Word on the Wire By Andy Latham andy@salvagewire.com

The Yield Factor A

uto recyclers never cease to amaze me with their ingenuity and dedica- tion to pushing the boundaries of their business. I recently visited one forward thinking auto recycler in the UK who has proved over many years to be genuinely ahead of the curve. Two years ago they moved into new premises and faced a significant volume of issues before they could get the oper- ation running at full capacity. One of these was permission to operate an auto recycling business from the site, especial- ly difficult as the chairman of the local planning committee lived in a house over- looking the business.

Proving that the operation was a facto-

ry that took in damaged vehicles and pro- duced green recycled parts was the key that resulted in permission being granted to the business – a true example of think- ing outside the box!

The owners have recently been looking at their processes and reflecting on the volume of parts they remove, store and sell, and are focusing on the yield factor. Yield factor can be described as the ratio of the amount of materials that results from an industrial process to the amount of material that went into it. The Yield Factor of a vehi- cle can be brought down into 2 areas – the amount of each vehicle that is recy- cled rather than going into landfill, or the volume of parts going into the process that are sold within a defined time-scale. Lets take the recycling yield factor first. The European Union End of Life Vehicle Directive dictates the yield factor for all ELV’s processed – 95% of every vehicle must be recycled, re-used, or recovered. It is the responsibility of auto recyclers to prove that this yield factor is achieved via their annual reports to each national gov- ernment. They have been assisted by research over the last 10 years that proved 75% metal content, that when added to fuel, tires, batteries, fluids, and all other items removed from the vehicle during

30 Automotive Recycling | January-February 2015

de-pollution processes equalled almost 82% of every vehicle, so they only need to prove the additional recycling, re-use, or recovery to take them up to the 85% tar- get (through 2014) and the 95% target that is in place starting Jan. 1 2015. The yield factor is of importance to many auto recyclers as this is where the main profit is generated.

Do you regularly analyze the volume of parts put into the operation against parts sales data? We all know that there is con- siderable cost associated with vehicle dis- mantling and parts storage, so calculating your yield factor gives a very big indicator to the success of your business. A yield factor for any business selling Green Recycled Parts®

should be calcu-

lated on a daily or weekly basis and the suggestion is that at least two reports should be run, one to focus on parts placed into stock less than 30 days ago and the other for parts placed into stock more than 30 days ago, So the two sets of figures could look like this: • Parts sold this week less than 30 days old: 250 x100 = 50%

• Parts placed into stock this week: 500 • Parts sold this week over 30 days old: 100 x 100 = 20%

• Parts placed into stock this week: 500 Regularly turning stock over is one of the best ways of increasing profit and min- imizing costs which means that the yield factor could be one of the most impor- tant reports that any manager or owner could produce.

Obviously the report will highlight those parts that are fast moving and in demand and all good owners and man- agers should be using this report to check pricing strategy, but how do you influence the yield factor to make certain that this is as high as possible? Here are a few tips. Do your staff always record every inquiry they receive, even the ones that they can- not satisfy? If they do, then you already have a significant chunk of data that will

be of considerable use to you and your business. Look at why you could not sat- isfy those inquiries and the volume of each. Did you have the parts in stock, but were too expensive; were the parts shown as stocked but could not be found or were damaged when picked; or there was no availability? Answering these questions will not only show where processes are failing and give an indication of improve- ments that can be made it will also focus attention on parts in demand and guide future buying decisions.

What should your yield factor be?

Every business will be different, depend- ent on the cost base of the business along with the average sales price – the lower the average sales price then the higher the yield factor required, and the sugges- tion is that a yield factor of 50% for parts less than 30 days old should be a mini- mum target along with 25% for parts over 30 days, this will give a decent return on the investment in dismantling vehicles and parts storage and ensure revenue is available for replacement stock. It is entirely possible that your yield fac- tor is very different to the figures quoted above and your business is achieving a great return on investment and decent profits; it is still a number that requires regular tracking as a change in this figure could be a very clear, early, identification of issues in the business that require addressing.

Should you need help to further under- stand your yield factor and how changes to this would impact your business, or for more details on this or the UK recycler involved, please contact Salvage Wire. ■

Andy Latham is Managing Director of Salvage Wire, a unique Auto Recycling consultancy with a focus on Safety, Ethics, and Profitability for all clients. With over 30 years of experience

in the automotive industry, Andy shares his knowledge, ex- perience, and wisdom garnered as an engineer, manager, and leader: Contact him at +44(0)7710 877411 or e-mail andy@salvagewire.com.