INVENTORY STRATEGY

Real Questions, Real Answers How do recyclers determine (and then advise their

buyers) the list of vehicles that they want to seek out first and foremost?

Hopper says for his yard, it’s Bid Buddy that helps his team to determine which vehicles are the most desirable for their yard. “We rely on the rankings from Bid Buddy and the buying priority reports to help us to choose the right vehicles for us,” said Hopper. “We look at our projected sales to reach sales goals with production num- bers, and the fixed over- head per car and cost of goods. If the cars you are buying match these three, you may have the right car.

If

you buy inventory you may make money on your cars. If you don’t buy you won’t. I would rather be broke and have something to sell,

Megan Watson-Rons, Purchasing Manager, ABC Auto Parts

than be broke with nothing to sell. The key is having the right thing to sell. Nothing to it right?” Gold says Standard Auto uses Bidmate rankings, buying priority reports, and uninventoried daily reports to come up with their lists. How do recyclers decide what fixed overhead and cost of goods need to be?

The Standard Auto team uses the historical cost to handle their vehicles ($2,500) as a basis to set criteria for their buying team for vehicles sought after at the auctions.

Hopper says it’s the “overhead divided by the num- ber of cars you dismantle. You lower overhead or dis- mantle more cars. This is the only way to improve your numbers.” How do recyclers decide how many cars to buy? Gold says his management team uses yearly goals to determine how many cars to buy.

“Management goals are team goals that are set at the start of each calendar year,” said Gold. “We believe that it is important to have a monthly goal in mind and set a target for our buyers as to what they should be buying in anticipated sales per month. An example of

a monthly target that could be set for your company could be $1,000,000 in anticipated sales. We continue to tweak overall targets based on month-to-month reporting and rates of buying. The goals are somewhat dictated to by the space we have available and produc- tion numbers (overall output).

“All departments tie into each other and buying goals require all other areas to keep up with their own targets in order for the cycle to continue. We also look at our production capabilities to give us a realistic picture of how many vehicles we can actually handle effectively. Tracking overall is also a big part of ensuring all parties are striving to hit their targets. We do assess- ments of quantity on hand in each location.”

Gold gives the following example (see box):

Example of targets that could be set:

Location Buying Per Week Inventory Per Week Dismantling Per Week Yard 1 40 + 40 + 40 +

Overall target for the year (Yard 1) – 2000 Vehicles

34 Automotive Recycling | May-June 2015