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June 2006

Tools you must consider to control profits in 2006 – and beyond
Part One of Three

Since this is a three part article, please watch for the remaining portions over the next two months. As I travel internationally consulting, I continue to come across the same problems time and time again. The biggest problems I see are (in no particular sequence):

1. A total lack of or very poor systems in place.
    2. Poor purchasing.
    3. No performance pay.
    4. More employees then the amount of monthly revenue can justify.
    5. No financial metrics.

You must prepare yourself and your yard for positioning. If you are not ready to position yourself when a windfall or better yet an opportunity presents itself, then your windfall or opportunity will soon be eaten up with the inefficiencies in your yard. All will be lost and you will be back to square one.

Systems – In order for a system to be effective, it must be scaleable. This means the system will work equally well if the monthly sales volume is $25,000 per month, $150,000 per month, or even $350,000 per month. If your systems are not scaleable, then at some point they will breakdown under the volume and stop working. When this occurs, some or all employees must stop performing their primary function, whether it be selling, delivering, dismantling, etc. and go into the special project mode.

In the special project mode, we must design and implement a new system or worse yet, clean up and rearrange the old system. This activity almost always causes a reduced service level, loss of focus and the end result is a loss in business. When you lose business, it is always more difficult to get it back the second time then it was to achieve it in the first place. Nearly every place I visit I find what I call, “The Make System,” of placing vehicles in the yard. Chevrolets are up on the hill, Fords are down in the valley, Chrysler products are over by the creek, and so on. This system does not work and is not scaleable. No matter what size area you designate for a particular make or model, you will invariably obtain more of that make or model then will fit in the area, and too few of another. Next thing you know, all the makes and models are mixed up again.

I believe this system originates from either not having a yard management system already in place or not trusting the information in it. A much better system would be to label each area with a sign. For example: YA for yard area A, YB, YC and so on. Then, make up signs for rows 1, 2, 3 and so on. Place a stock number on each vehicle, then enter the vehicle and its location in the yard management system. Know that this is a scaleable system. No more wasted time, lost sales or vehicle damage from moving vehicles around to get all of a particular make or model in a designated area. You do have a yard management system, don’t you? If you do not, this is the first system you need to install. You will find it gradually more difficult to stay in business during the 21st century without a computerized yard management system.

If you do these things, you will be prepared to position yourself to take advantage of any opportunity or make the most of a windfall if one comes along.


Don’t forget to subscribe to Ron's free monthly auto recycling e-newsletter, with news and tips, register at www.autosalvageconsultant.com.

Remember, only you can make BUSINESS GREAT!

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, rons@rdsinvestments.com or 817-834-3625 ext 6#.


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