The year of 2020 will be remembered, talked about & researched forever. All of those things will be good topics but the reality is we have businesses that need to be run profitably during a period of time that sees many different ideas and principals in play. Simple math and deductive reasoning — skills that are questionable in today’s world — will tell you that less new cars are going to be made. Less new cars means an increase in value of used cars which in turn causes less salvage available to us. When quantity goes down the price goes up and the quality can be questionable.
This translates to a potential threat on our supply line during a time when our competitors from the OE / Aftermarket side have their own supply line problems they are dealing with. We have watched the supply of vehicles replenish but most if not all recyclers have depleted inventory leading up to the increase in supply. That means that everyone needs to be sharp in what is going on in the areas that impact buying.
Are you sure that you are using the correct part price in your buying software? Vehicles cost more than they did a year ago. Have you adjusted your prices to reflect what replacement value is or are you trying to purchase vehicles based off of undervalued part prices? Are you paying attention to what parts your customers are telling you are on backorder and then adjusting your prices to reflect part availability? We live supply and demand economics daily but are we reacting fast enough?
Do you know what your unit cost overhead is on a per vehicle basis? How many units are basing the purchase overhead number on and are you hitting that unit count in dismantling? You see people that pay some crazy numbers for salvage and wonder how they do it and if they make money doing it. I hear stories of how they are money laundering drug dealers but the reality is that they have a unit cost overhead advantage that allows them to pay more for salvage and make the same amount. 2021 will test your knowledge on this number and the various ways to move that number down to create an advantage at the salvage pool for yourself.
Ron Sturgeon is known for telling people that only you can make business great. 2021 will present itself with many challenges but that also means plenty of opportunity will exist to make lots of money. The auto salvage industry has survived and prospered under many market conditions and leadership plans so history is on our side. The coming year will call for you to look at what you are doing and how to improve upon it to allow you to profitably purchase cars.
The Profit Team Consulting Team is really excited about the future and remind everyone that having vision when others do not is a key to success!
Mike Kunkel Lee Worman
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