Lower Your Return Rates
From The Back Of The House To The Front, Communication Is The Key
Photo: Lisa Vercauteren
A customer calls and asks for a fuel tank for a truck. The salespersonlooks at the computer screen and asks, “What’s the wheelbase?” The customer answers, “I don’t know? I just bought this truck for my fifth wheel.” Sales people sometimes are really good at selling, closing deals, juggling multiphone lines, flying through computer soft ware and smiling for the customers, but they haven’t a clue as to where to find codes and tags on vehicles. If you ask me, understanding these codes and tags is a skill that is paramount to making a sale stick. The salesperson, in this example, will lose the deal because, besides the option in the computer, there is no way to find the right answer to the customer’s question. Kiss the sale goodbye or find an experienced salesperson to help.
An experienced salesperson knows where to find these codes and tags, but rarely has the time or the ability to explain or reveal his or her resources. A bad salesperson sells the fuel tank anyway, and crosses his or her fingers, hoping it is the right one. This is a bad idea and very expensive, but the salesperson is not always at fault.
Your sales team only knows what you teach them and weekly sales meetings are key. In a weekly sales meeting, a discussion about sales and returns is something every yard needs to do. All salespeople know how to sell, that’s a given. Let me take a second to discuss returns.
If your returns are well over 30 percent, it’s important to have your returns person show up at the meeting to discuss why this is happening and how to get the percentage down on returns. Believe me, a returns person will do everything in their power to get the returns rate down rather than be buried in returned parts. Usually a returns person understands parts inventory, but if your returns are inching towards 30 percent, get the inventory people involved in the discussion. Bringing the back of the house to the front can be one of the best things you have ever done for your operation. Salespeople will be more informed and know primary goals at each meeting. The inventory people are held more responsible for parts, as part of the team. The returns person develops in new ways, by not only putting parts back, but working on the return rate and recording and decoding.
Numbers Don’t Lie
Let’s take a look at some numbers. A yard that makes $1 million a month, and has a 35 percent return rate, loses $350,000 a month. That comes to $4.2 million a year. If the rate goes down to 20 percent, that’s $200,000 a month or $2.4 million a year in returns. That’s a profit of $1.8 million a year for making salespeople better and pulling your team together.
I’d say, if the team can pull it off for the year and accomplish this goal, a huge party with a live band and prime rib might be a great reward. To get the rate down, there must be a good leader, an active person roaming to every department. If you look at this from a business perspective, would you hire someone for $100,000 a year to lead the crew to a profi t of $1.8 million dollars? The whole operation is greater than the sum of all returns.
David R. Vercauteren has a background in operations for the Marine Corps and corporate sales. He started in auto recycling as a salesperson. When his returns were way too high and couldn’t understand why, his mentor J.C. Cahill placed him in inventory to learn the backside of the house. With a background in international operations, sales and business, he quickly noticed the pros and cons of the local auto recycling operations and visited them to see what was and not working. Vercauteren is writing a pamphlet called “ The Inventory Monster” to help yards come up with a good foundation for inventory projections on parts and developing open discussions at sales meetings.