Your Inventory; What You Buy, How Your Show It, and How You Price It

The important thing to remember here is that sales and revenue are a by-product of your inventory and your process.


When I was new to the business, a wise person told me, “Always remember, you make your money when you buy the car.” He also said, “The parts that come off of these cars are only worth so much. It doesn’t matter if you paid a million bucks for the vehicle or if you got it for nothing. The part is still worth what it’s worth.” He also told me to make sure I pay attention to, and follow the prices that the salvage is bringing so that when cars are going cheap, you can “lay in the weeds” and load up when salvage is going cheaper. Another thing that he said was, “Buy the car when you don’t need it.” In the beginning, I did not understand this, but I quickly learned what he meant, because when I was out of stock on things, so were a lot of others. So naturally, I would have to pay more to get what I needed.

These statements are so true, even today. If you are overpaying for salvage or buying deals instead of the right vehicles, you are basically painting yourself into a corner. After all, you can only sell so many parts and get creative with other sources of revenue, like extended warranties.

This is why proper purchasing is crucial. It is the foundation for everything else that comes after it. The goal here is to buy the right vehicles at a fair price and have a margin for error. We have a lot more tools at our disposal now, especially with technology and our ability to now identify trends within our Yard Management System (YMS), but the thing to remember here is that while technology is great, it is only a tool and a guide. It’s a slippery slope if you’re taking it literally and expecting it to do your thinking for you. Your buyer should know the needs of your business. This is why I believe that the owners should be directly involved in purchasing and inventory, if not doing it themselves.

Our purchases are not inventory until they are available for sale in our YMS.

Do it right the first time. With inventory being such a huge investment and so crucial to our success, doesn’t it make sense to have a thorough and concise inventory process so what your salespeople see on their screens is what they have? They need to have faith in what they’re selling to be truly effective. Now, with e-commerce and all of our inventory being on the internet, we have more opportunities to sell our parts.

Theresa Colbert from Car-Part said something very wise. She told me, “Describe your parts like you have no pictures and picture your parts like you have no description.”

Pricing: Hitting a Moving Target.

Keeping your prices current and competitive is the most important and is also the most time-consuming and often the most neglected area in our businesses. How often do you go through your entire inventory and update your pricing, and what factors do you use? We’ll look at a couple of examples here:

Recycler “A” reprices his inventory according to its age or days in stock. He wants to have the cheapest price and he changes prices on a lot of part types en-masse. This is the fastest way to do it, and he wants to get through it as quickly as possible and thinks he’s going to get good results.

Recycler “B” looks at his inventory and uses multiple factors in his decision making, such as quote to sales ratio, quantity on hand, part condition, days in stock, and average selling prices. He also does comparables. He does part searches to see what others in his area are selling the parts for, using an “apples to apples” approach. He also uses, if he has them available, tools and analytics to identify trending. Trending, when properly applied, is the most reliable and powerful guide in managing inventory for both purchasing and sales. This tells us what individual parts are starting to trend upward in demand, and what parts are trending downward. As we move forward into an electronic or e-commerce environment, it will be crucial to have good images and descriptions, and to have our prices current and competitive. Failing to do this will result in lost opportunities and we will never know if we are losing out because to date, we have no ability to track or measure them.

Remember the importance of the proper execution of these fundamentals. Your goal should be to consistently deliver a quality product on time and as-described that meets or exceeds your customer’s expectations. A confident, satisfied customer is a steady customer.

Support your State Association! Support ARA, the only association for Auto Recyclers!

Marty Hollingshead

ARA Secretary · Northlake Auto Recyclers — Hammond, IN

Hollingshead has been in the professional automotive recycling industry for 45 years, including 34 years as President/Owner of Northlake Auto Recyclers, one of the industry’s leading facilities. Hollingshead prides himself on taking a hands-on approach in the business, employing the use of checks and balances for quality control to ensure customers only receive the highest quality parts. Northlake was one of the first automotive recycling facilities in the state of Indiana to receive from the Indiana Department of Environmental Management the Indiana Clean Yard – Gold Level Certification in 2009. Northlake was certified as one of the Indiana Certified Automotive Recycler Exemplary Standards (INCARES) program’s inaugural medalists and was the highest scoring facility in Indiana in 2014, 2015, 2016, 2017, and tied for first place in 2018. Northlake was also the recipient of the 2016 ARA Certified Automotive Recycler of the Year award, having been nominated by his peers in the industry.