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November 2004

Consolidation - How Will We Cope?
Part 2 in an ongoing series

Consolidation has forced most recyclers to change the way they sell, deliver, market and purchase salvage. The first article, “Consolidation - How will we cope?” printed in the September 2004 edition of American Recycler, focused on customer service while this article will focus on consolidators in your neighborhood. When we hear our competitor/neighbor sold to consolidators we start wringing our hands, what are we going to do, how will we stay in business, and how can we compete with the big boys, with truck loads of money? Let’s face it; the consolidators have forced our industry to do something we should have done years ago, change, forcing us to move into the 21st century, improving our systems, but mostly to become sharper operators. Worrying about consolidators and not staying focused on your company will cost you plenty, your business. Changing your image to compete with consolidators could cost you your business, image is not only your appearance, a company image is the combination of the thoughts, feelings, beliefs, opinions and visions people have about you, your products and services, or your company. Your premium brand had better be delivering something special, or it’s not going to get the business. Stay focused on your product, improve customer service and concentrate on purchasing the correct vehicles and your customers will continue to call. Do this not because of the consolidators, but because it makes your business better.

Consolidators raise the bar for independents to compete, raising their level of service, quality and reliability, consolidators coming into this business have made the acceptance of salvage parts by the customers a reality, forcing smaller facilities to follow suit, washing parts before delivering, or having some type of accreditation program (URG8000, Goldseal etc..).

Consolidators purchased recycling facilities coast to coast giving them the availability of selling more parts and purchasing more parts vehicles, we recyclers have the same opportunity with URG, Car-Part, and Eden. We trade with independent recyclers without the overhead of distribution trucks, employees, and expenses.

Join together with your competitor in your area. Sharing fees for buyers, deliveries and employees, to lower your expenses, or consider joining independent consolidation group in your region. Independent recyclers can become stronger working together. For certain consolidators forced independent recyclers to change for the better, one thing consolidators can’t do is make changes on demand while we independents have that ability, and we can manage our business from our desk not having to hire managers to manage managers to manage employees.

As we stated in the first article, being independent allows us more flexibility to change our business and serve our customer. Also, do you really think their size allows them an edge on buying inventory, which is the single biggest component of our cost?

In closing, if we could have been around a decade ago, we have lots of recycling friends that were around then), they would have been wringing their hands about how tough things were. Their concern was almost the same as today, but for different reasons. I was around personally a decade ago, when salvage title laws were being passed, and the cars at the pools, as well as pool fees, were skyrocketing and all recyclers were concerned. I heard lots of stories about how we wouldn’t survive, so on and so on. I hear the concerns were here two decades ago as well. But guess what, we are more profitable today than then, at least at my facility. Sometimes it hard to see the solutions, we just want things to be the way they used to be, and you don’t know what you don’t know, so get help. Get your friends to tell you what they did to lower cost. I know we have continued to lower our cost year after year, using the same techniques we teach our consulting clients every day.

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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