New Life for Old Parts
No matter how carefully and strategically you manage your parts inventory, someone’s going to want something you don’t have. For most distributors, it’s a weekly – if not daily – challenge. In most cases, you can offer a viable alternative or at least order the necessary component.
But if that customer is looking for a 1982 rear-axle housing, chances are you don’t have one, you don’t have an alternative part to offer and you aren’t going to able to find one through traditional sourcing.
So if you want to help that customer with his request, you need to get creative. That’s where truck salvage companies play a unique, and sometimes vital, aftermarket role.
Salvage yards are where trucks go when they die; as a complete unit, anyway. Usually through an accident which totals the vehicle, but sometimes by just reaching the end of their operational life, thousands of vehicles make their way into the hundreds of salvage yards throughout North America each year.
Parts that are taken off these trucks and resold don’t come in boxes. They aren’t pristine. But they are survivors and fill specific aftermarket needs. Chances are that whatever medium- or heavy-duty part a customer needs is out there, it’s just a matter of finding it.
One company that has helped many distributors and installers find what they need is Frontier Used Truck Parts in Wyoming, Mich., in the Grand Rapids area. The company is a 10-acre salvage yard and retail parts store. Chris Weller, the company’s president, is one of four brothers working within the Weller network of business units, including a sister company called Weller Reman, also in the Grand Rapids, Mich., area.
“We take the trucks, we bring them in and we put them in a holding area until the titles and paperwork are all processed,” says Weller. “Then we bring them into a teardown area where we take out all the fluids and batteries, then dismantle the truck. The usable parts are inventoried and put on a rack. They go on our Web site and are resold.”
Weller says they thoroughly clean and inspect each part they sell, and even offer a 90-day warranty on the engines.
“Since a lot of the products we sell look like new, there’s a real benefit for the installer who doesn’t have to deal with a greasy old spindle or axle housing,” says Weller.
In fact, with the exception of the engine, most other mechanical parts are sent to Weller Reman where they are remanufactured and resold. “So that’s where we’re a little different in that most other companies don’t have their own remanufacturing and salvage yard,” Weller says. “The engine is the only mechanical part we do at Frontier, the rest is sent to Weller Reman.”
As a general rule, salvage companies will sell low mileage components after cleaning and inspection, while higher-mileage parts may be remanufactured prior to resale.
Woolworth estimates that they fill a parts need with a used component about 15 to 20 percent of the time, particularly for older suspension parts that can’t be obtained through other means.
He says they procure through companies like Frontier because they tap markets nationwide and “if you need it, they can get it if it’s out there.”
CONNECTING SEEKERS, SELLERS
Getting hard-to-find parts to those who need them doesn’t have to be a wild goose chase. Companies specialize in bringing these salvaged parts to distributors and installers.
One such company, Partslink, based in Shorewood Park, Alberta, was founded in 1994 and has been online since 1995, well before this industry considered the Internet much of a business tool. Partslink, and its affiliated sites, acts as an exchange between medium- and heavy-duty truck salvage companies and parts retailers, often helping its 4,500 daily users find the hard to find.
Scott Tetz, president of Partslink, says they publish about 35 to 45 pages of content that includes thousands of components.
“The way that it works is they log into Partslink, then say they have a client that needs a C15 [engine],” says Tetz. “We put the ‘want to buy’ ad on Partslink and then it goes out to the whole membership, and the membership responds directly to the company who needs the C15 for his client.”
Tetz says when end users – anyone from an owner-operator to a large municipal fleet – strikes out through their normal procurement channels, they can turn to Partlink and tap its network and its inventory.
“It’s a little bit of everything. It’s mostly hard-to-find parts though, stuff that they can’t either machine or replace with some other option,” says Tetz.
Other companies, like HeavySalvage.com, help ensure a steady supply of vehicles make their way to salvage companies.
Ron King is president of HeavySalvage.com, a company he founded in 2006 to help insurance companies establish values and find buyers for wrecked equipment. He says they have about 750 buyer-customers spanning both on- and off-highway equipment.
King, who worked in the insurance industry for 11 years prior to launching HeavySalvage.com, explains his business:
“The insurance company’s insured place claims with them on their heavy trucks, semi-trailers and off-road equipment. They’ll take photos and write down the specs. They’ll come back to their offices and post these pictures and specs online. My buyers who are signed up view the available salvage online, place blind bids of what they’re willing to pay for that piece and then the insurance company takes that information and does one of two things: They’ll either sell it to my buyer, or they, in most cases, offer that salvage back to the owner, to their insured. If the insured wants it, then they’ll charge them what our high bid was. If they [the insured] don’t want it, then they’ll sell it to my buyer. It’s all done electronically.”
HeavySalvage.com generally deals with the whole piece of equipment, not individual components. He leaves that to his buyers. “We have dedicated buyers where all they do is scrap out trucks,” says King. “They don’t rebuild anything. Then we have some who do both, rebuild and sell parts.” He adds that some of his customers will even rebuild the vehicle and sell it on their used truck lot.
There’s also the export market, which King says is thriving. He says his buyer-customers will sell components all over the world, sometimes into applications for which they weren’t meant, but fill a need nonetheless. For instance, an on-highway truck engine may find its way into a mining or other off-road use in China or South America.
SALVAGE VS. SCRAP
When a salvage yard acquires a totaled truck, usually through an insurance company but also through vehicle owners, they must determine which parts still are operational and reusable. Depending on the type and extent of the damage to the vehicle, making these determinations are sometimes more obvious than other times.
For instance, a truck involved in a serious front-end collision likely won’t offer much in the way of engine and cab body parts.
“I would say it would be based on two things,” says Tetz. “One would be visual. They would visually inspect, and that depends on a number of factors, like if the truck is running or not. If it’s running, then obviously they can determine what they’re able to take off of it a little bit easier.
“The other aspect would be what they determine as hot,” Tetz continues. “So, for example, if they’re not selling any 10-speed Eaton transmissions, then they would just leave that on the truck. There’s no point in taking that off if they’re not going to sell it and they already have five.”
Knowing what sells is essential and something Weller says only comes from experience and watching trends.
“We try to buy what the customer wants,” says Weller. “There’s a lot of stuff we pass on. We don’t consider ourself a so-called scrap processor and just bring something in for the price of scrap. We try and just focus on what the customer wants and what is going to sell. We’re selective in our buying.”
That said, they make the most of what they do buy. Nothing goes to waste, not even whatever fuel or oil might still be in the vehicle. Weller says they reclaim the fluids in the vehicle and use the diesel in their own fleet and the waste oil to heat their facility.
“There isn’t much left when we’re done here,” says Weller.
Salvage is an inventory intensive business. Inventory turns are not a metric usually used to gauge performance. “Sort of the mantra is you can’t sell out of an empty cart,” says Tetz. “A lot of it comes down to if you have it.”
While availability is critical on the WD side as well, Tetz observes, they have the opportunity to get expedited replenishment of a needed component to satisfy customers. However, if the needed part is obsolete or no longer in production, availability is all the more important.
“The problem with the salvage industry is that it runs completely differently than the WDs. There are a few guys who do kind of a replenishment type thing, but typically it doesn’t run like that,” says Tetz. “They buy as the trucks come up. Unlike the WDs, they don’t have the opportunity to go back to the same supplier and say [I need that same component].
“There is no just-in-time inventory for a salvage guy,” he continues. “You’ve either got it or you don’t.”
So while most distributors try to keep just what they can turn in their warehouse, salvage companies typically are sitting on inventory for much longer periods of time.
It’s also more labor intensive as components are handled multiple times before sale. A salvage company may need to tow the vehicle to the yard, they remove the part, they clean the part, they inspect the part, they often refurbish it, then they inventory it before they retrieve it for sale.
As such, they usually command higher profit margins on the parts they sell.
Parts that are not salvaged for resale are usually scrapped.
“With trucks, most parts are recyclable – engines, transmissions, axles, turbos, starters, alternators, wheels, tires, bumpers, hoods and other sheet metal, aluminum fuel tanks, batteries, etc.,” King says. “With trailers, many parts are aluminum to reduce weight for increased trailer capacity. Much of the severely damaged trailers can be recycled. Many scrap buyers purchased bailers where they can crush entire trailers for recycling.”
Salvaging and scrapping parts prevents them from ending up in landfills, as well as having other environmentally sound benefits.
Although Weller says he doesn’t buy with the purpose to scrap, what they don’t use or what doesn’t move will go to a scrap recycler.
“We just keep it moving. Sometimes we get lucky and the price of scrap goes high,” says Weller. “When it gets really high, that’s a good time to clean house and scrap the slow moving inventory.”
He says they don’t dismantle vehicles to their scrap basics, such as tearing down a truck and sorting the plastic from the aluminum, the copper from the steel, etc. He leaves that work to the recycler and focuses on his business model, salvaging for resale.
Taking a truck apart for scrap and sorting the materials is labor intensive and if you don’t specialize in that business, the cost it takes to do so can quickly exceed the value of the materials.
COST CONSIDERATIONS
Sometimes customers turn to used parts not because they are the only option but because they may be a lower-cost option at the point of retail.
“In this economy we’re seeing more and more people wanting used,” says Tetz. “That’s probably why our traffic numbers are so high. I would say there is a cost component to it.”
Woolworth says the usual buyers for used components are owners of individual vehicles or small fleets.
“It’s big savings for owner-operators. It’s a tough market for trucking right now,” he says. “They’d rather keep the old stuff running and looking good.”
And, of course, like any good distributor or service shop, doing whatever it takes to keep the customer satisfied is paramount. Even if that means searching high and low for that elusive component.
“It’s huge,” Woolworth says. “Because they’ve called everybody in town and everybody’s told them they can’t get it. Then they either call me or they call Weller, and we can find it. Then they tell their buddies that these guys can get you anything.”
If keeping customers operational and happy are the ultimate goals, the salvage industry serves a need for distributors and installers.
“If you’re talking about used part distribution, then there’s a huge fit between the two,” King says. “They work hand in hand to help service the same customer.” n
