Managing Cores for Profitability
Cores are not just worn-out parts. How they're handled can make the difference between profit center and profit drain.
March 2013, TruckingInfo.com - WebXclusive
Wolma says one of the biggest obstacles to profitable core management is that no one is accountable for managing the cores. “They are treated as an afterthought,” he says. “Often cores are stored in a place where they are out of sight and therefore out of mind,” he adds.
Clark says that since cores that are returned are often dirty and greasy, they are not viewed as having high value – when in fact many times the cores have a higher value than the actual remanufactured part.
Personnel with responsibility for cores need to be educated about their value and the processes that should be used to keep track of them. Wolma believes lack of education is one of the big obstacles to core profitability.
The responsibility for cores lies with the parts department, according to Wolma. Since cores are part of the parts transaction, it makes sense that the parts department be given the responsibility for them.
“They have to control not only inventorying the inherent core, charging the customer for the core, they also have to manage all the dirty cores that are coming back,” Clark says.
It also is important that cores be priced properly. “We always encourage that cores be marked up and sold at a profit,” he says. “Typically those profit margins are different than what is executed on the parts themselves.”
The Business Owner’s Role
The business owner needs to understand the investment he has in cores. Clark encourages owners to go out into the parts department and look for cores and determine if they are being handled properly. The business owner needs to instill in his staff the fact that cores have significant value.
“Cores are not just worn-out parts,” Clark says. “They represent big dollars to the business. There has to be high visibility for cores.”
The owner needs to set policies in place so that every customer is charged for a core unless that customer has a dirty core that he is exchanging directly at the point of sale. “They also need to adopt the discipline that their dirty core inventory should be accurate at all times,” he adds.
Working With Suppliers
Dealers, distributors and repair garages also need to carefully monitor the returnability of cores to their suppliers. “They need to makes sure all cores are returned on a timely basis so they can get their total credits due,” Clark says.
Wolma suggests returning cores as soon as the minimum ship quantity is reached rather than waiting for the core return deadline.
Suppliers will inspect all cores that are returned to them, so dealers, distributors and repair garages must make sure they are not returning damaged cores. Damaged cores are worth less than cores in good condition and manufacturers will make deductions for damages and only issue partial core credit.
If a dealer, distributor or repair garage has already issued full core credit to a customer, it will be hard to get that back if the manufacturer only issues a partial credit. This is why it is important to make sure that employees who have responsibility for cores are not only trained in the core management process, but also have a thorough understanding of what to look for when inspecting a returned core.