Interchange: We need only
Part 1 of 2
A few months ago, The Answer Men (Jim and Robert
Counts) wrote an article asking the question, “Do We Need Another
Interchange?” If you missed it, it clearly spells out many of the
reasons that another interchange would be a very bad idea for our
Jim and I used to be the young guys in the auto recycling business.
However, that was 1980. Now, I suppose, we are more like the elder
statesmen, or even the grey beards (no offense, Jim). All kidding
aside, we have seen a lot over the last 25 years in the industry.
Both of us came up when there was ANOTHER interchange. In the late
80’s and early 90’s, when Hollander had little or no foreign car
interchange, I wrote my own that covered all foreign vehicles,
including current models. The computerized inventory system we
used then allowed that.
Some younger operators may not recall those days when the insurers
couldn’t or didn’t use our inventory estimates, unless we were
on the “right” interchange. We had all the same factors then: OEM’s
pulling on us, insurers pulling on us, computer companies pulling
on us, and it was a REAL MESS.
It was a period that I can’t imagine our industry ever voluntarily
re-visiting. Mitchell, at one point, even wrote a table that converted
our system to their system and vice versa, but this was just a
band-aid fix that was far from perfect. The ARA database attempted
to collect and utilize all the data, but it was just a mess, and
I’m being kind.
At first glance, we think that interchange is just an indexing
system for parts that tells us which parts fit on what cars. One
of the pioneers in our industry and co-creator of one of the computer
systems for our industry, Howard Nussbaum, saw interchange as much
more. He saw in the interchange the ability to create a “demand
planning model.” A model that—when properly used with quality data—could
actually tell us what to buy, how to price it, how and when it
might sell, whether to save it or not, and even which cars to buy,
based on our actual current market data.
Without adequate interchange and the data that can be harvested
from a single system, salvage yard owners are in a much worse position
when they try to run their businesses based upon quality data about
which parts sell. Having good data is certainly more critical today
than in the past because our cost of goods has doubled over the
last two decades.
Imagine for a moment what a traditional retailer would give to
have the level of customer data that some of our systems gather.
What if Macy’s could understand how many times a shopper looked
at a red dress (vs. a blue one) relative to where it was located
in the department store, how long she looked at it, whether she
bought it or not, how many red dresses they had and how long it
took to sell them and at what discount, and even the probability
of future sales? Yes, today the salvage industry has better information
about the buying behavior of our customers than virtually any other
industry has about theirs because of our single system of interchange.
Auto salvage operations that use interchange data to make business
decisions are ahead of other industries because of the quality
of data we can get from a single interchange. How much harder would
it be to get reliable data to make key decisions on what to buy,
what to salvage, and how soon it should be sold—if the data were
spread across two systems or incomplete? How much harder would
doing business be? Plain and simple, a second interchange is a
Take it from someone with first hand experience working in a multiple
interchange world; it’s something better left in the past. Or,
as I might say, been there, bought the t-shirt, and don’t ever
want to go back. This article is continued next month, so be sure
to tune in then, as I discuss further negative implications of
the proposal to add a second interchange.
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Ron Sturgeon is past owner of AAA Small Car
World. In 1999, he sold his six Texas locations, with 140 employees,
to Greenleaf. In 2001, he founded North Texas Insurance Auction,
which he sold to Copart in 2002. In 2002, his book “Salvaging
Millions” was published to help small business owners
achieve significant success, and was recently reprinted. In
June 2003, he joined the new ownership and management team
of GreenLeaf. He also manages his real estate holdings and
investments. You can learn more about him at WWW.autosalvageconsultant.com
He can be reached at 5940 Eden, Haltom City, TX 76117, email@example.com or
817-834-3625 ext 6#.