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Maximizing Profits: Buying Better

Now is always the best time to evaluate your profits as an owner and decide where you can grow the bottom line. The end of the year or fiscal year, finalizes our impressions as we look at the bottom line and realize what we have worked so hard for.
In this month’s series, we are going to assess the purchasing and inventory side of maximizing profits. The core of maximizing profits is finding the right hunting grounds, seeing all the value, and funneling inventory to the right channels.

Choose the Right Hunting Grounds
Ever get the feeling that your current auctions and pools are running dry? No longer providing the returns and quality they once did? Well anyone who faces the challenge of growing inventory supply must understand that you typically have to add sources to grow at a sustained rate for cost of goods and to satisfy the diversity of your customer base. It needs to be common practice to add at least 1 auction annually and anyone struggling with current supply should be more aggressive in adding sources until your needs are met. The number one job of the buyer is to pick and have the right sources. Otherwise you only buy what falls in your lap not what is desired by your base.

Evaluate alternative sources, contracts, tow lots, donation cars, street purchasing, etc. as needed. Each source should be specified in your IMS so it is easy to evaluate COGs and ROI.

Seeing All the Value
Every company needs someone who is investigating and finding the additional value on their vehicles. We are moving out of the phase of making it solely on our top 15-20 parts. Many companies who are thriving, do a better job of capturing the miscellaneous values on specific vehicles both in price, listing (ecommerce) and feeding this information back to the buyer. How much time is your buyer, inventory person or pricing specialist spending reviewing other company’s listings, parts on back order, or non-interchange components?

Ever wonder how “that guy” can afford to spend “that much” on that vehicle? They are either going broke or they see value that you have missed. I’d err on the latter and follow up to see what the company ends up listing off that vehicle and how does that compare to the value you saw? The information is there. Whoever captures, finds and uses data better wins, period.

Inventory Channels
Similar to the work that must be done in sourcing inventory, listing inventory is now facing similar demands. Those of you who attend national conventions have seen the difference. There are multiple channels to list inventory online, either through a broker, direct to DRPs, through an aggregator (craigslist, eBay, car-part). Likewise, each of these channels has inventory that does better than traditional channels. Customers have different buying expectations and experience; they likely will pay more if you show more value.

Who on your staff is researching these tools? Who is researching these customer habits? Are you using the platforms to their benefit: freight and warranty markups, targeting certain zip codes or keywords? Do you have the right images and reputation to be reputable in this new arena of sales?

Lastly, parts must be priced, priced again, priced again and priced again until they sell. Do not rely on your salespeople to reprice your parts unless you have spent extensive time training them to do so! It is only inventory if it sells. We can’t sell it if we can’t get calls or hits on a part and that won’t happen if our price gets too far out of market.

This is a 360-degree approach to leveraging inventory to compete. Looking out, to maximize inventory sources. Looking in, to research and uncover unseen value in existing inventory. Looking forward, finding the right channel to list your inventory to sell. Retail, wholesale, collision or mechanical.

Most inventory based companies, like everyone in this industry, develop departments because they understand that percentages are won and lost by the knowledge and resourcefulness of those in their purchasing department. Buying, pricing and listing are all critical aspects of your company’s future. Are you leading and developing experts within your organization to maximize your profits?

Counts Business Consulting provides sales management services to the automotive recycling industry. Reach Chad Counts at (512) 963-4626 or crcounts@countsbusinessconsulting.com and Robert Counts at (512) 653-6915, robert@countsbusinessconsulting.com or visit www.countsbusinessconsulting.com.