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CASE FOR CERTIFICATION


has only traveled a few hundred miles and it is being put into a vehicle that has traveled thousands more. It all comes down to being able to guarantee that the part in questions will work as designed. The own- er of the vehicle deserves nothing less and rightly so. So let’s cut to the chase. We need to find a solution to this. There is absolutely no reason why we shouldn’t and couldn’t. Let’s face it, these same parts are driv- ing around in every vehicle on the road today and we assume that these used components work perfectly. The reality is that each of these components goes through a diagnostic check every time we start our cars, so we know they are working as designed, otherwise our vehicles would tell us there is a fault. Technology in vehicles is al- ready affecting the automotive industry. Supply chains will need to adapt to better service the needs of the repairer and insur- ers, who ultimately service the consumer. Independent certification programs are now emerging. These will make sure auto recyclers ad- here to and are audited against these independent standards. Those recyclers that decide to participate and go through the process to comply with these stan- dards will differentiate themselves as the best of the best. A move towards component certification – a set of standards that clearly defines how specific harvest- ed parts need to be removed, handled, stored, tested and distributed is the next logical phase in developing supply chain and repair process.


The Economics


High-tech parts are expensive and are hurting con- sumers. If the repair bill increases, so do our premi- ums. Sure, we can argue that it is the greedy insurers trying to squeeze more money out of each of us, but while this could be a contributing factor as sharehold- er returns are protected, the rising repair costs also drive these price hikes.


[1] Industry Trends Report, APD Edition, Vol. 17 No.1, Q1 2017, Published by Mitchell International


48


Through the extensive work I do with insurers, I know that approximately 45 percent of a repair cost is made up of parts. In an article from The Age (August 24, 2017) titled “High-tech parts push up repair bills – Motor claims costs dent IAG margins,” IAG’s chief executive, Peter Harmer stated – “the parts of some vehicles, especially grilles and bumper bars, have ac- tually skyrocketed…” Where do many of the sensors and collision avoidance technology components sit in the modern-day vehicle? In the grilles and bumper bars. Now comes the opportunity – • What if recyclers could harvest sensors, test them, certify them and make them a viable alternative?


• What if we found a way to make them an option for insurers to use in collision claims?


• What if we found a way to run them through a diagnostics check?


In the current context, it is a scary thought, but for those in the insurance and repair industry, a thought that could provide a safe alternative and save millions of dollars a year if it materialized. Repairers would have thousands more vehicles, as in the Genesis ex- ample, that they could repair and the parts supply chain, millions more parts to sell.


High-tech parts are expensive and are hurting consumers.


If the repair bill increases, so do our premiums.


Independent Certification One solution, independent


certification ensures that parts meet a certain set of agreed cri- teria to give confidence to the end user. It ensures the part has gone through an agreed process to make sure that it will function and perform exactly as it was de-


signed. This type of certification has driven the use of certified aftermarket parts in the U.S. up from 13.72 percent in Q2 2014, to 20.66 percent in Q4 2016 ac- cording to Mitchell.1


Independent certification will enable the automo- tive recycling industry to make these high value, hi- tech part types saleable. It will also establish a sound set of criteria that will give repairers, insurers and their policy-holders confidence in the parts. In this way, via the certification process, the auto- motive recycling industry can help insurers keep the cost of their policies at sustainable and affordable lev- els for the consumer, and keep more of these vehicles from becoming uneconomical write-offs – a win for the collision repairer, as well. We have witnessed moments in history where change has swooped in on the traditional industry. The innovators, the leaders, the visionaries, have not only taken advantage of the change coming through, they have designed and guided it. This is one of those moments. If you are an insurer, think differently. If you are a repairer, embrace the opportunity to use alternative supply chains in the future. If you are a re- cycler, be proactive and invest in your future. Many say change brings with it risk, but with every risk there is opportunity for those willing to think and act stra- tegically. 


For over 10 years, Chris Daglis of PARTnered Solutions has been the leading independent ad- visor to major Australian insurers on alternative parts strategies. He has an understanding of the key drivers for all stakeholders and an abil- ity to build strategic mutually beneficial solu-


tions for insurers, repairers and suppliers. You can reach Chris at chris.daglis@cdps.com.au or at www.cdps.com.au.


July-August 2018 • AUTOMOTIVE RECYCLING


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