Construction Equipment Used Parts
Construction Equipment Used Parts
Guest writer Alex Weaver writes this blog post tonight on the topic of Construction Equipment Used Parts.
Construction Equipment Used Parts is similar, in some ways, to the automobile or on-highway truck salvage business. A core is purchased for salvage, disassembled, parts are evaluated for inventory, and some parts and components are repaired or rebuilt and sold. The business was created out of a need or demand for additional price points in the construction equipment replacement parts business.
A successful Used Parts business contributes to overall company goals. Assume, a company has the following high-level goals: Financial Performance, Market Share, Customer Satisfaction, Employee Satisfaction. Used Parts impacts these goals in the following order. Customer Satisfaction first, Financial Performance second and Market Share third.
Used Parts increases Customer Satisfaction by providing additional price points, and in some cases parts availability. Today, parts availability is not as certain as years past. In fact, some very large consumers of parts have created their own internal used parts operation to support parts availability needs. To insure they have the parts they need when they need them. Customer Satisfaction or loyalty positively impacts market share. Used Parts can impact financial performance by adding a revenue and profit stream for the seller. Used Parts can increase customer loyalty. Used Parts, also, contributes to harvesting a greater share of a customer’s wallet.
History
The Construction Equipment Used Parts business got its start in the late 1940’s and early 1950’s. Enterprising entrepreneurs purchased U. S. government surplus war material from World War II Primarily half–tracks. An armored truck, mated with a rugged bogie and track suspension system in the rear, allowed foot soldiers to quickly move with modern, mechanized attack forces. In civilian life, many found homes in large farms and ranches as a way to deliver feed and hay bales to herds scattered across many acres. Some 12,499 M3 half-tracks were built by White, Autocar, and Diamond T during World War II. The track bogie’s required replacement parts and cannibalizing other units became the best, easiest source. The companies that started here, gravitated toward other track type units. And, thus, an industry was born.
As the construction equipment product lines expanded, so did the demand for used parts and components. Product improvements obsoleted older technologies. From Mechanical systems to oil lubrication, hydraulics, electrical, and electronic. Dry clutch to oil clutch, Gasoline Starting Engine to Direct Electric start, Manual transmission to PowerShift, Cable lift system for dozer to hydraulic. Operator Environment – from no operator protection to Air Conditioned, Enclosed Roll Over Protection. Every step of the way, used parts provided opportunity. And, that opportunity continues today.
Growth & Change – Scope and Scale
The transition from Half-Tracks continues. The number of construction equipment manufacturers has increased. The numbers of product lines and models has increased.
Heavier, bigger machine products as well as compact construction equipment. Many smaller models, and as a result many more customers. The construction equipment market now includes global manufacturers and distribution.
Some products are now obsolete or out of production. But the original products/machines are still operating. Elevating Tractor – Scrapers, like Caterpillar, 613/615. The used parts business helps keep these machines running.
It all adds up to used parts opportunity.
Operations
Used Parts can take a lot of real estate. Or not. Some combination of Core (a machine to tear down) storage, warehouse storage and physical space dedicated to core disassembly and parts inspection. Plus, space for counter sales. Some customers want to “kick the tires” or look at what they are purchasing before they purchase. Which means public access to the used parts operations.
In today’s world, there are environmental considerations. How do you wash/clean a core before dis-assembly? How do you capture the waste fluids from a core?
Environmental Impact
In 1976, Congress passed the Resource Conservation and Recovery Act to increase recycling and conservation efforts as waste became a bigger problem. It is estimated that the slogan “reduce, reuse, recycle” was born at this time. The used parts business is a positive contributor to environmental opportunity. Used Parts maximizes the use of original material. Reduce/Reuse/Recycle and now Repurpose are all in the used parts “wheelhouse”.
Accounting
Many used parts operations, assign or breakdown the purchase cost of a parts machine, to some larger, higher demand parts or components and value the “by-products “at estimated scrap value. Slower moving inventory is not overvalued. In some cases, the cash accounting model is more suited to the used parts business than the accrual method. Your accountant will have the answer as it applies. Proactive, managed scraping of unneeded material is an ongoing process.
Products
- Work Tools / Attachments
- Drive Train Components
- Hydraulic Components
- Cabs / Canopies
- Sheet Metal
- Structural Parts – main frames / track frames / booms / sticks
Condition
Used Parts products can be in prepared and sold in various conditions
- “As-Is” – removed during salvage process. Take off with no condition offered
- Removed – Cleaned
- Removed – Cleaned – Inspected – includes condition estimate
- Removed – Repaired – base product used as core to make some repairs
- Removed – Rebuilt – base product used as core to rebuild to published standard condition
- Removed – Remanufactured – base product used as core for complete rebuild
Future
Our industry has grown and prospered by providing customer solutions. Used Parts, starting with Half – Tracks, has provided, and will continue to provide customer solutions. The details, models, applications, horsepower, reach, lift, capacity, may change, but the demand and the supply our industry provides will continue. Used Parts has been a part of every product/market change.