Okay, we're going to try this again. Andrew, can you hear me, if you would let me know? Jim, can you hear us? Great. All right. We're going to get started here. Welcome to Getting Serious About Dealing with Surplus and Obsolescence, an AED webinar. Sorry for the inconveniences and the issues. As people say, technology is wonderful until it messes up. Today's main message is that obsolescence can have a negative effect on the profitability and cash flow and customer satisfaction. Okay, Steve Burden says he cannot hear. Steve, is it getting any better? Okay. Mr. Breeson, if you could, could you check with Steve Burden or text him and find out what the issue is? We'll keep going. Steve can hear now. Yep. Good. All right. Wow. Okay. We're going to get through this one way or another. All right. Here's our agenda for today. What is obsolescence? Why it exists? What's the cost of obsolete inventory? How we can possibly prevent it and minimize it? And then how can we reduce what we have currently here? You know, one of the things that we need to think about when we think about obsolescence is the fact that it didn't get there overnight and you don't correct it overnight. And the other thing that we need to realize is that you can minimize it, but you will never totally eliminate it because it's just part of the – it's just a creature of the business, especially if you've got parts inventory. It's also a mindset that's out there that's been around for years, and you can look on your – if you're a dealership, you can look on your yard and back in the back corner, there's probably a piece of used equipment that's been sitting there for quite some time and hasn't been moved, and it just exists. So it's one of those things that we have to deal with. So as we go forward from the agenda, what is obsolescence? Well, it's parts in inventory that has not sold within a particular time period. And you'll notice there with the formula I put, X turns in X months, what we're looking at is you probably have a criteria for stocking a part. It may be two turns in 12 months, it may be four turns, it could be as high as eight turns depending on what your situation is. So any part that is in stock that has less turns in that many months, that's your stocking criteria, usually is probably considered an obsolete part. Standard in the industry has always been zero in 24 months if you have no turns. However, if you've got a part in stock and it's one turn in 24 months, that's considered, in my opinion, an obsolete part. And so it needs to be looked at. Now, the other thing that we are going to need to look at is the key performance indicator that goes along with this. And your obsolete parts, if you take that number, shouldn't be any greater than 10% of your total inventory. If it is, and in most places that I deal with, as far as dealerships, it is, then you need to come up with some way to keep it below that. And we'll talk about some of those ideas as we go forward. Why does it exist? Well, the first reason that it exists is because we underutilize parts returns offered by our vendors. That's one of the things. And then we also have some situations where vendors do not offer parts returns. So we have to be mindful of that. Then we also need to look at not heeding future non-returnable notification. Does your whole goods company or your vendor that you buy whole goods from or you're getting parts from, do they have a policy for future or do they let you know in advance of what the future non-returnables will be? Some do, some don't. So you need to be aware of what you've got there. The ordering process for non-returnable or non-stocking parts. There's underutilization of the dealer business system's reporting system. This is a key thing because really and truly when we look at dealer business systems, there's a lot of stuff that they can do for us and help us with, and we need to know what reports and how we generate them, and we'll talk a little more about that. Changing whole goods suppliers. As parts managers, we have no control over that, but we need to be able to look at that and see what we have to do whenever we change suppliers. And then if you're a rental company and you change out your rental fleet, maybe you're going from one manufacturer to a different manufacturer or maybe you're rolling out all of your current models or older models of backhoes and bringing in a whole new fleet of them. What do we do with that? There's also a misunderstanding of parts life cycle, and we'll go through the life cycle itself. So there's kind of an idea of why it exists, and we'll get into it a little further. When we look at costs associated with obsolescence, and we're going to look at it from the standpoint of I believe in the KISS method, which is simplicity, the cost of obsolescence or overstocked inventory or surplus, we're going to look at how it affects profitability, and then we'll also look at its effect on cash flow. The first one, when we look at the cost, let's take, for example, let's say that your obsolescence in your dealership is $100,000, and there's zero turns, and we've predicated that on zero turns in 24 months. The easy way to calculate this is just to take the current interest rate out there for business. And down in where I'm from, it's around 7% right now. And if you take 7% over a year at $100,000, the annual cost of that obsolete inventory is $7,000 per year. Now, if we were to put that into the cost of the inventory, add that in, our inventory, our cost of goods sold is now $107,000. What that will actually do is it will actually reduce our gross margin by about 5%. Now, because we were looking at this at 24 months, I want you to think about this also. If we add another year's worth of interest on that, then we've now looked at $14,000, and we look at reducing our gross margin by in excess of 5%. It's going to be much closer to somewhere around 9% to 10% when we do that. That really has a drain on our department as well as a drain on trying to get rid of that part and trying to salvage some sort of money out of it. Now, when we look at profitability, we're going to take the same $100,000, and we're going to invest that in competitive parts. The reason I say we're going to invest it in competitive parts is because if we invest it in captive parts, those normally don't turn unless we have a major failure, and we can't count on that. But on the competitive side, cutting edges, bucket teeth, those type of things, we can move those. It may be nuts, bolts. Maybe we're into the bolt business also. If we take that $100,000 that we've got there, and I've been very conservative and used four turns a year. Our sales, we're going to turn that four times, which means that we're going to bring about $400,000 for the parts through, and if we've got a 25% gross margin on sales, our total sales within that year would be $533,000. We kind of backed into that number. The gross margin on that sales would be $133,000, and that's just for one year. Now, if we did eight times turn on that money that we had invested in obsolescence and put it in competitive parts, then we're looking at about a million dollars worth of sales that we could generate with about $200,000 worth of gross margin dollars. Now, the interesting part about that is that if we have not had to increase our expenses, in other words, we didn't have to put another person on board, we didn't have to increase any of the expenses that went along with that, our parts department, then that would actually be net margin or net dollars, net profit to our business. Now, the question there, what if we turn the inventory eight times? What effect would that have? As you can see, that would be a considerable contribution back into our department and back into our dealerships, so profitability is one of the areas also. Now, the next thing we're going to talk about is its effect on cash flow. Three key areas here. Parts inventory is a current asset. If you look at the balance sheet, it is a current asset, which means it's more considered like cash. In fact, it is in a lot of dealerships considered cash that's being tied up. If you'll notice there, in a dealership, it's the largest consumer of cash in most dealerships. The reason we say that is because with your whole goods, some of you guys from the dealerships are going to say, yeah, but we've got $5 million worth of whole goods. Well, yes, you do, but you've probably got a floor plan, so you haven't put out cash for the total of $5 million. So, parts being what it is, it's the largest consumer of cash. Therefore, the question mark, you're tying up a lot of cash sitting there. Without cash, a business doesn't run very well. One of the questions that I use in my training classes that probably pertains real close to this is that, can you imagine walking in one day and the boss comes up to you and says, we're running kind of short on cash. Can you bear with me and hold up until maybe a week or two and we'll be able to pay you? Most of our parts counter people and technicians and us also, we can't go that long without a paycheck. So, you would lose pretty much all your people if cash didn't show up and you didn't have the cash flow right. So, that effect on cash flow is great and it has a very detrimental effect on the dealership. We're going to move on to prevention and minimization. These are the key areas and it goes right along with why it comes in. I won't go through each one of these because we've done it before, but we'll get into each one now because of the time constraints. Vendor return policy. First question you need to ask is, does it exist or not? If it exists, what is it? What are the terms and conditions and requirements? You need to know that. If it's not, what are we going to do? How are we going to handle parts that need to come in if we can't get it returned, if we don't utilize it? Most vendors have a return policy. There are some out there that you buy it, you own it. So, you need to know the terms and conditions. What is the frequency of parts returns? Is it an annual return? Is it a monthly return? Is it a quarterly return? And each vendor will have something different. I know some vendors are annual. Some vendors are manufacturers or monthly. So, you need to know what that frequency is. Who is responsible? Ultimately, it is the parts manager's job to get that inventory out of there so it's not obsolete. However, one of the things that you need to think about is that as a parts manager, you can't do everything. Yes, you can keep up with, I need to get this return out and I need to do this, but you're going to have to have somebody help you go pull, make sure it's tagged, and do all the legwork for you because this is a very big job keeping up with this. So, one of the things that I suggest, if you have multiple people in your dealership that work in the parts department, which most dealerships do, push some of that picking, packing, and checking onto those people. And you do the paperwork side. You do the submitting for the return and getting it back and then have somebody else do it for you because you can't do everything. Now, we're going to move on to the future non-returnable side. The key thing is knowing how the vendors do that. How do they notify you that something is going to be future non-returnable? With some vendors, it may be a code in the price structure or the pricing tape that you get. It may be a 5-6 or whatever. In some vendors, they may send you, and I know some manufacturers send out an email that says, okay, these particular parts have been substituted or they are no longer returnable. This will happen in 30 days, it will happen in 60 days, whatever it is. But you need to know what their notification process is. And then you have to have a plan to manage that. And so how do you manage it? Once that comes in and it says it's future non-returnable, how are you going to make sure that that part gets pulled, sent back, so that it doesn't end up in a non-returnable situation? And so you've got to come up with that plan and then initiate and communicate that with the people involved in doing that. It's my belief, it's also been my practice in the past, that if it shows up that it's going to be future non-returnable, there's no ifs, ands, or buts. Pull it, make sure we've done all the right things as far as getting the requisition so that we can return it and get it out of our inventory as soon as possible so that we don't get stuck with it. Very, very important. This happens way too many times, and so you need to think about it. Now, one of the things that I've seen happen with several manufacturers is that they will come in and show you as a code that this is future non-returnable. And people say, well, I've got time because when the next pricing tape comes out, that's when it goes non-returnable. Well, it's one of those deals where we're out of sight, out of mind. We push it off, and we don't think about it, and it comes back to bite us. So make sure that before that next pricing tape, if that's the way that they notify you and that's the way they handle it, that you've taken care of that. We're going to move on to analysis of ordering and stocking parameters. First thing here, it talks about demand required to stock a part. As a parts manager, you have determined what that is. It's X turns in so many months. It might be two, it might be four. I've seen dealerships where it's eight. The thing about it, that is predicated on how many machines are out there, the particular industry that you're in, and what's happening in your area. Most of the construction dealers that I have dealt with, they're using somewhere between two to three turns per 12 months. Some also go out to four, depending on the type of equipment. So you need to set up that stocking requirement and make sure that it is in your dealer business management system. Then the other thing you need to do is look at the min and max that's in your dealer management system for ordering points. Where do you set that at? Is it at two for a minimum, or is it a max of three? Is it a max of eight? You don't know. That's something that you have to look at and look at from the standpoint of how long does it take you to get the part in? Are your stock orders a weekly stock order, daily stock order, monthly stock order? Or are these some program orders? Competitive-type parts a lot of times come in under a program or what some people call ship-direct-type programs, and you order quite a few of them so that you can get the extra discounts. So you need to set those mins and maxes. You need to also go back and look at those periodically, at least on a quarterly basis, to make sure that those are within the parameters that you've set. And then the last part of that, you're starting to probably hear about depth and breadth. Breadth is how expansive, how many part numbers that you have in your system, and that's driven much more by the demand required to stock than anything else. If it says that we're going to do two turns in 12 months, then anything that has two turns will set up and show that it needs to be ordered. One of the things that we've got a problem with is the depth, which is the quantity required for use. Also, there's something called safety stock. If you're on a monthly stock order, you would have to have more safety stock in your system than you would if you're on a daily or weekly stock order. In fact, if you're on a weekly stock order, you'd have more safety stock. This being, if it takes two bearings to fix whatever that problem is out there, whether it's through the shop, which is normally your biggest customer, or the other people out there, the other customers, then what you need to do is you need to go in there and say, it takes a minimum of two to fix whatever this repair is, so if I'm only daily stock order setting your max point at two and min point at two, it'll keep it in there. However, if you've got a weekly stock order and this seems to be an issue, then you may have to put that min at, you know, I want to stock four of these to make sure I've got four in stock all the time, or you could set it at two, max of four, and go in and make sure the system keeps running properly. If you've got a monthly stock order that you're working with, don't see many of those left, but there are a few out there, then that depth, that safety stock that you're using will be considerably higher. So the ordering parameters is very important because you don't want to be in a situation where you've got too much depth, which provides surplus, and so you're using up cash. That surplus will also turn to obsolescence if you don't watch it. Now, another one there is ordering non-returnable and non-stocking parts. I know some of you are going to say, well, why are we putting that in there? I would venture to guess that most of you have been in the same situation I have, in which you've got a customer or somebody out there that they need a part for an old piece of equipment, the manufacturer's got it, but it's now been slated as non-returnable. Or maybe it's a part that's a non-stocking part for you, it's just an off-the-wall piece, and they come in and order it. If they haven't paid for that thing up front, you probably still have it sitting back there in will call. I'm a great believer that if there's not any skin in the game, the customer's not going to come in and pick it up. So what I'm suggesting here is that you analyze your current process as to how you handle this situation. You need to develop a process that includes, number one, prepayment at the time of purchase. Some of you are going to say, yeah, but these customers, you know what, if you walk into a motorcycle dealership, an automotive dealership, or any other dealership out there, even the bus and truck industry, they're going to ask for prepayment up front. In that prepayment, they're also going to include freight. Now, the main reason is now these customers have skin in the game, and if they don't come pick it up, it's not going to cost you very much. So it's already been paid for. Now, if it's non-returnable to the vendor, then it's non-returnable back to the dealership. If it's returnable to the vendor, then the returnable to the dealership should be refunded, less any restocking charges in freight that is accumulated with that part. Some of you are going to say that, you know, I can't do that. You know, my customers or folks, it's just part of business, and you're going to have to get to that point to where you do that. You can't change this overnight, though. You're going to have to let them know in advance that, folks, you know, we can't afford to do this anymore, and we're going to, you know, on such and such date, we're going to make these changes, and it's just part of business. But I understand your heartache when it goes to changing a process or procedure that's been going on for years, and it's just that's the way we're kind of heading. The next one has to do with dealer business system reports. What I've done is given you a list of the following of some reports that you could run utilizing crystal reports, and I don't, you know, the bad part is that I don't know all the different systems that you have out there. The major systems have the capabilities of going in and doing a crystal. Usually it's a crystal report on the database that's sitting back there, and you can look at parts that are stocked with zero turns in X months, parts that are stocked with one turn in X months, and you can go on down the line. Myself, because I've worked more in the ag and the construction equipment industry, I always looked at zero turns in 24 months. However, I would actually go back and I would push myself into zero turns in 18. I did that with a codicil, though, because if the part that was showing up zero in 18 or one in 18 was for a new model that just came out that hadn't been out in the field that much, you know, it was part of a new model stock order, and I have to be careful not to get rid of that part until it's been some time elapsed out there. And so new model stock orders, the key to that is understanding what the manufacturer's parameters are for having a new model stock order and the return privileges. Some offer very good return privileges with it. Some don't offer any return privileges. So you need to keep up to speed as to what's going to happen there. The next area is I would like to know what parts are in the will call location. Now, these should show up in the two previous reports that we talked about, but if you've got a location for will call, which you should have, find out what's sitting there. Find out how much time it's sit there because you may surprise yourself. The other one is part substitutions. Some systems will allow you to be able to write a note in there and say this substitutes to this. Some systems will go in and say if you plug in this number, well, this is the new number that you're going to be using. You need to know what those are. Some of those part substitutions are just a number change. It's the same part, not a problem. Some of those part substitutions, as you well know, are situations, well, we're now using a different bearing. There were some issues with the old bearing. Now we're using a different one. So you need to look at that. And then the last report is parts with diminishing demand. What's going to happen, and we'll get into this in a little bit, about the demand of a part or the life cycle of a part. As a part goes on, what you're going to find is there comes a time when that part's going to start diminishing in demand. And if you look at that over a period of two to five years, and you can run that report in most systems, when you look at that, what you find is that you'll see where it peaks. And maybe there's a demand of 24, and that happens for, say, from year three to, say, year four or five. And then year six comes along, and it's down to, say, 20. Year seven comes along, and all of a sudden it's down at 10. Now it should show you, you know, it should be a light bulb come on and say, hey, look, we're going to start seeing some issues here. When do we pull the trigger? And this becomes a non-stocking part for the future to keep it out of the obsolescence. So one of the things that we can do, my biggest problem with dealer business systems is that most dealerships don't utilize them to their fullest potential. If it's kind of like a technician, you know, you've got technicians back there in the shop that have $30,000 to $50,000 snap-on boxes, if all they had in there was, say, baling wire, hay string, some duct tape, super glue, a big hammer, got to have that big hammer, a chisel, some screwdrivers, and some pliers. Oh, and don't forget the test light. Is that adequate for where we're at today? And some people or some of our dealer business systems, they're being utilized just like that. It has the capability of doing more, but we only know what to do with how to handle a little bit of it. So something to think about. If you don't know how to make that thing just really operate like it should, go back to the vendor and say, look, you know, we're paying you a maintenance fee. We need training. We need to upgrade the skill knowledge of our people here so that we can better utilize this so that we can make better management decisions. And in visiting with vendors, that's one of the issues that they see from people calling them all the time is that they really don't know what the capabilities of these dealer business systems are. Now, there are some dealer business systems that they have some issues and there's no way to get around it. All right, we're going to move on to changing whole good vendors and suppliers. First thing you need to do is, number one, the vendor that you're getting rid of, inquire and verify what the return policy is for anything that's going out. The new vendor that's coming in, you need to do the same thing. What's required for us to get in here? What do you require? What are your return policies? How do we handle all this? This is all kind of like, can you imagine, some of you have coached little league baseball or you've coached soccer or something like this if you have kids. And can you imagine playing the game and coaching the game if you didn't understand the rules of the game? Same thing here. You've got to understand the rules that you're playing by so that you can win. Not that you want to take advantage of the whole good supplier, but you've got to know what rules you're playing by. Determine if your dealership will still be servicing those machines in the area. Is somebody else going to pick up the contract or are you going to still be servicing those machines? It's something you need to think about. The reason that you want to start looking at this is the captive parts. Do we keep the captive parts or are we going to order those from somebody else? Competitive, that's not a problem because you can move the competitives. The captive stuff is stuff that you're not going to be able to. Concentrate on the high volume items. Reduce the inventory on the minimal volume items, the captive type stuff. One of the things you may do is if you've got a lot of those captive type parts sitting back there that probably won't sell, think about the customers that you have out there with those machines. Identify those parts and go to those customers and say, look, we're no longer handling this. Our service guys will still take care of it, but I just wanted to give you a chance. We can't return these items. If you would like to buy them at a discounted rate and move those out of your inventory, and then, yes, you're going to discount it, but if you can take that money that you get out of those discounted parts, put them back into the competitive parts and turn them like we talked about earlier, then you can definitely see a profit after going through that process. How about changing out the rental fleet? Similar to changing the vendors. You've got to go through the same process. You're going to have to identify what the future parts needs are of the old stuff because you may have sold some of those things, but what are the future parts needs of the new stuff that's coming in? Eliminate those where it's necessary to do that. Here's the life cycle of a part. When you look at the demand of a part from the age of the machinery and population of machinery, if you look at this graph from the starting of time when a machine comes into your area, there's not a whole lot of population, nor is there a lot of time on the machine, so the parts demand isn't there, but as you see the machine population grow, it's going to grow to a point in time that it's going to peak out and then it's going to start going back down. This is more or less kind of like a bell curve, and the greatest potential for parts and selling the part is within that middle one-third of that bell curve. Once it gets off to the right-hand side and back out past 10 years, you start seeing it decreasing because you start seeing machinery population change. This curve has changed a little bit, and I want you to think about this as to what's happening in this day and age. We're not seeing, or one of the things that I'm not seeing, is our customers aren't holding onto these machines 15 years or so like they used to. We're starting to see a life cycle of a piece of equipment shorten quite a bit. In fact, I think some of you might agree with all the electronics that are being used on this equipment nowadays that we're not seeing problems in the hard parts, the transmissions and the engines, so much as we're seeing problems on the electronic. Customers, after a while, become frustrated and leery of the electronic side, and so most of them, if they haven't gotten an extended contract for parts and labor, or maybe you call it a warranty contract or maybe it's an extended warranty, something like that, we're seeing a lot of people buy that. Once that runs out, a lot of times they're getting rid of those machines because they don't want to have to pay the extra costs to have these machines perform. That's kind of what we're seeing in the industry. Now, whether that stays that way or not, that's to be seen, but that's just one of the things, and so we're seeing a shortened life cycle for a lot of these parts. The last area we're going to look at is reduction of obsolete inventory. There's two different sections to this. There's the stuff that's returnables, and then there's the non-returnables. On the returnable side, the key there is utilize the vendor's return. There's three different things you can do. Utilize it. You may be able to ask for a special parts return. Some vendors will allow you to do that, some won't, and then leverage whole goods orders. Let me step forward too quick. When you request a special return, normally in order to get the manufacturer to do that, they're going to request that if we're going to let you return $50,000 worth of parts, then you need to order $50,000 or something of that sort. Some vendors will do that, some won't, so you need to know who will play ball with you, who won't. Now, if you've got a small whole goods vendor out there or supplier out there, maybe they supply attachments or whatever, and you've been trying to get returns done, here's something you can try. I'm not guaranteeing that it will work, but have you used this before? When it comes to the annual order writing time and you've got some parts that need to be returned, go to the sales department and say, hey, look, before you sign that order, can we meet with the whole goods rep and see what he can do to help us with this? It's amazing when you've got orders sitting there for $200,000, $300,000, $400,000 of whole goods and you need to return $5,000 to $10,000 worth of parts, how that whole goods rep can help you get that RMA number. So it's something you can try. I've had success with it with some small vendors and it works very well. The last area is the non-returnable parts. Here are some examples of what you could use to help yourself. First thing, you're going to have to identify it, and that's going to be using reports and analyzing your inventory to see what it is. Now, here's one process that I've used. One of the things that I'm going to ask you to do, understand, I am not a CPA and I am not an attorney that works with tax laws, so you get with your bookkeeper and your owner and see how this can work. Once you've identified it, then what you can do is isolate it. Now, I'm not saying go back there and pull it off the bin and put it in a different bin. What we're talking about is creating a digital warehouse, and all you're doing is taking those part numbers and moving them into a digital warehouse, say call it the X warehouse. Once you've done that, then my suggestion is you stop all updates as far as pricing to it. When you do that, by doing that, once your business people have looked at it, they can possibly write it down. Basically, it's like a depreciation over time. My caution is that once it gets to about $1, then hold it right there, because there are some implications dealing with some lawsuits out there that it has to have some value if you decide to resell it. What that's done for your inventory is it's lowered your inventory as far as what the obsolescence is. Once you've been able to do that and you've got it in the X warehouse, if you're a manufacturer or you belong to some of these other groups that have access to see what your inventory is to transfer something out, those numbers will still be there. It won't show your cost, what you've costed it down to, but it will show that you've got the number. If they need that part, then they can go in and call you and say, hey, look, you've got this XYZ part. Would you transfer it to me? Then you can negotiate from there as to what the price of the part would be with them. It's a great way to do that. The other thing that you need to do and can do is identify use. Some manufacturers have very good systems where you've got to set apart numbers there and those all go to, let's say, a 580K backhoe, or maybe they go to a John Deere 520. Anyway, what you can do is you can take those parts and say this is what it goes to. You've identified where it's used and you can kind of make a list and lump those kind of parts in that area. Some of those parts also can be crossed over maybe to be used in another manufacturer. If you know what the Fafner bearing number is on this piece of equipment and you know what the Fafner bearing is on another piece of equipment and they're the same number, you can switch that over as long as it's not something that has to be used in a warranty situation because you're using them like apples to apples. Once you've identified that use, do me a favor. It used to be one of those deals where people would take the parts, put them on a card table and say, hey, look, we're having a fire sale and here they are. That doesn't work. We found that by putting together a marketing plan, utilizing an aftermarket salesperson who's out there selling parts and service for the dealership, they can identify customers in the area that may have these pieces of equipment and go to them and say, look, let's say that you took $5,000 worth of parts and you've taken it down to it's now worth $500 in your inventory. And you take those parts and that person goes out to the customer and says, look, you don't want to tell them what your cost on them is, but retail right now on that particular group of parts is $8,500, let's say. I'll be glad to, you know, these are no longer stocking parts that we use. They're non-returnable. You'll probably need them in the future. One of the things that you can do is discount them to those customers and a lot of customers will take them. The other thing that you could also do is say, you know, if you'll buy these parts, we can make you a deal on the service side so that if you need them put on, we can sell them to you that way too. We can sell the service side, which will allow you to pick up some extra cash on the backside. Another way is to use the Internet. Some people have an Internet presence and have some way of going out and selling to people. They have a store on the Internet and you can list these parts and this is what goes to this and, you know, here's what my price is. And then there's some other apps that are out there that some people are using to do this also. So the key there is once you've isolated and identified it, isolated it, come up with the use of it, you've got to market it. You've got to get it out of there. They're not going to come clamoring at your door to get it, okay? The next way to do that is the use of a liquidator. I don't necessarily like that. There are several of them out there. I just mentioned a few of them, Parts Depot, Salvage Yard. There was another one I ran into this past week that was in the Northeast. The thing about it, normally they give you pennies on the pound for whatever your parts are. And so, you know, I've had parts managers tell me, yeah, but, you know, for six months I get a chance to pull out of their inventory and it's at a reduced price. The problem is after six months it's gone. They haven't given you anything for it and you have no way to recoup it. And so it's not a very good process, at least I have found it to be. So it's a way that's out there, something that you can do. Now, the last is the scrap. And a lot of people use this. You know, it's a slush fund. It's for the Christmas party fund or maybe, you know, whatever. The thing about it when it comes to non-returnable parts, and you know as well as I do, there are certain items that are going to be non-returnable. It may be paints. It may be some sort of a chemical. Rubber goods have a life expectancy. Gaskets have a life expectancy. If you're running into those items, you're just going to have to get rid of them because you can't sell them. It's going to cause problems for you later on. So you're going to have to take the hit on that. But metal parts, I mean, throw them in the scrap and go forward. Okay, that's the last part of the non-returnable. Things to remember. Number one, obsolescence cannot be eliminated but can be minimized. Minimization not only reduces the expense, it frees up cash, but also provides opportunity for increased sales and customer satisfaction. The problem is that in order to stay ahead of the game, you must be vigilant and disciplined in this process. It doesn't happen overnight, and you can't just flip a switch and it's going to happen for you. And then in summary, so what are you going to do now? Are you going to stay status quo where you're at, or are you going to make the changes that's needed? Here's my suggestion, and it's to be proactive. I call it radio, but bottom line is run the reports, analyze and process them. Analyze your reports and the processes that you've got. Devise a game plan, initiate it, and then overcome the obsolescence. That's it. I want to thank you for your participation. If you do have any questions, I didn't see any here. If it's okay with Bob and them, you can email me. My email address is lcole696 at embarkmail.com, and I will get back with you as quick as I can. I will send this out as a text or chat to you guys. Have a great day. Sorry for all the issues that we had, and look forward to meeting you in the future. Thank you. Thank you.

obsolescence

profitability

cash flow

customer satisfaction

preventative measures

vendor returns

digital warehouse

proactive planning