INVENTORY STRATEGY
“For us, the latest technology doesn’t affect our buy- ing process; if anything it affects the dismantling process the most. We figure out how to understand computers. The first time might take some time to properly dismantle the part. Once the dismantlers learn and are used to that vehicle’s technology, the process goes faster the next time. We are getting a lot of opportunities to work with the latest technology.” M&M Auto is also seeing a trend in buying cars that includes cars that require specific training to deal with the latest technology. “We are buying more hybrid and electric cars because of our market in Northern Virginia,” said Morrow. “We are also seeing the need to dig deeper into the car in order make the most on the sale. It becomes a delicate balancing act between digging deeper in the car with digging yourself into a hole of parts you will never sell. The latest technology is also having an impact on the training and tools our dismantlers required in order to process our vehicles. With hybrid vehicles, training becomes vital to avoid risk of serious injury and possibly death.”
Both Hopper and Gold have noticed that the cur- rent trend is leaning towards buying more inventory. “One strategy for buying right for your yard is to
try to fill the holes in your inventory,” said Gold. “The recent trend is that you have to buy more and more cars to have the parts that are in demand. Buying is more of an art than a science even with the bidding tools. Assume the sales, not every part will sell but some will. We are in business to supply parts to customers. We need to know what parts our cus- tomers really need and if it means spreading our wings and attending other auctions then we need to be willing to do that.”
Hopper says that the current trend can be tackled better by looking back at your history to help you navigate the journey ahead. “Looking back shapes your strategy,” he said. “As we buy more cars to have more parts to sell, we must watch our numbers to make sure we are raising our dollar sales per employee while upping production. Purchasing the amount of sales to meet your future sales goals is the biggest key in achieving success. Managing the depth and width of inventory to max- imize cash flow is something that becomes more challenging the more sales you purchase,” said Hopper.
“While using data is vital and I completely support it, I agree with David that buying is a kind of art form that depends on the buyer’s ability to know what to buy,” said Morrow. “Our main buyer is my uncle and
30 Automotive Recycling | May-June 2015
I applaud him for the job he does. He relies on his intuition as much as on the data, and that intuition plays a big part in buying as efficiently as he does. As we move forward, we are going to rely more heavily on the data for purchasing because it is about buying the right salvage for the right price.”
Tips for the Road Ahead
Most recyclers rely on bidding tools to provide data that allows them to see which vehicles are the best to buy for their business. Each recycler has his or her own preference on which tools to use, but all agree that these tools are invaluable in their analysis of potential inventory. Kelly Roepke, President, Y-Yard Auto and Truck, Inc., suggests that recyclers consider their markets carefully before buying. “We currently use the Buddy Bidding tool and we are on Pinnacle,” said Roepke. “Between the two sys- tems, they generate enough reports that point us in the right direction. Every market is different and recyclers need to be buying what their customers are driving up and down the road.” “We analyze our past purchases to help us select our future purchases and Bidmate does a lot of this for us on a daily basis,” said Gold. “Reviewing the B1 going back 12 to 18 months (we used to go back 6 to 12 months) allows us to see the full scope of buys made by our team – we can zero in on vehicles that made us the most profit, but also take a look at the vehicles that did well in shorter time periods than expected, etc. It does surprise us that there are high- er-end, more expensive vehicles that break profitable really quickly.
“As far as knowing which is the most profitable class of vehicle for us, i.e. ‘A’ vehicles (high end), ‘B’ vehicles (medium end) and ‘C’ vehicles (lower end – filler type vehicles, private – GVD and charity), we have found that the entire mix works for us; how- ever there is much more time and focus placed on higher gross margin ‘A’ vehicles.”
The mix of vehicles in terms of keeping the busi- ness “busy,” says Gold, and maximizing their through- put is very important. Knowing that they have to make at least approximately $2,000 on the vehicles over and above what they paid for it shapes their buy- ing strategy. “It’s very important to find the correct balance in the mix of vehicles we buy,” said Gold. “With a mix we can adjust production numbers as needed. Higher-end vehicles take longer to process. Lower- end vehicles are processed faster, which in turn allows for more throughput.”
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