Posts Tagged ‘asset recovery’

As we near black Friday, supply chain managers across the globe are trying to catch their breath. For the most part, the biggest bulk of the importing and manufacturing for this year is completed. Retail distribution is working to the fill the retail stock rooms and but even their work is starting to tail off.

The next big event for many supply chains is to process returns and stale goods left over from the Christmas season. (Yes Mr. President, that’s CHRISTMAS).

Today, half of all goods returned after the Christmas season ends up being sold on the secondary market for a percentage of the “original retail” price. Interesting, there are three terms used for the secondary market; Asset Recovery, Salvage, and Liquidation.

As with most things, Google does a great job of defining these terms. If you Google Asset Recovery, the first page is full of companies that specialize in retrieval, repairing and selling “end of life” computer equipment. These are the guys who will take away the old PC’s when your lease is up or you are buying new computer equipment. They will ensure the data is cleansed and you will get some type of revenue from the resale of the refurbished unit or parts harvesting.

If you Google Salvage, you get a completely different set of providers in an entirely different industry. This search shows specialist in auto salvage of parts and buildings. Specialized in every way but clearly different from the Asset Recovery guys.

Then there is Liquidation. If you Google Liquidators you find a variety of companies that sell close out merchandise to both the B2B market and the B2C market. They buy in bulk and typically their products have never been sold to a consumer. They may be from last season, they may be ugly, or they may have been refurbished or re-manufactured to repair some flaw that prevented the primary market from buying them, but you can get a great deal.

The one thing every asset recovery seller, salvager, and liquidator has in common is that they have goods they sell below normal market values. Each has an niche and each will expect to make about 25% over the total cost of goods, transportation and processing.

One last thing. For the supply chain managers out there who have a corner of their facility that is holding damage product, now is the time to sell to your liquidators or salvage buyers of choice. Prices on the secondary market are best in September, October and November. If you wait until the first quarter of the year, you won’t get near the recovery value. Remember, the secondary market is ruled by the law of supply and demand.

The Sustainable Supply Chain Management Podcast is hosted by Dr. Dale Rogers and Curtis Greve. This podcast is focused on sustainable supply chain management issues and best practices.

Podcast #4 – Asset Recovery

Join Curtis Greve and Dr. Dale Rogers as they discuss basics of Asset Recovery in their fourth podcast. Whether you call it Asset Recovery, Liquidation, or Salvage Sales, it is an opportunity to increased profits for manufacturer and retailers alike.

Successful manufacturers such as Nike, Dell, HP, Adidas, Foxconn, and leading retailers such as Walmart, Kohl’s, Canadian Tire and Target successfully integrated a Strategic Asset Recovery Strategy into their Sustainable Supply Chain Management Strategy. This approach enables these companies to maximize the value of obsolete inventory while removing slow moving or dead inventory from the primary stream of commerce.  A Strategic Asset Recovery Strategy will increase customer satisfaction and increase profits.

If you took a good look at the average retailer’s inventory, you would find that roughly 6% of total sales gets returned by consumers. During my 20+ years in the business, I can tell you that half of all returns are not defective at all. They were returned for some excuse that was really a variation of buyer’s remorse.

Most retailers return half of all returns to the manufacturer and sell the other half on the secondary market. Some refer to this product as salvage, some call it liquidation, some call it asset recovery, but they all call it profitable.

Selling goods on the secondary market can literally turn trash into cash.

What many don’t realize is that there is a lot more product that is never sold to the consumers that is sold on the secondary market. This inventory comes from seasonal product that didn’t sell, over buys that can’t be returned, and product that is recalled by the maker or the retailer.  If you shop at a Marshalls, TJ Max, or Big Lots Odd Lots you know exactly what kind of stuff I’m talking about.

Regardless of why the product goes to the secondary market, there is a formula that salvage buyers use to figure out what they will pay for the product. That formula works like this:

(Retail X 75% X %Yield) / 2 – Transportation = Salvage Buyer Bid

There are some important variables involved but for the most part salvage buyers work on a 50% margin, assuming a certain amount (% Yield) of product that can be sold for roughly 75% of a brand new item.  From that, they subtract transportation, which is usually paid for by the salvage buyer, which leaves the amount the salvage buyer will pay for the returned or recalled product.

However, this the land of supply and demand. Depending on the situation, bids could fluctuate significantly. Other factors also impact demand and the price paid on the secondary market. A good example would be iPods. A year ago refurbished iPods were being sold on the secondary market for $100. Then Apple dropped the price of new iPods to $100 and the inventory that was in high demand had to be sold at a loss.

The secondary market is not for rookies. There is a wide network of really smart people who buy and sell product just like the guys on Wall Street buy and sell stocks. If you want to jump in the market, hire an expert, just like you would if you wanted to buy stock. Underestimate these pro’s at your peril.

Whether you are looking to get into the liquidation business or if you are thinking of turning your trash into cash, now you have an idea of how the secondary market works. Here’s to bigger profits and turning trash to cash!