I wanted to discuss product turnover, how increasing production looks and what the side effects are.
In an attempt to dismantle more cars we find ourselves stripping less parts of each car and becoming increasingly more concerned about the big money parts… engines, gearboxes, panels etc
This comes at a cost as each car generates less income because it sells less parts.
Issues created by this;
- We are going to make less of each car so we must turnover more cars
- We are going to make less off each car so our projected earning will drop and so will our bid price on the cars… If we are too lean we will not be able to win cars at auction at an acceptable profit margin
- We may have to drop our profit margins
- We may have to say ‘NO’ to customers on some small parts as we no longer stock them
- We will need more storage space and racking to deal with the volume increases
- We will tie up more money on stock and need to move into new car ranges
- The new cars will be slow to return while growing into a new market, this will tie up even more money
- Our RA accounts will grow as we now have more stock, and in turn more account sales
So why increase productivity and turnover, its simple…more profit!
If you stock more parts off more cars you will sell more. This will predominantly be big money parts… so your average sale will increase.
All of the above listed factors are reasons to increase slowly and with caution, many of these issues I have experienced. The process of moving to less parts more cars is certainly an interesting one. Knowing where to draw the line on how many parts to take off a car and what profit you need is difficult as this will change with time and the buying market will fluctuate.
Some food for thought
Macarthur Auto Parts