4. Your Yard Management System and You

EVOLVE: PLAYING A BIGGER GAME

Cracking the Code to Increased Profitability.

4. Your Yard Management System and You

Internal data and how you can use it to make the right decisions for your business.

[Presenter: Mike Kunkle + Chris Daglis]

Chris Daglis, Auto Partnered Solutions 00:04

We are going to talk a little bit about YMS: Yard Management Systems and I know we've got one yard

management system here today. But I know a lot of you use different systems eg Frontier, Pinnacle, Breaker

Pro, Aladeen, etc. One of the things that I've noticed is that a lot of the data that's in your systems, is really

critical to your decision making. To quote Edward Demming: 'Without data you are just another person with

an opinion', right?

Mike Kunkel 01:08

Yes and if you're like me, my old data has value. If I change systems I want to know exactly what data is

going to come over. Am I restarting over? Or is there a tremendous amount of resources and information in

there that I just don't want to lose?


Yes exactly and it's about understanding your system and getting training around your system. We're all

seeing this as a big issue at the minute because a lot of these systems don't have the resources to provide

that training don't have the resource to provide the support that you're looking for. And I'm not having a

shot at the systems. I'm just saying that you need more, right? And if you get taught why it's important to do

certain things, why is it important for your salespeople to search every time a request comes in, even if they

know they don't have the power? To fix data, you create that search, you log that search? If you've got it in

stock, great, but if you haven't guessed what you can see if someone else has, and we'll talk a little bit about

brokering in a minute. You may have an opportunity to buy that from someone else and sell it to someone

else. And that's great. Because you say yes to your customer. Mike said before a little bit about saying yes.

We say no, probably about 60% of the time. If we're really Overstock, we say yes, we say no 50% of the time

to get to 60% of the time in stock. lookups it's a huge amount of inventory to get there.



Mike Kunkel 02:44

I have a lot of different things. And I have we really haven't really talked about my story about what even

qualifies me to be up here. Right. But my not in stock rate, right? I live in the Dallas Fort Worth metroplex in

Texas, there's 9 million people that live there. And my delivery trucks would go as far out as three hours and

come back, right. So customers weren't my problem. I ran an 80% non stocking. So think about that. Think

about that. 80% 80%. Right, because what I needed was inventory. I had customers, I need inventory,

because can you stop to think about that, if you go into the grocery store, and 80% of the time they're out of

milk for you to keep going to that grocery store, or you probably going to find you another grocery store.

Right? So I had a fundamental problem within my business because I understood it's about saying yes, and I

didn't put my staff in anywhere close to a position where they could be successful, nearly enough. Now, at

the same time, we ran a big volume facility, right? Because like I said, customers weren't my problem. They

were consuming cars. I mean, an average life expectancy from the day I got it on site till the day I hit my

projected sales was 115 days on a six year old average year model. Okay, so this was a roll up your sleeves

and run and get it done. At the same token, I ran a 57% cost of goods. Okay, high cost of goods. high spin

rate, right. So you made money, you know, off of that, but I couldn't afford any chinks. But this 80% That was

a change, right? Because every time I kept saying no, right, there's an old saying, if you say no, you say go

and at some point in time they go and instead of being the primary supplier on the afterthought that when

they're regular people leave them out. So this becomes a really big thing in going about that and

understanding what we are in fact doing to our customer.


To talk a little bit about the data, well, the data is

Mike Kunkel 05:11

what we have

Mike Kunkel 05:17



is powerful, right? The data is important, right? The insurance companies want the data, right? eBay wants

the data, everybody wants the data presented in to them so that they can do what? Push it out to the

person, the end user, right? The person who is going to be installing the part putting, you know, putting it

onto the vehicle. So the goal with the data is really what picking out what it is, how does the customer want

to be communicated to, right, putting it into front of them in a form and fashion that they can read?

Understand? And ultimately, when you're dealing with a professional repair, what are they in business for,

to make a profit. So they have to be able to put that data, those informations into something that is then in

turn a profit center for them in order to push that out? To do that. So once again, when we start placing the

inventory out, right, and when we when we talked about parts sold per car, that was a pretty wide range,

right? When somebody said 10 to 15 parts, that somebody else went holy macaroni, right in doing that,

right? So I mean, there's a ways to make that work. And, and do that's got to be a high average ticket. And,

you know, in some things, but getting that number two, you increase that, right? If we're averaging 400

pound per part sale, right? Can we How many more? Can we give up a little make it 380 pounds per part, so

average, but sell another two or three parts per vehicle strictly by taking that data, putting it up and sprucing

it. Ask a question in a description line on a part for an engine? Does runs good? mean something? Does it

show of hands over? Yes. runs good? runs good. Does that help? Does? Do you know why you think it helps?

Because we can see systems only have engines that have problems. Right? We have a small percentage of

them that go back? Do you know that the end user runs good means nothing? Because to them? They would

say why would they be selling it if it didn't run? Good? Right? They're not expecting to source a bad part.

Right? When you start putting, you know, engine minus exhaust, exhaust manifold EMF, you know, EMG

minus EMF? Does the average person know what that means? Or if we want to get real technical into, you

know, Hollender language, you know, 300 minus 308. Right? That's the engine minus the timing cover


to 300 is the code for the engine 308 is for the time. So the average

Mike Kunkel 08:15

person What's that mean? I have no idea. Right? A minus something I'm missing something. The exceptions?

Do they sit? Does that say by me? Or does that say avoid me? Right now missing a timing cover? That's an



important component. Right? But is it something that when we start talking about the data and pushing it

out there is that something that we need to be 100% forthright on to putting it out there when these are

things that can be cleaned up and easily handled with the customer. And then the other part of this is, if we

can't get deeper into the car, if we can't find a way to sell more parts per car, then we the only real other, we

have two other options. We have to find efficiencies in the operational side of the expense of the company

to cut some expense out, or we have to accept less bottom line profit. Right? Does anybody here want to

work the same, were harder for less? Right? Work harder, make less equals no fun. So you know, kind of

going back and just positioning and understanding the data from the multiple pieces, right? Because I have

the data from the end user perspective, what I'm putting out in front of the customer. I have the data from

my sales staff standpoint, what I'm putting in front of them and in allowing them to look at is the number of

requests on a part, an important component. Right? I mean, if we look it up, and we have 100 requests in

the last 30 days, and the customer wants to pay less, does that make sense? Right, it's a high demand in the

deal, right? have zero requests in the last 30 days, does it make sense to try to force 100% of the money and

upsell or or how do we move so putting it in and, and making sure that the data that we're putting in front

of the sales staff is applicable to them. And then the same thing with the buyers and getting that data so

that they are using so all of this and it's the same thing, right? It's just that same thing. When I was a kid,

starting in this business 35 years ago, every phone call was the same Do you have? Do you have? Yeah,

that's not really the case anymore. So as that dynamic changes, we've got to get our staff out in of how we

are taking the data, and mining and manipulating the data in order to get it in a form or fashion that

ultimately does what produce gross profit. Everything we do today, everything we talked about, is all going

to come back to the same thing of how do you produce gross profit? We intuitively know how we make

money. You really question whether our staff intuitively knows how we make money? I mean, if we ask

everybody, what is our cost of goods? What do they tell you? I mean, I hear all kinds of things. Right? You

know, 2%, okay, we keep all the money, right? You look at your car, you're driving, look at your life, you're

leaving, you know, we keep all the money. No, that's not really not the case. And all of that. So some of this

is we got to kind of teach everybody, how they do it, pull them through the keyhole, to expand their

mindset, in making sure that they're arming me up with the information that I need that then I can in turn,

implement and make work.




Yeah, perfect. So I think, and we've got this information in front of us, we've got it in our systems, right? We

do have this data in our systems. Now, this is just a screenshot of a report that we're running the exact stats

just to show you that there's information there. And it's, as I say, there, it's never been more important to

actually use this effectively. Why does it matter? What you know, 21.9% of sales, complete vehicles, and

51.59% of sales for major mechanical parts. And 17.06% of sales are small parts, which is non collision, you

know, basically the collision parts of those that we can see out on the outside major mechanical engine,

gearbox diffs transfer cases, and so on small parts, or all those other little bits. Now, why does it matter?

You know, what, why is that important? You know, what is that telling us about where our customer bases?

Where are the collision parts here? 21.9. Okay, so that's, that's low ish. You know, it should be if I look at the

averages for everyone that we run this report for. That's usually between 30 and 40%. And mechanicals,

around 40 or 50%. And small parts is usually you know, under 10. Okay, so that tells me a little bit about that

business in the context of labor being hard to get and getting more expensive. Selling a lot of these small

parts hurt. Thinking is like the six pound part or

Mike Kunkel 13:18

this is a thing is when we say small part, we're a blanket industry or blanket statement industry. When we

say small part, we instantly think cheap part, right. And we know that you can have 1000 pound the relays fit

in the palm of your hand. And you need a forklift to move a 40 pound item of something else, right. So it's

targeting out and not finding this small part is a cheap part. We don't want to do the six pound parts, but

there are small parts that have value. And as we move forward with this, Evie, stuff that is going to be where

that's at is finding out which widgets and gizmos, really have the value that we're going to assign to it in

order to offset some of the potential other revenue losses.


That's a good point in the context of this report, small parties, low value paths, okay, so that that's

important. But this data is available, it's there, if you're a pinnacle, use it sitting there. Right? How many of us

know what this breakup is? How many of us know what that looks like over a period of time? Where is the

opportunity heading would correlate this information with what Laura showed us before? You know, where



what part types are actually increasing in sale? And where's their opportunity? So I think it's important that

we we understand that we've got this information. And again, the discussion I just had that lunchtime with

someone was being able to infect two people, being able to extract that information, knowing that it's there,

knowing where to find it, knowing how to get it and knowing how to then use it, I think is really, really

important. And it's an area that in other countries. It's critical. This we measured the center every three

months, this guy's you know, the his peer groups, they they measure this whatever we have offered every

three months every three months. So that's what we're looking at all the time and comparing,

Mike Kunkel 15:12

I'll say we officially look at it every three months, the the customers this the RS themselves are monitoring

significantly more often. Yeah. Right. Laura talked earlier and she said how many people have looked at the

report she sent out about the request activity and stuff, right? Going through that, that's where you start to

find these parts that you have arbitrarily decided are low value parts, and we're not going to mess with

them. And then all of a sudden, we start to see that that's not the right statement, right? That there are a

bunch of them that are low dollar, but these particular models or, or numbers are the ones that we need to

introduce. And by going through that, you start to find out that you know what, I have a bunch of these, and

I never thought about putting them in there. So now I can start to add that and then start to manipulate

because the idea is to leave the dollar amount of major mechanical the same but reduce the percentage of

the total sales, right? Because then we have true growth in the segment.


Yep. So data driven decision making, you know, have you been trained in and this is a question I'd like you

to answer. Have you been trained on how to not how to go from step one to step two in your yard

management system? But how to actually go the next step? Not how to use it, how to extract that

information? And how to find what you need to find why you need to do that more than how Has anyone

been trained in that.

Mike Kunkel 16:39



And look, this is back into my my backstory. My first exposure into the salvage industry was as a computer

installer, for a company by the name of auto info, which morphed itself into checkmate, which is one of the

still yard management systems. And I was telling Chris, that I started in 1987 or so. And it was a really cool

job. I was 2222 years old, my territory was defined as United States and Canada, I spent 50 weeks a year on

the road. And an install was a three to four week period of time, right? Because in 1987, I had to say, this is

how you type, right? And then I said, this is how you write an invoice. This is how you inventory a car, you get

all of that right? Well, after that I have an entire menu of a computer system, right inventory, sales,

accounting, advanced management, all of that to teach, install the system teach and get you up to speed. Is

that really possible? When I left, you were ecstatic that you knew how to inventory a car and write an invoice

and apply payment. Right, we got the basics in there. So over the course of time, he spent a lot of money for

the systems. And then we don't ever unlock the potential because we got force fed out of a firehose and are

now just kind of learning in there. So you know, knowing what your system does, knowing what you can

export, knowing how to manipulate that data is really big. And, and so I used to one of the big things, what

actually got me into sight managing was one I got sent to do a retrained a fellow had a computer system for

three years. And they came to the conclusion that they really had no idea how to do anything except ride an

invoice and inventory a car. So when I went in, and we went through all that it ended up turning into as a 23

year old I thought Las Vegas, Nevada would be a great place to settle down and put roots.


Alright, so reach out to management systems, ask them for their training. Oopsies Do you know what to

look for? What are you trying to measure? You know, what are the key numbers? I mean, I know we can you

know, what's your in stock lookup ratio, what's your breakeven? What are your breakeven days? You know,

what's your gross profit on those vehicles? Is it covering new cost? All that type of stuff? You know, some

other numbers?

Mike Kunkel 19:12

Well, Terry brought up the deal. He's a 45 year veteran, right 35 years ago when you were asked how

business was it was 100 Protect contingent upon the checkbook balance right? How's business open

checkbook? We got money businesses good we got no money businesses and so good. Right now the



checkbook it's the worst place to look right? Because the money right when I'm really doing well my money

is is one of two places it's either in inventory, or accounts receivable right because that leg I'm doing and I'm

always waiting I mean there's lots of places that are driving a Cadillac to the poorhouse as they're going out

of business while other places are, you know, taking their their little feet, running it into the ground while

they're stacking up money.


Yeah. So I think it's really important that we understand what those things are that we measure. And again,

a question, what? What things do we measure? Terry, you use pinnacle? What are you? What are some of

the things that you're measuring? Sorry to put you on the spot, but you've been in it for 45 years, I thought it

was a lot more by the by but anyway.


And this is a guy that's been going to Ara you RG for 47 years.

Mike Kunkel 20:27

And look, we've already called him out on a deal. But when he says that his face turns bright red, because

fundamentally, you know, that that's kind of wrong. When you start looking and saying, Man, that check guy,

right? For what I do, is that really a good trade in doing that. So this is kind of some of that stuff where

unlocking the value of doing that, right. And like I said, there is such a thing of paralysis by analysis, you

know, in there, where you get so deep in and you know, you dig a rabbit hole, and then you cross cut to

another rabbit hole, and to do and you can't do that. Right, Chris asked which numbers, I think some of this

you got to start to product type, individualize some of what you're doing. Right, we have, you know, used

parts, we have, you know, new or reimagined parts, we have our warranty stuff that we can potentially sell,

we have brokered, we have scrap, you know, you have those components, and you can dig in and go about

that you have a set of metrics that have to do with the production side of things. And and what are we doing

there? Right? Because regardless of how we pay people, right, I mean, we have some people that are on

performance based pay, we have some people that are hourly, your salary or whatever, but when I pull a

part off, and I put it into the warehouse, I have pre paid labor on that part. Right? The only way I get that



labor dollar back is to do what sell it. If I don't sell it, at some point in time, I have to purge the warehouse.

So I have to pay somebody to go to the shelf, get it off the shelf, take it out of the system, and dispose of it.

So now I have the cost to get it in and the cost to get it out. Where do I get my labor dollars back? for that? I

have to go back to the parts that I sold and deduct it from that. So the decision making comes down of how

do I get my labor cost that takes killing me? How do I you know, how do I get my all of that stuff to balance? I

don't mind investing and waiting for the money to come. I do mind investing, and then the money never

comes. And this is where figuring out what the measure what you're going to go on? Does, there is

something called the Hawthorne effect, in the Hawthorne effect says that the moment I start focusing on

something, everybody's performance gets better, just because they know I'm focused on it. Right, as we talk

about disemployment things, the millennials, right? Everybody talks so poorly about the millennials. And the

truth of the matter is, a lot of it is correct. It has the least amount of work ethic built into them of any

generation. But it's not all, there's still a section of them that are really rock solid individuals that are going

to be really good employees and potential owners and whatnot as it goes. But these millennials are more

interested in the whys. They want the explanations of why are we doing what we're doing. So having the

data being able to come back starts to become constructive in giving the people what they need, there has

to be more for the employee than just pay not saying that the pay is not important. But if it's down to just

pay, somebody can always come along and outbid me, right I need the other stuff. You know, we have

family businesses, the culture of that the things that we do the you know, the the elbow room that they get

to do all of this, those become in and, and helping them explaining to them teaching them how to do all of

this stuff and how all the pieces of the jigsaw puzzle go together, ends up helping us tremendously in what

we're trying to accomplish.


So let's think now about what Mike just said a second ago about that inventory that we put on the shelf. We

wrapped up, we tagged. We took off the car, right? We take it take it off the car that we're not selling, why?

It's going to cost us a lot of money. Let's go back to now buying sales versus buying cars. If we know what

sales we're going to buy if we're buying those five sales up that vehicle, do we need to take off 80 parts of

that vehicle? I don't think so because those other 75 are not what you invested your money, you invested

your money in those five sales, that's what's going to give you that your 10,000 pounds or 3000 pounds



worth of sales. That's what you paid for. Right? That's where your cost of goods is. So all of a sudden now in

a very difficult labor environment in a very costly labor environment, if we do our buying, right by using our

data, and then we can take off the right parts, by using our data, we only put the right parts on the shelf that

we know we're going to sell. And we've just saved a whole heap of money in wrapping in labor in stickers in

not throwing them out at the end of

Mike Kunkel 25:35

it in a roundabout way. North all gas caps and radiator caps kind of the same. Right? I mean, they screw on,

they got a pressure point, they're all kind of the same, right? So me knowing that they're all kind of the same

means that if a guy calls for gas cap or radiator cap, I could say yes. Can I really make any gross profit?

Selling radiator caps and gas caps? The answer is no. So it's kind of coming in of Dali and uh, where do we

make our money? How do we make our money in doing that? The cost to sell apart? How does anybody ever

calculated that? Anybody know how to calculate that? Expenses divided by total number of number of parts

sold? Right? When if I go into your staff, when I say What's it cost to sell apart? Right? Anybody has to show

hands? Anybody think that their numbers under $50.75 100? food coma? Right? Because I mean, you look,

when I ask your staff, they I hear numbers like 45 $50 $75 $20. But when I do the math 150 175, that

number adds up. And when you start to look at that, that doesn't cost include the cost of the part. Right? So

it's $150 plus 50%, or 30%, or whatever your cost of goods is on the part. And that's our true though. And

then that's how much growth, you know, is left it starter net gets left it gets mighty skinny, if we don't go

about doing this, right, when really, every buddy has a personality type. Most sales, people's personality

types are pleasers, right? They want to say yes, I want to say yes, do the right thing. Right? Well do the right

thing tends to be from the customer's perspective, not necessarily the company perspective back into

selling those radiator caps and doing it's the right thing for the customer wrong thing for the company.

Right? So how do we go about, you know, doing and using all of this stuff, measuring, getting them focused

in and understanding of how all these pieces fit together? is how we start to build a team that then in turn,

starts to recruit other people. Right? I mean, if you haven't had an employee recommend somebody for hire

in a long time, you might want to look in the mirror, right? Are we a company that they're doing that? Or are

we the ones that, you know, they're at the pub tonight, crying to all their friends about what a terrible place



that they were going, and whatnot, that's really not what we want, especially when employment is such a

very hard, hard thing now.


Alright, so we talking about some of the key numbers. Again, this report comes straight out of someone's

Pinnacle system, and it dumps into this file. And we can see some stuff, you know, what's your instock ratio?

Why is that important? Mike just mentioned before that, Is he out of stock ratio, or installed ratio was 20%.

Back when he was at American auto salvage, so 80% of the time, he was saying, No, that's not good. It's not

bad. It's not good. It's not good for the customer to say no, but what do we do about that? broken parts, etc,

etc. And understanding customer segmentation, you know, if we look at, for example, which one is not on

the screen, but understanding being able to see where your customers who your customers are?

Mechanical collision, small parts, right, breaking that up into those segments, understanding what that looks

like benchmarking that against a whole heap of other recyclers who remain nameless in the report, but you

can see where you're at and how you sit. That's really important, because otherwise, I don't know, what am I

doing? Well, am I not doing that? Well, maybe you may be best in class. Maybe you're doing everything right.

But maybe you can learn just one thing that you'll take away from something from the data and then

actually improve.

Mike Kunkel 29:37

Well, you can look I mean, this this becomes an onion, right? Every time you peel off a layer, there's another

layer of something right in there, which is why you do have to watch but is there a correlation between

lookups and sales? Right, everybody has a volume or ability to close I may be a really good closer, I need less

activity in order to get my sales number. If somebody next to me is a bad closer They need significantly

more volume to do that we'll a low closer next to a high closer chains demean the low closers, probably

running off business, right? We're missing the opportunities to do that. So coming in here, now I start to

have the ability of correlating lookups to in stock sales to close rates to start coming back in to customize

the training, right? Because we go back to one of the things of go isn't very good marching orders, right? I

mean, go that way. And this is what we're trying to accomplish. And this is how we're going to accomplish it.

Now we're starting to put together the marching orders to where they they can go back net sales by sales



type, right is average ticket. Right? Then that starts to tell you is I got a guy that's a, you know, a 900 pound

per invoice seller. Right? I mean, holy macaroni. That's good. But is he running off everything that's 250

pound does he say and not worth my time, or she say aren't worth my time and shut it off? I have

somebody else that's in the same because like, we're all working off the same inventory and somebody else

has a 250 pound average ticket. Does that mean that their tongue swells up when it's 3000 pounds? For the

part and they can do because look, there are parts that we're asking our staff to sell that they cannot afford

to buy themselves? Right that becomes a little bit of a of a tough deal for them because they go what? Holy

smokes. Holy smokes. Yes, sir. Oh. I can't see very well. But somehow or another that caught that? It's

because I'm focused on my tape in there, but you look start looking up a somebody who is primarily selling

body parts, right? Somebody else primarily selling mechanical parts? Is that their customer base? How are

they position? How do you start to work of growing this stuff? Because look, the ability to get a paintbrush

out with a broad stroke of saying, Oh, look, ya'll are doing this one thing, you know, are doing it wrong.

That's crazy. Y'all we're making money are running very good businesses. This is not about you saying

everything is bad. This is about fine tuning and tinkering with the stuff in order to cover where we're at. You

know, it's by textbook definition. We're borderline if we're inflation or not. Do everybody in the room? Are

we having inflationary times? I mean, yeah, um, it's by my definition, every time I go past the gas pump, it's

costing me


it's at 7% this morning.

Mike Kunkel 32:42

No. So you know, it's going up, I think it's a half percent is when it officially becomes a recession, who came

up with that? Probably some wise consultant guy like me, that picks a random number out of the air. So this

is what it is. But when you have back if I have a deal, is it likely Chris said 7% 10%, pretty likely outcome for

the year, right. So if I know I have 10% margin compression because of expenses, or cars getting cheaper,

more expensive. So I now have some pressure on cost of goods as well. So now all the sudden if I'm in a

position where I have 15% margin compression, I gotta figure this out. Because look, I don't mind going

through a period of time where I have to make less money as long as it's offset by a time where I'm making



good money again, but it's just balancing to make sure that all of this leads in there so that all of these

different numbers based on department comes back because everybody has their, you know, KPIs per

department, in our peer group. Well, they have, whether you use them or not, right, whether you even know

that you have them or not, but they have that right dismantler set their pace, the parts cooler, set their pace,

the salesman set their pace. And if you don't say this is the pace, you need to run that they have established

their own KPI, right? We all do train, whether we know it or not. Right? Because if we don't train them, they

train themselves the wrong way into that, right. So going through all all of those different things and

breaking it back up in our peer group meetings. We send out a data request sheet. And on that you fill out

roughly speaking 45 questions in stock sales broker sales, warranty, sales, how many cars do you buy? What

did you spend? I mean, just kind of a department by department through there, right? And it takes the first

time you do it takes about three hours. Right? I can do it because I've been doing it for a long time. I can

knock it out in about 20 minutes. So there's a thing that one of the reasons it takes everybody three hours

to start is you start running reports you've never run before and then you start looking at the report. and

trying to figure out what I'm looking for in the report, or you see something in there that jumps out and

says, I see and go back. But I take those 45 or 48 items that you fill out, and we spin that into 140 items that

then in turns reflect five other spreadsheets. Right? And if it comes back, and so each section has, where it's

at, and what we're trying to do is there's something in, in manufacturing, called the Theory of Constraints.

And we do manufacturing, it's the manufacturing, it's manufacturing in reverse. So we have those same

problems in the theory of constraints. It's a bottleneck, right? For most people, the bottleneck is in

procurement, right? We run out of money, before we run out a need for vehicles when doing it. But once we

get them bought in the bottleneck then gets pushed to where inventory, right? Inventory up. If I inventory

200 vehicles today, 200 breakers, what's happening to dismantling tomorrow? Stock, it'd be jammed up,

right? I mean, we're going to be selling much engines transmissions that need to go through the shop. So

that becomes the next bottleneck. Then from once we get through dismantling, then the next bottleneck

goes to where we really want the bottleneck which is in sales. Why do we want it in sales, because it's the

easiest place to crack the whip, add more people say you got to do more blah, blah, blah. And then the final

bottleneck becomes production or distribution, getting it out to, you know, pushed out. So but in reality, we

have that bottleneck throughout all of our businesses, and it continues to circulate through. And what I

really actually want to do is continue to push it into sales. So that, that that's the easiest spot for me to really



work and manipulate. And so by knowing all of these is how I start to know where my bottlenecks are,

before they come and then start pushing it back away. Yeah.


So I think in that context, the whole idea about talking about this session around key numbers, the data

that's available, is to get you thinking about, what can we do? What is it that we've got in our business today,

you don't have to do anything, you've got a data, you don't have to find what you have to find it. But you

don't have to buy it from anyone, you don't have to get a system to get that information. If you're running a

yard management system, then you should have it in there. I know from a political perspective, it's there.

These are Pinnacle reports that have driven that stuff out. So three reports get gets all of that plus another

40 pages of that type of stuff. So the point there is you've got that information. And just by going through

and filling out those 45 lines, for example, starts getting you to think about it. Right. And we talk about

bottlenecks. I was talking to you guys before about potentially 900 cars sitting in a yard that haven't been

inventory.

Mike Kunkel 38:01

My first question when I walk into a site that has that is can I borrow some money? Because you apparently

have plenty.


So if the if the cars aren't inventoried, we can't sell a part this secret, you know, we've got a whole heap of

secrets. And then you've got eBay saying, Look, you listed this many parts in the last two years, it's gone up

by 30 40%, whatever it was, and the correlation between that, and sales is actually a parallel line. How do we

how do we get those parts into

Mike Kunkel 38:34

eBay? Or to your sales staff? When do you take possession of the car when it's inventoried in the system,

and ready to go, right up until then it's phantom inventory. It's a it's a You're teasing me, right? It's on the

side of a fence where I can see it, but I can't take any parts off of it. I can't do any of that. It's just there.



Right? When Terry and I were kids, when we got to work in the morning, we walk the art, what's changed?

Right, what's changed, and we had unbelievable memories back then. I mean, much better than we have in

this today. But now our sales staff if we catch them out walking in the yard, what do we say? What are you

doing here? Your phone doesn't reach out here, get you in there because what I got I got a box I'm writing

pretty good check for that knows what I want to sell those all that stuff. I need somebody who can interpret

that data, not necessarily go back out. So they don't even know that we have this car and I have this engine

sold for $3,000 kuti inventory it and get it into the system because they don't even know so you kind of have

to keep all of that in mind for doing it. Right, because we pay for the car.


Right up front on day one. Yep. So the longer you leave the car, they're on inventory, the worse it is. We

need to get that inventory. Laura, can I just throw you On the spot for a minute, traditionally, or over the

past 456 years, or whatever he Bay's been saying, take the parts off, take the photo of the individual part.

Can you give us a little bit more on that? What are your thoughts? Is that something I know we've had a bit

of a discussion about it, but what are you thinking?


Sorry, one second. Where's the microphone? Come on chess. Seriously, one job. One job, man.

Laura Richards, eBay 40:41

Yeah, so it's 5050, right. It's the people in the room, some of you image parts on the car, some of you take

the parts of the car. I think the key, the key thing here, I speak to a vision about this earlier, is his resource.

Okay, so if you can get 100 more listings up onto eBay, and you sell them straight within the first day, you

need to make sure that you can get them out to the customer. eBay currently says two to three working

days is the the cherry pick of time. So if you can get your parts out within three working days, which might

give you a little bit of time, in order to be able to actually get your guys out into the yard, there's no issue at

all, take images, take them take an image of the door on the car, it takes 20 minutes to remove it and and

actually get it packaged and shipped out. But just keep in mind, images sell. So the more images you have,

we were talking about it yesterday, you actually get a higher rating based on the amount of images you have



per listing. So we gave you a five out of five, if you've got 12 images, we give you a one out of five if you've

got two images. So it's good to just keep that in mind. Just make sure you take as many photos as you can

take photos of the car, customers like to see, like I like to see actually, this is the same car as mine. But I'd

encourage you to do it. All of the all of you that are certified in the room are under what we call a white

glove treatment. So you all have access to account support levels, where if you're going to try it, and you see

volumes are growing so exponentially, that you can't keep up, let us know we'll help you. We'll make sure

your business doesn't fall over. But I think that's a good thing to happen. Right? It's, it's, it's a good problem

to

Mike Kunkel 42:17

have. Let's start because in law and this is where I get to be collected back into by my mom. So she's

teaching textbook, right? That's her that's her deal is this is the textbook and the textbook says have an off

the part habit or have to have it off the vehicle habit pictured have it ready to go, Okay, now, there's a big

chunk of the time that that's 100% possible and feasible. There's another section of the time where it's not

right. So if that's the, that's the Holy Grail, right, that's what we're driving to, there is no reason why I can't

take a picture of the door on the vehicle and get the process started. Then when the car goes through the

production, then I go back and I put the individual pictures, and then I up and I'm starting to move along

that entire process and making sure that we're getting towards that goal of going out there because look,

there are some if there's four of them, or six of them, or 20 of them out there. Well, the person was the

individual, you know, spot when they feel they may be in the driver's seat, but at least I'm exposing my

inventory and giving it the opportunity. While I know I am taking the steps as they go along to get it cleaned

up the way that that it really needs to be,


you can't sell a secret at the minute. If you've got 900 cars, hybrid cars, 50 cars that haven't been

inventoried, there are a lot of secrets, and you paid for them. So let's try and get them inventory and get the

money buy as quick or wherever you want to put them as quickly as possible in front of your salespeople.

So you can see what you've got there, get them selling. And if you need to change your process a little bit,

change your process a little bit. All right, I need a particular get a particular right, or divert one of your



current resources. Maybe you got three people doing this mapping? Well, you're running crazy trying to

dismantle if you can't find a particular see if you can get one of those people to do the pattern. Right?

Mike Kunkel 44:17

And if you look if you go back to what Laura said, if I have 300 breakers in backlog, can I do what she needs

done? Not really, because I got all that stuff and it's a mess. Right? So if I have you know, we're talking

earlier, somebody had deteriorated to guard, you know, waiting to be turned down now can I do exactly

what Laura's talk? Yes, I mean, it's timing and so some of this is those circumstances to do and we all have

ebbs and flows within the backlog of how we can do so it's establishing the process and then consistently

working for it. Right because the one thing that Lord did say that this is his two to three days, right my in my

operator life If a part was sold by 3pm Today, we delivered it tomorrow, period. Okay. The only exception to

that was if it was a diesel engine that an affordable drive that needed dismantled. Right. So in other words, I

had a dismantling shift that started at 3am. So if they sold apart an engine or a transmission that was still in

the vehicle at 259, that went into the dismantling Bay the following morning and went out that same

morning of coming back. So everything was a 24 hour turn on doing it. So how do you get back? Now there

are ebbs and flows. I mean, you get a little hiccups. But this is where you start looking and saying the

procedure said what the salespeople did not ask any questions. Right, the delivery trucks to full that's not a

salesperson problem, is it? That's a production problem. Right? Push the problem, push the bottleneck to

the next section, and let them deal with it. So and there and that because I do think that speed is of the

essence. I mean, it's it's a weird deal. Right? Laura said it takes three months to get your car back. But they

got to have the part right now. Right? So it's balancing all of that stuff to make it happen.


Just most people, that's our I'll repeat.

46:19

Was that delivery of 24 hours driven by you, against your competitors, because you're racing to be the first

or was it driven by your customers needing a diesel engine by the fall?




So can I just ask that question. So the question was, was that delivery time KPI, that 24 hour KPI driven by

internal requirements to meet what his competitors were doing at the time, and therefore I need to get it

out there within 24 hours, because that's what everyone else is doing. Or was it because the customer was

asking for that?

Mike Kunkel 46:53

And in my market, there were two major consolidations LK Q was one and Greenleaf was the other that was

originally backed by Ford. The LK Q facility does $2.5 million sales per week. Okay, that's 10 million a month.

That's a big daddy. So they had pressure to perform based on that the metroplex, Dallas Fort Worth

metroplex, the customer was a demanding and fast, so it was a combination of both, but what it did is I

continually positioned myself to out execute everybody else, because keeping in mind, I've always been

more expensive than LK, Q, no ands ifs or buts about it, right. Because you got to, you know, you got to pay

me I mean, you can't do all the stuff that I'm doing. And the deal is it pick, you know, price quality or service

pick two. Yeah, right. You can't have three, so it's hard in there. So I had to kind of out hustle and out

position. The other thing is, when sales people have to start to think the good things or bad things happen.


Really bad. Okay, really bad. Look, I

Mike Kunkel 48:10

know how many salespeople are in here that I just offend? But look, it's true, right? When we start to have to

think about the other stuff, we get off of our game, we get repetitive and we're not think so when you start

establishing that, then it comes back to say that it's the next guy, we push it to the next guy. Now you have

strong leadership that comes back in doubt him because it's back to what are we measuring? Well, you

know what, I had a meeting with the owner of the company every day at 715 in the morning, right? And at

715. The numbers we discussed is what time are we pulling parts from? How many units deep? are we

hitting, dismantling? And what's the what's the early run of trucks look like? Right, because in the end, it's

like, I gotta go, cuz I'm back there managing parched pillars, right? Because look, most of us run through our



businesses with five gallons of gas in one hand and a fire extinguisher in the other. Right, because we're

either lighting fires or putting fires out. That's what we do. So that's kind of coming in using those numbers

starts to predicate where my attention goes so that I'm driving performance through the business.


Excellent like that fire you. All right. Any questions? Any questions or comments on that? But really, it's

about data, right? It's about how do we use it? Yes. Sorry,


this thing. Just a bit about what Laura was saying about taking the parts off, but also going back to where

you were saying about everything has a cost? Yep. So if you just do that, take the part off and handle it that

one time. It's less of a cost than then, like what you said going back and then getting somebody else to then

do another cost of Loading more images, which is time, which is money.


Look, my view my view on that is, I know you guys do eBay better than anyone else anywhere in the US or in

Australia and New Zealand anyway, that seriously, I'm not just saying you guys do eBay better than anyone

else. So Laura should be happy with what you guys do. But the point I want to make there is are we over

servicing? Are we overdoing it is the question I've got, because my view is keep the keep the part on the cat,

if you can, if you've got a large facility where you can store a lot of cars, that car was designed to, you know,

rack that door on it, it was designed for that door, it's less damage, less handling, less cost less headache, it's

there, it's on the door, but you gotta have space for that. Right? If you haven't got space to have warehouse,

because kind of you gotta have one or the other. If you've got plenty of warehouse space, then you can start

taking parts off and putting on the web, you run the risk of if you're not buying properly, if you're not buying

sales, you buy cars. And if we just take everything that looks good on the car off, then you run the risk of

wasting a lot of labor, high risk of wasting a lot of labor, you will waste a lot of labor.

Mike Kunkel 51:10



It truthfully, if I if I want to pull it and warehouse it. It needs to have an 80% likelihood of selling, right I

mean, if I take I can take a guess here in there. And I can guess incorrectly right? I saw 74 Chevy Vega left

taillight on the shelf about six months ago. Right? Bad Yes, in there really cool. And another 20 years is going

to be something to behold. But you can guess a little bit wrong on that. But it's got to be an 80% or better

likelihood of selling. If I want to unbolt it and leave it in the car to make it easier for the field dismantler to

grab it, they'd better have a 50 to 79% likelihood of selling everything else, I'm going to take my chances.

And if I sell it, I'll deal with pulling it. Now in there. Those are three different lead times for part prep,

depending on what's what and this is back to where I don't need the salesperson saying all it's unbolted. Oh,

it's because now we're thinking again, what I really need them thinking what do I need to do to get you to

say yes, to get you to take this off of my hands? Because I don't know if any of y'all have tried to eat an

alternator? They don't chew good. So I need it turned into cash. Well, I could turn that into steak.


Yeah. So on that point, would I necessarily start taking other photos? If you want to you can. But I've got

some customers in other markets that we do eBay for and basically, they take photos of the part on the car,

their conversion is pretty good. Compared to other benchmark conversions,

52:44

generation will change that. Because the way they look at it might take longer, they see the actual part.


No, I don't think so. Do I think sorry? The what the question was, do we think that my daughter who's 20 is

going to look at that and say, Oh, no, that's still on the car is going to take longer, or I don't like it because it's

on the car versus seeing the door mirror that's off the car, and ready to go. Sorry. Can I just quickly answer

that? My view is that, no. Why? Because if it was me, and I reckon my daughter or my son would look at that

photo and say, That's my cat. That's like my car. That's the right mirror. Right? Whereas a mirror by itself,

you might know what it is. Don't know what it is, they can't relate to it. So there is the relationship thing with

the vehicle. And therefore with the part if you're guaranteeing them 24 hours delivery, who cares whether

it's on the car or not on the car,



Mike Kunkel 53:41

and see that's where I'm gonna go with that is because I'm going to look this is a lowest common

denominator thing, right? I got to sink this down to the lowest person who's gonna do so that you know

what, you're 100% right there might be some person that is not attracted to that because it's still on the car.

So if I'm taking my pictures and it's still on the car when I'm doing my listings and whatnot I'm making sure

that I add will ship today right because that offsets it so now I have yes maybe it's not as it may be sought

perfect, but I'm still putting that note in there that says it will be off the car today and then if I'm processing

through where it does come off the car and I read picture well then then it kind of updates itself that way.


So if

54:31

you we go in the photo editing software to wipe the background out because he may want everything on a

white background

Mike Kunkel 54:49

Laura what I was going

54:53

to do is click your camera. That's how we all started. But now if I set the parameters They want it on the

white background. You can't put watermarks on, you know, you've got to do 12 pictures. So how do you do

12 pictures of a fuse or relay,


you don't, you do 12 pictures of the car. And you tell them what relates got, and you sell it, then you worry

about taking it off. Because guess what, you got the money. So now you're investing in return, because

you've already got the money, you're not investing in pulling it, and then hoping one day you sell it, and then



realizing that in three years time, you're gonna invest in someone else with a front end loader, rip a wall out

one end of the factory, rip a wall out the other end of the factory and just go rip everything early. Why?

Because that stuff ain't gonna sell. And you've just invested all that time in. So put the money in when you

got the money. That's margin. Laura. Sorry, you're gonna say?


Yeah, I think with anything I've get, I ask those you guys to do things and I get objections. And I say to you,

just try it. Try it. Go home tomorrow, try taking 100 images of 100 parts for the money Bay and see what

happens. You won't you won't know unless you try it. And if you if you just take them less time, and it's

selling, and it's converting at the same rate as your other listings, that's your proof. Basically,


what we're trying to do is find ways where you can get parts in inventory and listed as quickly as possible,

because we know that that correlates with sales. Right? So just because we said something's white today, we

can look back at and say hold on, maybe we can make it a little bit gray. Why? Because we've learned, we

tested that, you know, we know it works. But there are other factors that are affecting, you know, the

volume that we put on eBay today. And that is, do we have the people to rip all the parts off and take photos

of it? Do we have the warehouses to put them in? Do we have the money to invest in that really expensive

labor? Can we find that labor, things have changed in the last two years? So what do we do? We can't just sit

there and say, Let's just keep on doing it the same way? Because I didn't get to get the result? What about if

we tweak a few things? Let's try a few things. Try it?

Mike Kunkel 57:13

Do we know what a closed rate is? If I say closed rate? What would you think? Right? I mean, because the

closed rate to me is is a salesperson or eBay quotes. X number of dollars, X X number of pounds, right? And

then a certain amount of that gets converted into a sale.




So hold on, hold on. So close rate is the number of the value of the value of the parts priced. So quoted. So

you've quoted 100 pounds worth of parts.

Mike Kunkel 57:40

And then what did you sell? You sold 10 pound worth of parts? So including percent close rate, right? I mean,

pretty simple math, right? Yep. I have the ability, right? Because we're going back to data again, right? So I

have the ability by saying things like I want every part looked up, I want every part quoted, I want all that so

that I can start to generate data. And then I can start to see that, that for every 10 phone calls, Bill sells one

part, for every 100 pound quoted, he sells one pound, I can start to correlate it. So I can start to dial with all

of that. Okay, so then you take that's close, right? From a selling standpoint. Okay. Within pinnacle, there's

other close rates, you have a close rate on a part time, right within pinnacle, it tells you out of all the engines

that you have, right, we sell at 2%, close rate on engines or 15%, close rate on doing that, okay? Then you

also have a closed rate by interchange number, okay, which is what I looked it up four times, and I sold it

once I looked it up 10 times I sold it once. That's a close rate. When you run the auto pricing algorithms

within pinnacle, that's what it's really trying to drive is the close rate on the interchange number to match

the close rate on the part type. Okay, so if you go back to the fuse, box or your fuse, right, these are some of

the things I'm looking at how many of them would I have? How many of them Am I selling? What kind of

revenue are they producing? And do they justify the effort? Laura wants parts I got that I can still give her

what she wants, without necessarily mortgaging the future by doing silly things that don't produce money.

So it's balancing that because in the end, it's about production of what? Gross profit, right? We got to

produce the profit. And I NS again, I don't mind. So if we're talking a 20% likelihood of it selling, how much

time do I really want to spend picturing EO and putting it up when it's a low dollar value part? Right, because

that starts to come back because I don't think that we should ever get to 100% of our parts listed on eBay in

there but we should be significantly higher than what we currently have. So it's balancing you know all of

that out and I think that digging down into the data then starts to drive a what it is that we're truly investing

time effort into

4. Your Yard Management System and You

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