new manufacturing that exists. There has been a change in manufacturing to balance the exact need and the timing of the need so we can work within their needs and eliminate levels of distribution that will allow the source (us) to get the maximum money that introduces growth into the parts business without having to process additional vehicles. This ultimately reduces our cost of goods and allows us to pay more for the wrecked vehicle, which is the starting point for the whole part commodity process. “Those who leverage their knowledge of the needs of the remanufacturing folks to feed the product to them will have a competitive advantage and, in all likelihood, be more profitable than those who do not want to do the additional work involved with this,” explains Kunkel.
Cunningham enthusiastically agrees.
Taking the Program Seriously “Having a good, strong com-
modities program is such as important revenue generator that each yard should have a dedicated manager whose sole responsibility is to grow the commodities business,” said Cunningham. “That person has to be trained and educat- ed about the cores program and act as the point person. Having a commodity program has been identified as being
so significant that it has created a new revenue stream and caused consultants to have to re-write their KPI’s (Key Performance Indicators) to include this because it’s that big of a deal. Many industry experts have pro- grams that have benchmarking sessions and the com- modities program has become the centerpiece of these sessions.”
Cunningham is adamant that the auto recycler owner should not be the person who is in charge of the commodities program. He suggests investing in a person, giving them the proper education about the program, including what to harvest, when to harvest it, instructions for multiple sites, etc. “I can’t say enough that the person to manage your commodity program should not be the owner!” said Cunningham. “The owner needs to understand the program and measure the KPI’s, but you must meas- ure the program not the ticket. It operates like a sep- arate revenue stream much like warranty, freight and remanufacturing/aftermarket sales would, except in my humble opinion, it is more powerful.”
Getting a Program Up to Speed How do you begin to successfully control your com-
modities?
Kunkel says there are several important steps to start controlling your commodities: • You need to participate in a program that popu- lates the core price fields in the yard management system. • You establish a culture in your company that we will charge for/gather/consolidate the items that make the most amount of sense for the company to deal with.
• Each company will have to pick the dollar thresh- old to use.
• Processes will need to be put in place to minimize the labor involved and ensure the quality is main- tained.
• It is a profit center of the business and it needs to be managed accordingly.
Once you have controlled your commodities and not given them away, you can begin to position yourself to market your commodities. According to Cunningham, commodities need to go to a tier one core consolidator for configuration and quan- tity of which manufacturing need to receive.
Cunningham recently vis- ited Cardone, the largest
rebuilder in the world, that handles 250,000 cores per day and when he saw the specifications they need such as the right size pallet, proper identification, and other specific details, it re-emphasized to him the importance of the tier one core consolidators. “Buying cores is like a box of chocolates, you never know what you’re going to get,” said Cunningham. The difference in buying commodities is that you know what you are going to get, it’s properly identi- fied, priced, and already sold and it passes right through the supply chain. Due to the specific and precise details that remanufacturers want, auto recy- clers need to work with tier one core consolidators who can handle those details.
“As auto recyclers control their commodities better, margins may go down for core consolidators, but their quantities will go up and the high tide will float all boats. The added bonus for the core consolidator is that they will start getting inventory that is properly identified. If we, as auto recyclers, can get 90% accu- racy in what we give to the core consolidators and
July-August 2015 | Automotive Recycling 55
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