There is a saying that says second verse same as the first. There is another that says that the only constant is change. The final cliché saying I am going to recite is that history always repeats itself. What do all of these things have to do with the auto recycling industry?
The calendar has changed to 2021 but some things are still lingering from last year. The number of units available at the salvage pools has rebounded but the number of accidents is down and actual cash value (ACV) is still high on vehicles. These means many units that were destined for the rebuilder are now being repaired for the insured. That does not mean the builder goes away but changes their target to vehicles that used to be parts donor units. Do those things lead to an overall shortage of salvage similar to what we experienced during the early stages of the pandemic?
Do you have a plan in place for what you are going to do if salvage becomes scarce? Do you pay more money to keep the cars flowing to match the capacity demands in order to maintain a decent unit cost overhead that allows us to operate? If the price goes up and you choose to not buy inventory, what plan to you have to weather that storm? Have you looked at all of your revenue streams to make sure that you are properly factoring crush and core commodities correctly per unit? Has the increase in the value of catalytic convertors impacted you bidding prices? It certainly seems like it has for the low end scrap processer.
The year is still young but a solid plan with goals and accountability is needed and not too late to get started if you have not done so yet. We have a direct correlation from our purchases to our sales. What did you expect to sell from your 2020 purchases? How much inventory do you have left to sell? What is your current buying projecting to sell and what is the rate that it sells?
These are questions that the answers will let you know if the things that you expected and planned on happening are really doing what they are supposed to. The idea is for our plans to be executed to a predictable result. When that happens, we are happy to have succeeded in hitting the targets. When it does not work, we have an opportunity to make adjustments / corrections to get the plan back on track to the expected outcome.
Having specific goals for the buying, dismantling and sales departments are important. Everyone has a basic need to feel achievement. Having attainable goals gives people targets to define success and celebrate. When they are not successful in hitting the targets there can only be a few reasons. Bad plan, bad execution of the plan or lack of resources to complete plan. All of them are controlled by management and good leadership.
I will finish up with the 6 P’s. It was drilled into me by a mentor from college. The 6 P’s are: Piss Poor Planning Prevents Proper Performance. Maybe in 2021 it should be shortened to the 5 P’s but I am not that politically correct!
Mike Kunkel Lee Worman
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