Musings on Converters, Inventory, and Money
I’m a buy it now, sell it now kind of guy. When it came to crushed auto hulks, converters, aluminum wheels, cores, and any other commodity, we never had the money or space to hold material and play the market waiting for prices to rise again, nor did I ever think I was smart enough to time it. Remember, we did a 180 turnaround at Bill’s Auto Parts, taking an old-school junkyard and turning it into a profitable, award-winning operation. A huge shout out to those industry associations (ARA, ARARI, URG) and insiders who accelerated our progress with good advice like turn cash and re-invest in more inventory.
Yet, over the last few months, while I watch the price of rhodium dropping like a lead balloon, I’ve heard recyclers talk about trends, turnarounds, and other mind tricks to allow them to hold material while the direction of the market has been quite clear. There is a time to “cut your losses” and move on. My musing is that everyone looks like a financial genius when we are in the boom times but become timid when the market inevitably convulses and takes away the instant gratification of selling a load of converters at a high dollar value. In fact, it’s not all gravy as the prices of converters have driven up the cost of buying salvage. Hopefully, someone has figured out a way to determine the overall net profit of converters.
But during this boom time, were you reinvesting your returns into your business? Many recyclers still have 1st generation websites. Curb appeal and/or upgrades for parts prep and shipping? Many recyclers need a “Bar Rescue” of their facilities. This is not a doomsday article but more of a “wake up” call. I have seen other recyclers continually improve facilities, systems, and staff to make them poised for continued growth or possible acquisition candidates.
I love this industry because of the owners’ raw entrepreneurship and grit to build incredible businesses.
There are no surprises here. The times are changing, and between consolidations, labor challenges, technology, and scale, you either lead, follow, or get out of the way.
An incredible amount of opportunity is often overlooked when it comes to Cores, Commodities, and Non-Parts revenue. However, like any part of your business, it must be organized with good systems and people and have adequate space to be productive. It starts with refining your P&L to categorize each of these products so you can better understand the percentage of revenue it contributes to your overall income. Build efficiency with your people and processes to make it streamlined as part of your business model. Consider a payroll program that incentivizes your team to extract maximum value from your inventory to benefit the company, with a little extra going into their paycheck for contributing to the bottom line.
I am NOT a Core Expert, but a Recycler working at a Core Company. This has advantages because I have become the Recycler’s “Inside Guy.” Let’s put a laser focus on your inventory in 2023. Contact me at email@example.com or call my cell at 401-458-9080. Let’s make change together.
Pauly D is not only the “Recall Guy” for Takata Airbags but has now morphed into the “Core Hunter” helping Recyclers maximize Core Profits by reducing deductions. Contact firstname.lastname@example.org or 401-458-9080.