When it comes to creating a system that benefits your company, be efficient from the start.
By Mike Kunkel
Once we purchase a vehicle and it arrives on site, there are 4 basic components to our business. They are inventory, dismantling, sales and order fulfillment. There are things that can be done in each of these areas in order to streamline and create an efficient way of selling and distributing our parts.
We often find ourselves thinking that if a part came on the vehicle that we should sell that part off of the vehicle. Reality tells us that a lot of parts are not in demand and many others have value less than our cost to pull and sell that part. In other words, it does not profit us to sell that particular part. There are always exceptions, but the best way to control what parts you are selling is by inventorying all of the parts that have demand and value above the minimum part sale we need to maintain. Do not tempt the salespeople by inventorying parts you do not want them to sell.
You should inventory deep but only the parts that make us money when they are sold. There are a number of ways we can show how the profits lie in your ability to dismantle more vehicles, not sell more parts per vehicle. A number of low dollar value parts have high demand. Invest your labor in them at the time of dismantle to warehouse them. Dismantling is the most cost-effective time to pull any part, but it can be expensive if we start prepaying labor on parts that are not going to sell. Remember the difference between a museum and a warehouse is the ability to turn the inventory. There is a cost to carry inventory in a warehouse and then the labor to clean out the obsolete parts that are stored there.
Harvesting the core commodity is a growing segment of our business. The same cost reasons dictate that you should do any core harvesting at the time of dismantle and not during a pre-crush harvest. It will produce a higher return for you if you follow that rule.
Dismantling should take pride in the final product that they produce. They are in a position to have a positive or negative impact on the next person that touches either the vehicle or warehoused parts. The dismantler is the person who moves from one end of the vehicle to the other meaning they see all of the trash and should remove all of that same trash. It keeps the yard neater along with decreasing the likelihood of varmints moving in. Taking a few extra minutes and breaking suspension bolts loose, verifying the accuracy of the inventory, both interchange and quality will help everyone which saves time. Marking the stock number and identifying the proper side and ultimately putting the parts in the spot they said they put it in are also key. There is a direct correlation between highly profitable sites and them having dismantlers that perform at a high level. Meaning a large volume of vehicles with a high degree of accuracy.
The sales team needs to do and not do a few things. One of the things that they can’t do is spend a lot of time in the yard searching for parts. We started off saying that we are inventorying what we intend to sell so what is it they are looking for and why. The exception is a weird thing needed to complete a high dollar sale otherwise we are tripping over pennies while losing dollars. The salespeople need to be able to measure risk versus reward. Understand that the more time it is going to take to find, pull, verify and all of the things required to make it to the customer that the greater the reward must be in the form of a higher price.
Having a minimum sales price for your salespeople to adhere to can help them. It allows them to concentrate on selling parts that make the company money by eliminating temptation to sell the ones that do not make us money. Truthfully, most of us struggle with the concept of how selling cheap parts costs us money but it really does and can be proven a number of different ways. You should always encourage your salespeople to sell the things that we have a lot of. Is there a price above our minimum that is too cheap for something we are overstocked on, within reason?
The devil is in the details. Reading all of the particulars prior to starting the work will save a lot of time and reduce the number of times the task needs repeated to complete properly. The order fulfillment department is made up of everyone who deals with the pulling, QC, cleaning and delivery to the customer and all the support staff in between. The biggest thing they can do to push a lot of parts with a minimum of people is to read the paperwork from top to bottom.
In order to read the paperwork completely, they must first require paperwork for all tasks. Not having the proper paperwork leads to confusion and wasted time along with effort. It also lends itself to everyone blaming each other and not having the paperwork makes everyone mad. Paperwork equals accountability and accountability is another key in having an efficient operation.
Once they have been given and read the paperwork, they need to execute what the paperwork says. Pull what they are told and if any changes need to be made, make sure they either make them or get with the person who is supposed to make them. The lack of inventory accuracy is a killer when it comes to efficiency. We cannot spend a lot of time doing work that we have already paid someone to do.
Things get broken and left attached to other parts and all kind of strange things. We need to make sure that all of the strange things get deleted from the inventory when they happen. The punishment for not reporting damaging parts should be greater than the punishment for actually doing the damage. It is that important.
Search the surrounding area when parts are missing. Everyone makes mistakes but if we mark the stock number on the part and spend a little effort looking, we can find the missing items a lot of times. This is a big part of staying profitable. Being able to collect the money for parts we had in the place we said they were. What a great concept!
Make sure your people have the computer skills that they need to do their job. This is really important to being able to understand why things happen the way they do. This also allows you to empower them to be successful in their jobs.
Add all of these things together and you will have an efficient operation that gets it right the first time.
Mike Kunkel has 35 years experience in the automotive industry, starting at his family’s new auto parts store, machine shop and paint & body equipment business. Mike partnered with Bill Stevens to purchase Counts Consulting after a 20-year career as general manager of American Auto Salvage in Fort Worth, Texas. Mike is known for his expertise in the production processes that allow the maximum amount of production by putting the workforce into positions that allow them to be highly efficient. He uses his skills as a process expert and financial background to help all recyclers sell parts more profitably while growing the business.