Wide World of Networking

Jun 1, 2024 | Toolbox

The selling process with trading networks requires diligence to keep cash flow healthy. 

By Mike Kunkel  

The world of trading used auto parts within the auto recycling industry has undergone a number of changes over the last year or so. The merger of the Team PRP and Midwest Runner systems have created a very interesting dynamic. The ability to move a part across huge geographical distances has never been easier.

Some things have always been preached by Profit Team Consulting, including the selling process. Getting your sales team to develop a mindset that if the part is available on the network, then it is their part that is ready for them to sell. Working out the price and delivery time is something that they do continually.

This mindset can create a bit of unforeseen problems. We are all aware of the credit/return issues that plague not only the trailer system, but our whole industry. We seem to forever fight the proverbial “lost job” as the primary credit return reason. While those are unfortunate, they are really hard to avoid with the goal being kept to a minimal amount.

The unforeseen problem that I am referring to is accounts receivables (AR) and the components involved in the AR process. The first is that we automatically assume that we have an open account with everyone who is on the network. That is far from the case. The network requires that charge accounts be given but only to the people that you choose to charge to. Team PRP will assist any disputes over payment, but it is your money and your call on how and to whom credit is extended. Establishing an account prior to doing business with someone is always wise but not always practical. Both the person with the part and the yard needing the part need to understand those things.

The yard buying the parts also needs to understand that timeliness of payment is important. One of the primary reasons that we joined the network is that we want to sell more parts. One of the problems with selling more parts is that the number of accounts receivables that are financed goes up. This can cause extreme pressure on cash flow. It is also why the history book is full of examples of businesses going bankrupt during times of record growth.

Remember that we are all in the same predicament of needing cash to fund car buying, payroll and vendor invoices. We pick and choose who we extend credit to and must live with those decisions. It is not fair to the vendor to slow pay because your customers are slow in paying you. These are the things that have the potential to fracture the network, which has benefited our industry. We have more parts and say “yes” to our customers more frequently than ever.

We need proper behavior from all parties. This includes realistic credit terms and account authorizations coupled with salespeople not abusing the system with parts that aren’t 100% sold. Add in honest reasons for the part return and timeliness of bill paying and sprinkle in the overall commitment to consistently putting out a higher quality part and focusing on the network continuing to grow and prosper – all of which only benefits everyone involved.

Everyone knows that the culture of Team PRP has been diluted but they are working diligently to improve the overall performance on their part. They are working towards pushing quality standards and involving URG and ARA in the process. As individual recyclers, we need to do our part to increase the quality of what we do. Better parts, more consistent service and reliability, along with financially responsible partner-to-partner behavior, will result in a continued growth of in stock and brokered part sales, which is why we are all really here.

The network will work properly if all of the participating partners work within the spirit of the program, which is that we will all prosper if we all try to do it better today than we did it yesterday.

Mike Kunkel is an automotive industry lifer having grown up in his family’s new auto supply, paint body & equipment and machine shop. Following his college graduation, he entered the salvage industry as an installer for Auto Info. His love of the industry led to a successful career in building a large recycling facility in Fort Worth, Texas while being instrumental in the formulation and growth of the Team PRP program. Mike is a frequent speaker at industry events in various countries. Mike uses a basic and proven platform to analyze businesses. He provides an honest assessment of where a facility is and what steps need to be taken to grow both sales and profits. Mike is a proven leader who is highly regarded in the automotive industry.

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