Auto Recyclers have two main sources of revenue: mechanical (driveline suspension), and collision parts (body parts and sheet metal). Let’s look at the challenges and opportunities of selling crash parts, and how we can improve it.
There has been a-lot of talk about “selling deeper” into the car. I say “let’s try to sell better into the car.”
Who is our customer? For crash parts, it is primarily body shops.
The Auto Recycling Industry has the smallest market share for crash parts that are put on insurance estimates and even a smaller percentage of actual usage by the shops. Why? One of the main reasons you would think would be the difference in mark-up between a new or aftermarket part vs. a recycled part, because after all, the cost of a recycled part is usually half of what the new or OEM part is. Which means the shop would only get half the mark-up vs. buying new. The second reason, which is something we can all control, is poor service, poor quality, and sub-par products. The shops are under constant pressure from the Insurance Companies to reduce loss severity and cycle times.
When I asked the repair shops what their issues were with recycled parts (besides the mark-up difference), this is what I was told. The biggest issues were:
- Sub-par vendors
- Poor communication
- Inaccurate descriptions and misleading practices
- Late delivery
- Poor quality parts.
They said that they could lower their total-losses and get more work if they had better access to a consistent quality recycled part. They also went on to say that they don’t like the fact that the insurance company is telling them where they should be buying their parts. So now, whenever a shop is being told to buy a part from a supplier they don’t know, they do this reluctantly. Beware of the new customer that calls and says that the part has to be perfect. They will now look for whatever reason they can to reject this part so that they can buy it from their supplier or in most cases, new OEM.
So, what can we do about this? Well for starters, individually we all need to take a hard look at our businesses and improve our processes and consistently deliver quality products on time and as described. Our number one priority should be customer service and building customer confidence.
Remember: There is no such thing as a perfect part, but there can be perfectly described parts!
Do you have a Quality Control Program? Do you have a dedicated person assigned to that area? Remember, your parts represent your company. Doing simple things like making sure it is the correct part, correct side, and off the correct vehicle is a good place to start. Is the part condition the same as the description? Was the salesperson told if there were any problems, and did that salesperson properly describe and communicate the condition of the part to the customer? If there were any additional issues, was the customer told or is the attitude “just send it out and we’ll see what happens?”
Is the part cleaned? All parts should be cleaned regardless of what the part is. After all, how much does soap, water, and a little elbow grease really cost? You can show a customer two identical parts, one clean and one dirty. Whether the customer is a layman or a professional, they will overwhelmingly say the clean part is the better part. You need to look at investing the time to properly prepare your parts and make them look as good as possible.
Again, you must have consistency in all parts of your process. Whenever anything goes wrong in a process, it usually is because of multiple reasons. It’s almost never one thing or one person.
Every time you move this vehicle or touch a part, it costs you time and money in addition to increasing the potential for handling damage. Can your salespeople sell with confidence? Can they rely on the information they see and take it at face value, or do they have to have someone go out and see if the part is still good or even still there? The salesperson spent the time to sell the part and now must say “sorry, we don’t have it,” or “it’s no good now.” How does this make you look in the eyes of the customer when this happens?
If you look at your Yard Management Systems (YMS), most now have some sort of production software that will give your parts puller alternates if the part you picked is missing or bad. If you have a good process and a good inventory system in place, this really wouldn’t be necessary. Wouldn’t it be better to invest the time and work up front and do it right the first time? Then any issues at the point of sale would be minimal, wouldn’t they?
Whether it’s mechanical or body parts, simply put, if we want to have more opportunity to grow and increase our business, we need to do a better job. As our industry improves in general, so will our opportunity.
Remember, work hard, do a good job and above all, be fair and honest with all customers.
Considering the evolution in engineering changes in production of new vehicles, as well as all the new materials being used in the manufacturing of these vehicles, (i.e. increased use of aluminum, specialized alloys, as well as high-strength steel and composite components), I fully understand the need for training and education to keep the repairers up to speed on all of the new procedures, processes, and techniques to safely and properly repair these vehicles.
This brings me to the hot topic as of late, certification.
So, for the Auto Recycling Industry, what exactly does certification mean?
There has been a lot of discussion on the certification of recycled auto parts. In practice, can this be done? Perhaps a better approach as I see it in our industry, is to certify processes and procedures which result in a consistent, quality product.
Our industry is in need of training and education. This is why I am very excited about some of the programs that ARA, our National Association, offers for its members, including The Certified Auto Recycler Program (CAR), The Gold Seal Program, as well as other training resources available at ARA University.
The CAR program will focus on Best Management Practices (BMP), as well as Environmental and Safety Compliance. This program is hybrid model that will have a practical, commonsense approach. This “ladder” type, tiered program will be available and achievable for all recyclers. The goal here will be across the board improvement for all recyclers, big and small. We need to have all recyclers involved. The motivator should and will be that better operators almost always are more profitable. As each recycler improves, they secure their position within the community that they serve. Better operators will also realize lower insurance premiums as they will now be lower risk, right?
Our biggest expense and investment, besides labor and our employees, is inventory. Sales and profitability (or lack of them) are a direct result of your purchasing and the actual inventory of these vehicles, as well as your process. Smart purchasing, a good inventory system, and having an efficient, disciplined process in place is your best method to ensure a profitable, healthy business.
A smart owner’s focus should be on the purchasing, the inventory, and the process. After all, isn’t this what drives sales, which in turn increases profitability and adds to the bottom line?
We have a lot of challenges facing us. We need to turn these challenges into opportunity. We need to secure our position now, as well as in the future. Nothing brings people together like a crisis. Whether you realize it or not, we are at this point now. We will not overcome this as individuals. We can’t remain fragmented. We all have to unite as an industry. We need to have a place at the table and we need to speak with one, loud, unified voice. We all have an obligation to our businesses and our employees, as well as fellow recyclers to support and participate in our national, as well as our state associations.
We need to change the negative (junkyard) perception that people have of our industry. We also need to do a better job of communicating who we are and what we really do.
ARA represents the best interests of all Recyclers. For them to be effective, they need our participation and our support. If you are not a member of your state association and ARA, you really need to join. The time is now, folks. What we accomplish in the next year will determine how the next 5 will be. Will the next 5 years be good or bad? It’s all up to us.
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.