological perspective and from an internal systems perspective), and generally trying to distinguish both of our companies from our competitors.

I see the industry becoming much more dependent upon technology, specifically integration with their vendors. If one adjuster has to spend 10 minutes submitting an inspection request and copying and pasting a completed inspection report into the Administrator’s computer, and a different adjuster simply has to click one button and have it done automatically, who is more efficient? It’s a no-brainer, and that example can be used in a myriad of situations, with both parts and inspections. Time is money, and integration saves time. It also eliminates a lot of human error. As this is the direction that we see the industry going, we’ve gone from simply outsourcing our occasional IT needs to having a rapidly growing IT department, with numerous programmers giving us the tools that we feel will help us stay ahead of the curve. It’s better to have the competition react to you rather than playing catch-up, and it’s better for the customer in the process.

What products do you believe will drive your future success?

Simply offering the widest range of products possible. I like the idea of becoming a one-stop shop. The more a customer uses us, the less likely they will use someone else and become happy with their services. A big part of business is simply getting the adjusters to get into the habit of calling us. Once they call us, we need to have what they need.

What technology or services do you believe will drive your future success?

Direct integration with our customers is the key. The customers that give their adjusters direct access to our products through their claims software have a much greater ability to save time and money handling a claim. Once a customer recently told me that since integrating with us his adjusters save 15 minutes per inspection between ordering the inspection and consuming the results. If you multiply that across every inspection and every part, the savings really add up. We have just reached the tip of the iceberg in terms of integration. We are working on integration through the leading claims software providers in the industry and we are able to provide much of the required IT services for one-off integrations as well. As we help the administrators succeed at their tasks of saving money, operating efficiently and making their customers, selling dealers and installers happy, we will find success as well.

Our coverage of DMS integration continues with the following questions and answers from StoneEagle’s CEO Brent Allen. Brent shares an informative and candid perspective on this integral segment of the industry.

How do you describe your products to potential customers?

It’s difficult to apply a single description to our products. StoneEagle offers several products and they are quite diverse. Our Enterprise Admin Systems include a Credit Life system and SEcureARCH, our new Service Contract Admin system. SEcureARCH is a C#.Net all service oriented architecture that we believe is the future in administration systems. Our F&I sales and reporting application, SEcureMetrics, is one of the earliest reporting programs. It has been integrated to several DMS’s for over a decade and is used by thousands of dealers in the US and Canada. SEcureSalesTool is our Service Drive Sales system and can be integrated to include appointments and RO pull. It will sell multiple products, handle credit card or financing, has fully integrated e-contracting capabilities and remits sold business back to the product administrator. SEcureTransmit has been available to dealers and agents as long as our reporting tools and includes a user interface for generating a remittance register to allow any sold F&I product to be transmitted back to the administrator electronically. At NADA this year, we will be introducing Service reporting. This product will allow the dealer and servicing agent to monitor and develop very impressive income opportunities in the service department.

Traditionally, one of our most recognized services has been integration. StoneEagle has been providing integration services longer than most DMS providers have offered certified interfaces, and it is an essential part of almost all products.

When asked to describe our products, we find it just as important to describe our customer service. For the last 25 years we have made it our goal to provide the best service in the industry. We believe that the product is only as good as our ability to support it.

How did StoneEagle get into the integration business?

In the 90’s, one of our earliest business partners asked us if we could help them with administration of a product which they had been pulling from the DMS electronically. We eventually acquired their programing staff and technology as a byproduct of that initiative. Shortly thereafter, another client asked if we could produce F&I penetration reports in a timely manner by pulling data directly from the DMS. We found that creating effective F&I reports required much more effort than simply pulling data. Almost all dealers configure some part of their DMS differently. Each dealer requires “hands on” configuration for reliable results. This “hands on” knowledge eventually led to requests for properly configured data sets for many other areas of the industry. Ultimately our understanding of the inner workings of the dealership and their processes became our strongest asset for offering “best in class” service.

Which DMS providers do you work with, and what is your official status with each?

Today we offer some level of integration to the following DMS providers:

* – Dealer or DMS provider must send data to StoneEagle
** – Not currently supported, will require additional time and development charges to integrate
*** – May be possible but will require additional time and development charges
($) – Dealer may/will incur extra charges for setup, field switches or both

Considering the changes taking place in the industry today, this list is subject to change.

How do you push and pull data, and why would your solution be better than others?

Certainly we do consider the exact technology of how we push or pull data proprietary, but we do offer both functionalities to a limited number of DMS systems. Pushing data is a very tricky business. Very few companies will do it, and very few products take advantage of it. Improper pushing to the DMS can cause costly errors to the dealer. After a decade, StoneEagle has had no reported errors in our pushing process. We believe our success and longevity coupled with the innovative solutions we provide make us stand out above most other competitors.

There seems to be building controversy about DMS integration – How do you see the industry today, and where do you think it will be in the next five years?

In a previous question I pointed out that third party integration itself actually out dates the integration certification concept. Today, advancements in technology and security have caused a general movement among all DMS providers to create secure standard interface processes that require some sort of fee for access. From there, DMS providers of all sizes seem to be in one of two camps regarding integration to their systems. One camp sees product and service provider offerings as enhancements to their systems. They certainly don’t want to see an outside company cannibalize a product that they offer, but they also seem to understand that dealers will never see all services the same. These DMS providers can create reasonably priced integration tools that create a revenue stream but also stimulate the growth of technology from smaller more agile “niche product” companies. The second camp is much more guarded. They see any competing technology as a potential threat to their control of the dealer. These providers are typically difficult to deal with and offer cost prohibitive pricing for their integration tools.

The controversy today revolves around DMS providers moving to a “certified only” model where any other outside access is branded as dangerous and aggressively discouraged. Telling a dealer what he can or cannot do with his data is one issue, but forcing him to require certification is a much bigger issue for the dealer than the product providers themselves. Even a small dealer is doing business with as many as five outside product vendors. If all five are forced to certify their products and pay (for an example) $100 in fees, those fees are inevitably passed on to the dealer. At that point, the dealer is faced with not just one fee, but five fees for the same service now costing $500. The model needs to change. The dealer should be able to subscribe to the service and allow the vendors access to it. Product and service providers can compete on the merit of their systems, not the cost of their integration.

One way or the other, we think non-certified interfaces will eventually disappear over the next several years. The cost of supporting non-certified technology is going up, competition from other products is increasing, and service oriented system architecture is definitely becoming the accepted model. We just hope that DMS providers will open their systems in a way that is reasonably economical and creates a “best man wins” environment for product providers.

We don’t want to discount the issue of security. It is very important that dealers recognize the importance of their customers private information, and that it be safeguarded properly. There is a need in this industry to make sure that vendors are following all governmental and ethical rules concerning data. Proper service agreements and contractual obligations are essential. Having dealers, DMS providers and vendors work together to establish standards in this area would benefit all players without stifling business, but most importantly, it would protect the customer.

How do your current clients feel about the changes in integration?

Most of them simply feel blackmailed. They feel like they are being cornered into a position where they have to pay fees for services that have worked well for years and are now just being taken advantage of simply because the opportunity was there. Most are happy to pay for advances in technology that increase their ability to sell product. In this case, they feel like it’s simply another expense that must be passed on to the dealer who will then pass it on to the customer. Remember, we are not talking about one point of integration. We’re talking about five, 10, even 15 points of integration that can ultimately mean hundreds of dollars to the consumer.

How are you planning to re-invent your products and services to adapt for the future?

For StoneEagle, planning for the future is and always has been important. As a family owned business, we must rely on re-investing annual profits in R&D for future product and service planning. We have been preparing for the change in integration certification for a few years now. We have been re-developing old products and inventing new ones in order to capture other segments of the auto dealer market. We have certified our products with various DMS providers and are in the process of doing so with others. Re-focusing some of our efforts and resources from integration will mean terrific advances in our product offerings over the next few years.

The new weapons against theft are the black light and a microscope. Law enforcement can now use a black light for quick identification of stolen vehicles or automotive components and a microscope to determine the property’s owner. DataDot Dealer Services (DDS) offers, a theft deterrent system that utilizes a unique microdot identifier that is fitted to 60-80 components of a vehicle.

The Product

DataDots are tiny microscopic discs (microdots), which contain unique information that links property and owners. As small as a grain of sand, DataDots are recognized as being one of the most effective ways of preventing theft, and play a crucial role in the recovery and return of stolen goods.

Single inscribed “microdots” were originally developed by the U.S. military in the 1940s to covertly identify items. It became obvious the tiny plastic discs would be useful for espionage as the grain size message carriers were very easy to conceal and transport. It was not until the early 1990s that microdots became a commercially feasible product. A U.S. engineer, Brent McLaws, was the first to develop a low cost process to inscribe information onto thousands of microdots.

Ounce of Prevention – Pound of Cure

Encoded on polyester substrate, Automotive DataDots can be installed on a production line or in a dealership. Either way, they provide undeniable proof of ownership. The adhesive used to apply the DataDots contain an ultraviolet tracing agent that fluoresces under an ultraviolet or black light, allowing dots to be easily read with a magnifier, but are difficult to detect with the naked eye. Water-based adhesive is clear when it dries and can be applied to any surface. When the adhesive is dry, it is resistant to solvents, road salts and cleaners. A typical vehicle offers many points of application, including the chassis, engine, drive train, exhaust, suspension system and after-market parts, where DataDots can be installed.

All DataDot Automotive Kits sold in the USA are registered on the DataDot International Database with the contact information of the purchaser and the unique PIN of the dots in the kit purchased. In addition, PINs are registered with the Insurance Services Office (ISO) – the most widely recognized database for patrol officers in North America. If a vehicle or part marked by DataDots is stolen, law enforcement can access these databases to affirm an owner and return recovered property.

Thieves are ever changing their approach and instead of stealing an entire car, they steal parts of the car. Catalytic converter theft has risen significantly due to the rising cost of the rare metals. Rental car companies have parts removed by renters and replaced with defective parts of the renter’s personal vehicles with no way to prove otherwise.

OEMs have struggled with warranty fraud for years. DataDots on vehicle parts proves if the part is OEM or not, eliminating warranty fraud from the substitution of expired warranty vehicles. Also, OEMs no longer have to compete against stolen parts and can increase their genuine parts sales.

DataDot USA Inc., currently is the only manufacturer that can manufacture VIN microdots for just-in-time delivery to OEMs anywhere in the world with five manufacturing facilities: Spokane, Washington; Taiwan; Sydney, Australia; South Africa (two plants) and the United Kingdom. The DDS automotive product comes with one to five years of warranty (dealer selected) and has a benefit of $500-$5000 (dealer selected).

Distribution, Sales and Support

In 2004, DataDot Technology (DDT) approached T. Rick Hughes, founder of DDS, to market the product in the U.S. as the exclusive distributor for the automotive industry. As a former employee of Pat Ryan and Associates, Rick had the training, the contacts and the vision to crack the U.S. marketplace. There are now over 100 million microdots on vehicles in the U.S. and the number grows annually.

DDS distributes the product to distributors, agents and major dealer groups. Major distributors are JM&A, EFG, Ethos Group, Ally Financial Services, Resource Automotive, IAS and others. In Canada, Leader Automotive Resources is their primary partner serving over a thousand dealerships.

All distributors are required under contract to provide an A-rated insurer if they choose to underwrite the limited warranty benefit (available for production levels of 15,000 monthly or greater). Assurant Solutions is the current A-rated carrier.

A partnership with IAS, using the SmartPad application, is the most recent addition to the marketing and sales presentation. E-Rating and e-Contracting are offered and there is full menu integration with over 19 menu systems and contracting in English and French, with Portugese, German and Spanish soon to follow is the result of the partnership DDS has with F&I Administrators.

Future Technology

The physical product used by DDS is either a polyester substrate or metal for higher heat applications. New stainless steel microdots are being delivered to a limited number of test sites and DDS expects to manufacture ceramic microdots for extreme heat applications beyond the automotive industry.

As more OEMs mark vehicles as they are produced for sale in the U.S. market, the move to a theft deductible waiver from the OEM and a VSC upgrade or combination will become available.

Today, DataDot Technology (DDT:ASX) is a publically traded company that manufacturers the microdots under the trade name DataDotDNA^®.

P&A Magazine had the opportunity to find out more information about Mark Thorpe and what his company, The Impact Group, is doing with electronic menu systems. The following interview discusses how Thorpe’s menu system can benefit the F&I office in numerous ways, including productivity, connectivity, mobile technology, and also looks into the future.

Tell us about your company? And, specifically, how the products you offer can add value to/for the Providers and Administrators?

I founded The Impact Group (TIG) in 1988, initially as a general agency. We evolved into a performance-based F&I training and consulting firm, and then finally into a full-fledged technology provider. We have had an exclusive relationship with Toyota for almost six years with our highly branded version, FS Presentation.

Having seen the industry from such a variety of perspectives, we fully understand the needs of the various constituencies and can offer innovative technical solutions to satisfy them. Within FUSION, our interactive F&I menu, highly branded treatment of the providers’ and administrators’ products really showcases their offerings. We listen to our third-party administrator (TPA) partners and work with them to build dynamic risk assessment tools, as well as a variety of other product-centric tools which emphasize their branding message and accurately reflect the image they want to promote to the marketplace.

Impact Analytics, our reporting tool, offers a wide range of data for the provider and administrator. Most menu reporting is limited to the quantitative analysis—unit sales, penetrations, and income distribution. Impact Analytics tells the story behind the numbers by focusing on exactly how the products were presented—what tools were actually used, at what point, and for how long. The actual product presentation data and trend analysis is available to everyone who has a vested interest in the performance of the F&I department, and accomplishes a number of things: for the TPA, knowledge of whether their product was actually presented is a big deal. Every administrator’s goal is to convey a consistent message from their training classes into the field—through their general agents (GA) down to the FSM’s. FUSION’s capabilities facilitate just that, and help build stronger channel partners and stronger producers.

Connectivity is extremely important these days. What third-party systems does your menu system connect to? What advantages does this provide to the Providers, Administrators, and Dealers?

Connectivity is a core focal point of our application. Through our partnerships with companies like StoneEagle and F&I Admin, we can integrate with any administrator client they support for e-rating and e-contracting. We rely heavily on our Edmunds relationship for the True Cost to Own (TCO) data, which has been a component part of our dynamic product sales tools for VSC, GAP and others. We integrated early with RouteOne because of our Toyota partnership, and we were also the first menu provider to be certified by Provider Exchange Network. We recognized immediately the value of the “central socket” concept which opens up integration capabilities with all the companies these partners support. We also have numerous direct integration relationships with companies like IAS, CNA, Warranty Solutions, NAC, Interstate, Easy Care, all the top tier biweekly payment administrators, and more.

Do you have plans to connect to any additional third parties in the future and why?

We are continually evaluating new partnership opportunities. We expect that we’ll be integrating with F&I Express soon. Our ultimate goal is to provide the most well-rounded, easy to use menu application in the marketplace.

Does your menu system have real-time DMS integration, and if so, is it bi-directional?

We are doing what most of our competitors are doing—either already using or pursuing the respective certifications with all the major DMS systems. We currently we have bi-directional functionality across the board and will continue to support it, provided it remains available with the certified interfaces. This is a primary focus for us, as it enables our application to more easily complete all of the secondary tasks that take place within a dealership’s F&I operations.

Over the past few years, customization has become increasingly important. What features are in demand today and what features do you think will be popular in the future?

There is a huge difference between customization and simply re-skinning your application for a client. I believe there is a great deal of dissatisfaction with some relationships between TPA’s and their technology partners because in many cases, the provider is either unwilling or simply unable to build what the administrator says it needs. Most enterprise level TPA’s and many of the larger GA’s have a fairly defined process that they would love to emulate through technology if they could. We really believe this to be a competitive differential for us. Our clients have the potential to truly tie the guiding principles of their training right to the end user—all while bringing consistency, standardization and ease of use to the product presentation.

As far as sales tools are concerned, any feature that behaves in a dynamic or interactive manner is in high demand and will be used to a great extent. When displaying a concept in a real, simple, and visual manner, allowing the customer to easily assess their risk exposure on a particular product, you take a giant step toward making an intangible product more tangible for them. As developers, everything we do is evaluated through the viewpoint of the “shared experience.”

Mobile technology has become a part of everyday life. Do you see a place in our industry where mobile apps can be utilized? How will this help the Providers and Administrators?

We’re already seeing it in many facets of the dealer’s operation. For the F&I department and the menu presentation in particular, there is a rush right now to take everything to the tablet and I understand that as somewhat of a natural evolution. From the TPA and GA side of the business, we want to provide our partners with as much technology as we can to effectively support a dealer client on-the-go. We understand the limitations of a busy support schedule, and the more real-time information we can provide on the fly, the better we can assist with income development and training initiatives. And that’s a win for everyone involved.

Looking back over the past few years, how have menu systems changed? What changes do you see in the future?

What began as Excel spreadsheets and simple paper presentations has evolved into sophisticated, well-engineered technologies. “SOAP compliant XML web services” probably wasn’t the most recognizable catch phrase of those early days, but they have quickly become today’s standard. Innovation has been driven by the emergence of applicable technologies, the desire to advance functionality, and a true need to improve the overall customer experience. Once today’s trend toward e-rating and e-contracting has been fulfilled, the advancement of remittance systems and ACH payment directly to the administrator is inevitable. I also believe that certain efficiencies—such as electronic signatures or “click and accept” methods will also be standardized. Finally, the ability for the menu application’s dynamic tools to import and collate data from within the TPA’s actuarial history and use it to more effectively present a product to a customer is a very exciting concept.

It is safe to say that most dealers have a menu system, but what percentage use it and what percentage use it to its full capabilities?

It depends on how sophisticated the application is. I can only speak about our experience, and we have a very high rate of adoption. Our training processes are tailored to fit the nuances of a dealership’s overall process, and because of the level of flexibility that is generally given to the business manager, the application is very easy to embrace. Most users can elect on-the-fly whether to use the traditional paper menu presentation, the more popular interactive menu, or a combination of both. Our average user will access 30-35 percent of the available tools or capabilities on a per-deal basis. Delivery by delivery, tool usage may be fundamentally different as the needs of the customer have changed. I view that percentage almost as a baseball coach would view a player’s batting average. The key is the flexibility of the application. With thousands of users, I sincerely hope that FUSION is being used in thousands of different ways. If so, we have accomplished our goal and the F&I manager has made it their own.

In this last installment of our connectivity series, P&A will be exploring the integration of parts suppliers and inspection services into the admin systems of providers and administrators. We will be profiling C&K Auto Parts, LKQ Corporation, Big D Auto Parts, Warranty Inspection Services (WIS) and Carr Appraisals.

For parts suppliers who must maintain large databases not only of individual parts, but types of parts (i.e. new, used or remanufactured), and the inherited legacy of not cataloging used parts with OEM part numbers, integration presents a special challenge. This challenge is that there are several different databases, all of which have different part numbers for the same items, and parts and costs are constantly changing. A more in-depth look at this will come later.

The solution to this problem is not an easy one, but can be achieved. As it currently stands, parts suppliers’ databases are not synchronized with each other and are also not connected with administration systems. This means that the providers have to spend a lot of time searching for one part on several different databases to get pricing estimates. If all of the parts suppliers were connected into one universal database, the process would be seamless for the provider. Ideally, the provider would look up one database where all competing prices are listed under the same part number. After selecting the parts supplier, the provider can then negotiate the desired price for their clients.

On the other hand, the inspection industry is particularly suited to integration because it is far less complicated in what needs to be done and, in particular, it is already far down the road in automation. The data entry portion of the inspection process is relatively high, so the ability to have the administrator’s system talk to the provider’s system can provide significant benefits even with a minor integration. At this stage all that is necessary is for the players involved with this process to make it a priority for this integration to happen.

Parts Connectivity

Considering the challenges required, the goal is to deliver the right part quickly, at the lowest possible price while making multiple parties – the provider/administrator, the dealership, and ultimately the policyholder – satisfied and happy with the result. For the claims analyst and the underwriter to find the part, whether it is a new OEM part, a remanufactured part, or a used part, with availability and pricing information readily accessible, is certainly valuable.

C&K Auto Parts already provides parts and parts value data electronically for both new and remanufactured parts to multiple providers and administrators. The integration has been accomplished directly with the administrators and through software companies the administrators use.

The company has been aggressively pursuing integration for the past two years with a number of projects currently under way. C&K’s in-house IT department has invested heavily in proprietary software that allows customization specifically tailored to meet the particular needs of the VSC industry.

LKQ Corporation states there is nothing preventing them from providing parts data to VSC administrators. However, they question if the client even desires electronic connectivity. If there is a compelling business case to make this integration a reality, LKQ is set up to accomplish it. The simple answer is to upload parts data to the integrator in real-time who in turn would make the data available to the administrators, however…

LKQ’s customers generally like the personal touch of a phone call or e-mail with a parts sales associate. With the very nature of recycled parts’ price fluidity, often changing on a daily basis or even more frequently, and the fact that recycled parts prices may be negotiated by the administrator, it is easy to see why LKQ views itself as “customer centric.”

Big D Auto Parts faces similar challenges with electronic connectivity. Again, the company values the interaction with claims personnel. If a particular part is not in stock, many times they are able to locate one from an associate or up sell to a remanufactured part that has not shown up in their inventory. Further, each claims office, and more specifically each claim, has different requirements pertaining to parts condition, shipping and warranty. Each of these requirements has to be considered when pricing an item.

Big D, like many parts recyclers, maintains an inventory management system hosted by a national organization. Inventory is part of an electronic data base that is online and available free to everyone. “It is great when working with individuals, however, when working with professional claims adjusters who have specific parameters for each individual claim, the ‘one size fits all’ philosophy does not work very well,” states Hugh Pettigrew, owner of Big D.

To summarize, the issue is not whether part providers are utilizing databases. They all are. And they can be connected to electronically on an individual basis. The challenge is to create a universal database where there is some referencing commonality and where everyone is connected.

Inspection Connectivity

For WIS, the inspection process can be broken down into a few different components: the initial setup, the expected ETA of the inspector on-site, and the inspection itself (broken down into the verbal report, written report, photos/videos and any computer data relevant to the inspection). Each component is possible to automate and integrate to a certain extent, depending upon how far the administrator wants to go.

As suppliers to this industry, WIS explains, as much as the company would like to believe they are central to the administrator’s daily operation, they cannot forget that they are an extra, a service that is common but not essential to the administrator’s prime function. As such, it is vital for them to do whatever they have to do to make it easy for the administrator to use their services. WIS have worked extremely hard and have invested significantly in connectivity and integration, as they believe it will be impossible to remain a significant player in the industry without it.

The feedback that WIS has received over the past two years has convinced them that there will be an expectation of integration capability going forward. It has been beneficial in every respect, although it does present a new expense to the provider. The administrators who have integrated have always been large enough to have their own IT staff, whereas this expense is a significant one for most small providers.

Carr Appraisals contends that the 100 percent automated transfer of all inspection data (from initial assignment through the return of inspection findings/written/photo documentation) through external integrations would streamline the inspection process. Obviously, the quicker the exchange of all information the quicker the claim resolution, which translates to greater customer satisfaction not only for the administrators, but the policyholders as well.

The benefits of external integration and connecting the inspection process with the administrator are evident, but have not yet been fully realized. When compared to the level of internal integration present in our profiled inspection companies, there is still a long way to go. A summary of the level of internal connectivity utilized at Carr Appraisals is indicative of what most inspection companies are already doing today.

Currently all stages of the inspection processes between Carr Appraisals and the inspector is 100 percent automated. Inspectors access inspection requests assigned to them from the company website, then they post corresponding written reports and photos to the web. Their inspection invoice is included in the report they uploaded to the web, which is automatically processed for payment every two weeks and paid via ACH/auto deposit for the most part—some inspectors are old school and still prefer paper checks delivered via U.S. Post Office, but even this is as automated as Carr can make it. Inspectors use digital cameras, some more expensive than others. Photos via a cell phone are not acceptable in most cases as there are flash issues and lack of zoom ability.

All forms and guidelines required to perform inspections are available for download directly from the web. Carr communicates on a mass basis directly with inspectors via an “announcement board” on their website —clients are also privy to these communications. The company notifies each inspector of impending inspection request assignments by direct contact, cell phone, pager, text, or email (this varies depending on inspector capabilities and preferences). Inspection assignment completions are tracked utilizing similar methods. Each inspection request assigned to the company website automatically gets the appropriate online report format (mechanical, tire/wheel, pre-purchase, etc…) attached, as well as an individual invoice.

With this level of detailed internal connectivity, the natural evolution would be for bi-directional data transfer between inspection companies and administrators: data entry to the inspection company and completed inspection reports back to the administrator. As we will see, this may be easier said than done.

Stumbling Blocks to Integration

Adaptability is a major stumbling block to integration, whether you are a parts supplier, inspection company, or provider/administrator. There is not much that is “standard” in this business. Each administrator has their own needs and each one does business a little bit differently. There are many different software platforms that they use and most have been customized over the years, so it is not possible to create a simple plug-in, off-the-shelf, integration program.

Used parts present a unique challenge for integration. George Laurie, national sales manager for LKQ explains, “Unlike new parts, recycled OEM part suppliers generally do not inventory parts utilizing the OEM manufacturers’ original part numbers. We believe that most integrators are currently using an MSRP parts database for new OEM parts. Therein is the challenge. Recycled parts suppliers use different software. Recycled parts are bar coded with an inventory number, VIN, part description, part condition and year, make, model part interchange information; but not the OEM original part number.”

Even if used parts were inventoried using the OEM part number, there is still the issue of price negotiation. Perhaps a system where used parts availability and pricing is made available online using OEM part numbers to accurately locate the part would solve the cataloging issue. Then, if necessary, the personal touch could be implemented when it comes to pricing. An alternative could be an online parts bidding mechanism in place of the personal contact, but that may change the dynamic beyond the comfort of the suppliers.

The “easiest” integration is accomplished through third-party integrators like F&I Admin or StoneEagle using an API interface – a web service that allows the push and pull of data. There can be different levels of connectivity, e.g. inspection request versus the return/availability of inspection reports and photos. The latter would most likely be accomplished via a hyperlink, as it is probably not very cost effective for two separate systems to store reports and photos.

“Easiest” integration does not translate, however, into a painless understanding between the parties as to who will bear the cost of the integration. Inspection fees have remained mostly constant over the last 10 years, in spite of the increased costs borne by the inspection companies for web services, digital photography and photo transfer from the repair facility. Third-party integrators have indicated that they cannot pass on the cost of inspection connectivity to their customers (the providers).

Without sacrificing the overall quality of an inspection, inspection companies are willing to accept their fair share of costs associated with providing “added value” for their product through technological advances. Participating in the cost for a third-party integrator to provide connectivity to an administrator, who at the end of the day benefits the most from the integration, may be too much for the inspection company to bear when one considers their already stressed margins.

The answer is for administrators that do not currently communicate through API’s to consider doing so. L’Tonya Carr of Carr Appraisals states, “Carr Appraisals has had the ability for external connectivity since 2001 [web service with an API interface for standard mechanical inspections], and I suspect other major inspection companies have this ability as well, but not one of our clients utilize that format for auto data transfer.”

In Conclusion

A common theme throughout this series has been the distinct awareness among the profiled companies, and the providers, administrators and dealers they serve, that the path forward is paved with improving communications at all levels.

A universal database for OEM and refurbished parts should be available. Used parts create a significant challenge for the industry and that database would take a lot of work on everyone’s part. However, integration of inspection services is just a matter of time.

There is no doubt that our industry is fully engaged in an integration revolution. In fact, for many, the metamorphosis from legacy processes to state of the art electronic processes has been agonizingly slow. The good news is that with forums like P&A Magazine, VSCAC, Industry Summit, Agent Summit and the newly formed F&I Providers and Administrators Association (FIPAA), the industry is now able to more openly examine and discuss the challenges we all face and begin to chart a path forward in a healthy community atmosphere.

Gary Fagg, a consulting actuary with CreditRe and one of P&A Magazine’s Actuarial channel contributors recently approached P&A to review some online GAP protection material that he will be providing AFIP for their certification program for F&I professionals.

His experience in the actuary, accounting, risk management, and risk transfer solutions related to vehicle protection products, precedes him and he has been asked to speak at the upcoming Vehicle Service Contract Administrators Conference held at the Las Vegas Hilton from September 26-28.

The editorial staff here at P&A Magazine thought who better to open the review to than our own Provider and Administrator subscribers because you are the experts in the industry. So, we are inviting you to click on the following link to review and comment on the material to be presented.

GAP Protection Offered by the F&I Office in Conjunction with a Retail Installment Sales Contract

The basic questions we are asking of this material are:

1. Does this document contain all the information an F&I practitioner needs regarding the GAP product?
2. Are there any technical errors, omissions, or commentary?

We appreciate the time that any of our readers can contribute to reviewing the document provided in the link above and welcome any comments, corrections, etc. that you can provide.