Chris Daglis, Managing Director of PARTnered Solutions, has a worldwide view of the vehicle recycling industry. Based in Australia he has involvement in many global industry initiatives, including the recently launched eBay B2B platform for reclaimed parts in the UK. We caught up with Chris to discuss how he perceives the future of vehicle recycling at this interesting time. Is there a land of milk and honey ahead or will it only be a place where fools rush in?
Q: What opportunities exist in vehicle recycling today and into the future?
A: There are amazing opportunities available to the vehicle recycling industry. Critically though, the auto recycler needs to think and act differently. Doing things the way they have always done them is simply not going to cut it. Auto recyclers need to reassess their value proposition on a number of fronts and look at ways to better serve their customers.
Q: Can you break this up a little for us? What do they need to do differently?
A: I like to look at these in three different compartments;
- Upstream – focus on inbound inventory (the resource) to the auto recycler
- Midstream – internal changes that need to take effect at the auto recycler
- Downstream – customer-facing changes and training
Q: If we look at the upstream inbound inventory, what can the vehicle recycler do differently?
A: One of the key points here is the auto recycler’s ability to fulfil the customer request. In real terms, they only have the part their customer needs in stock about 50% of the time. This means that they cannot help half the time, which is simply not good enough if you want to be a viable alternative to other providers that have the part nearly all the time. I mean, would you keep going to the same supermarket if they didn’t have the milk and bread you need every day?
There is a gap in supply and demand. This must be filled as best as possible in order to be a good option to the buyer. There are a number of ways to do this including;
- Developing a brokering capability that brings a number of like-minded organisations together and enables the trading of quality parts
- Adding product types like aftermarket, OE parallel or remanufactured parts to the mix of parts offered to the customer
- Building some strategic relationships in the market that helps all parties achieve their respective goals. This could see a flow of inventory (the resource) invested into a supply chain with the view of buying it back. We did this with IAG some ten years ago and it is a model that works in the UK with some large auto recyclers working closely with large corporates to better manage their End of Life Vehicles (ELV). This makes sense commercially and environmentally. It really is a closed-loop circular economy model.
Q: You mentioned midstream internal changes. Can you expand on what these may include and why they are important?
A: Gone are the days of buying a salvage vehicle and ripping it apart. Vehicle technology has changed everything. Auto recyclers need to invest in their systems, processes and very importantly their people.
Everyone else in the sector trains their people. Collision repairers must have trained and qualified technicians. They must follow manufacturer repair guidelines and they know what they can and can’t do. They also train their people on how to handle new vehicles. For example, how to safely handle electric and hybrid vehicles. These things are dangerous! They can kill you, so the modern-day auto recycler can no longer just buy a salvage vehicle and dismantle it without the right training.
Look my view is that the sellers of these vehicles will need to take some responsibility and make sure that they only sell these vehicles to recyclers that are independently certified as having had the training to handle them safely and in an environmentally responsible way.
I have been a strong advocate of an independent certification program for the industry. There are a lot of reasons for this, but at a very high level, think about the change in the way the industry, or at least those that are certified will be viewed by the customer. Its why consumers buy certified food products, certified used cars, certified baby formula.
The work I am doing in the UK and with the unprecedented support of eBay is all about lifting the standard to a new level and the independent certification program is the foundation upon which this will be built.
There is so much more auto recyclers need to do internally. This is just a start and those that embrace taking these steps forward will benefit beyond expectation.
Q: From a downstream perspective, at the end of the day, the customer is the customer. Isn’t it a marketing ploy?
A: It’s interesting isn’t it? Again, things are changing so much here. Let’s bring it back to the most basic question that any startup business would ask, ‘Who is the customer?’
I’m not trying to be funny, but how many auto recyclers have actually stopped to think about this? Is it the mechanic, the collision repairer, the insurer, the retail customer that buys online, the walk-in customer coming to a yard or even a self-serve facility, the fleet owner, the self-insured…?
This is a science in and of itself, yet we don’t even stop to think about it. Each has a different need and a different mechanism through which to buy. Especially nowadays with online buying patterns of both the retail customer and the trade.
I mean, look at the collision repairer globally who now buys using the likes of PartsTrader in the USA, or through their estimating systems, CCC, Audatex, Mitchell? I’m now helping eBay UK with their B2B play, over and above their B2C platform on which they sell a reclaimed part every 8 seconds.
What about social media channels? Look at the growth of product sales on Instagram, YouTube, Facebook marketplace. What’s around the corner that we are not aware of yet?
The question must be asked if the auto recycling industry is in a good position to firstly segment the customer base into distinct audiences, then build capabilities to market and sell to those segments successfully? Are the databases of parts designed to integrate as required? If I’m honest, I don’t think the industry is there yet and there are so many dependencies that need to be managed carefully.
In my view, the key is how recyclers systemise themselves with collision repairers, manufacturers and insurance companies.
Q: What about the role of the Vehicle Manufacturers (VMs)? Should they be working with the auto recycling industry more? Is there a mutual need and responsibility?
A: My dealings with the VMs suggest that things are changing. The days of us against them, whichever side of the coin you sit are fast approaching their use-by date.
I’ve just written an article on the need to co-exist. There has never been a more compelling argument for co-existence. From an environmental, product stewardship, consumer safety, traceability, recyclability and pure economic perspective, there is every reason to work hand in glove.
Many recyclers I talk to though just cannot put the past behind them. That is, that the VMs are out to get them and that they do not want the auto recycling industry to exist so that they can sell all the parts themselves. Sorry, but this is nonsense!
VMs need a recycling solution. They need a partner that specialises in this area to help them manage their ELVs, especially now that electric vehicles are becoming the way of the future. But here’s the deal – if the auto recycler does not professionalise, if he/she cannot improve internally, provide scalable solutions that are safe, consistent, cost-effective and environmentally responsible, then yes, the VM will need to act and do something themselves. Is it their core business? NO, but what choice will they have?
I think that recyclers need to look in the mirror and ask how they can engage with manufacturers. I work closely with a number of global VMs in my capacity as founder of the All Auto Recalls business and every indication I have is that they want to engage. It’s not easy though. There are so many moving parts, especially in a big global organisation like a VM.
The same can be said for the insurance companies which require a level of predictability and that reused parts can be quality controlled. They need to know that vehicles have been processed in the correct way and done within the parameters of strict safety and environmental standards. Recyclers need to understand how these mammoth corporations operate and understand that they need time to process information and make decisions.
An example of providing solutions to reassure potential customers and partners is the new eBay UK initiative revolving around independent certification and standardisation of reused parts that I am very heavily involved with. This initiative provides trust to insurers and body shops that they are buying quality products consistently.
This approach is driven by a positive mindset and is a huge step in the right direction. eBay UK should be proud of the stance they have taken to date and will move forward. It is one of environmental leadership as well as one that will support consumers.
Q: Where do we start the journey beyond 2020?
A: In short this is all about building relationships – again with insurers and collision repairers. There needs to be investment to provide a proven dataset and platform to supply. What is encouraging is that I am now seeing insurance companies globally showing a willingness to engage, understand what their options are and invest with the vehicle recycler. VMs will look to do more of this and the reality is that together, the auto recycler and the VM (and of course other parts of the supply chain) can achieve a better outcome for all.
As I have said before, it is not either/or, it is not one or the other, it is the optimum MIX of parts that will deliver the best result for all
- more vehicles repairable – good for repairers
- more parts sold (by all) – good for parts suppliers
- more policyholders retaining their cars – good for consumers
- less money spent on repairs/claims – good for insurers, and you never know, but to quote a UK insurer taking a strong interest in the program there
- maybe even a Reclaimed Part Policy at a cheaper premium – good for consumers yet again
‘The future is bright – I’ve gotta wear shades’
In closing, Chris said the vehicle recycling industry needs to make the decision to invest in the next step. He believes that they have to show inventiveness and provide the solutions to the problems that those in the circle present to them.
He categorically thinks that relationships are changing. Stakeholders are willing to listen and forge links in the chain to create a productive circular economy. Opportunity is very much out there but there needs to be ingenuity and eagerness to raise the bar to align with more ‘corporate’ organisations. To move forward, independent certification and standardisation is important and so is the need for training for the industry to prepare itself for the introduction of new vehicle technology.
A new dawn is coming for vehicle recycling but how bright it becomes is in the hands of the auto recycler. Chris thinks the role of the traditional dismantler is setting. Opportunity is there but forging good relationships and building a circle of trust, combined with a willingness to engage with others is paramount.
His advice? ‘look at and assess where your company is going. Don’t be afraid to walk into the sun but make sure you are well prepared’. Being a good Australian, he advises everyone to be equipped with high-quality sun protection, don’t be afraid to invest in some cool shades, walk with a swagger and enjoy the warmth!
Chris Daglis is a recognised and respected leader in the automotive parts industry with 30 years of experience working in Australia and internationally with successful, long-standing relationships and networks.
Chris has a proven record of achievement in the industry and has repeatedly produced sustained revenue growth while driving change in the market. His success is underpinned by my close working relationships with all the key stakeholders including insurers, repairers, OE dealers and alternative parts suppliers.
To contact Chris, go to www.cdps.com.au