Auto recyclers are a key part of two circular economies: 1) the parts reuse circular economy and 2) the material recycling circular economy. With the increasing use of rare earth metals in electric vehicles and their batteries, the material recycling circular economy is getting a lot of attention in North America; however, the parts reuse circular economy is a much more efficient circular economy and is the key driver of auto recyclers’ business models in Canada and the U.S. This article focuses on the parts reuse circular economy supply chain with an assessment of its performance compared to other supply chains in the collision repair industry.
Insurance companies play a key role in the parts reuse circular economy because the highest quality recycled parts originate from premature End-of-Life Vehicles (ELVs) owned by insurance companies. I will call these premature ELVs prime ELVs since they are the source of our prime parts. Insurance companies also buy many of the prime parts that come from these prime ELVs that they sell to us, so they are both a major supplier and a major buyer. Auto recyclers perform de-polluting and marketplace optimization services and are able to sell mechanical parts (such as engines and transmissions) to other marketplaces, which contributes to the overall recycled parts circular economy optimization.
Over the past several years, I have written articles describing the key factors required for an optimal parts reuse circular economy, and the auto recycling industry has been consistently improving our performance in those areas. Such factors include having:
• A robust interchange-based marketplace
• The ability for the marketplace to show buyers true part availability using real time delivery information, based on where parts are in the dismantling process
• Using marketplace demand data to optimize salvage vehicle purchasing and parts inventorying processes
There are millions of different part types and applications that fit the current vehicles in operation. It does not make financial sense to dismantle many parts on ELVs, so robust interchange-based marketplace demand data is critical to optimizing inventory availability. Using marketplace demand data to write enhanced Car-Part Interchange Plus (CPI+) has greatly increased both the efficiency and the size of the reuse circular economy. In four short years since enhancing CPI+, the CPI+ marketplace on Car-Part.com has increased six-fold (from less than $90 million per year to more than $400 million per year).
When compared to international OEM and aftermarket supply chains, the auto recycling supply chain is much more localized, with parts moving robustly within the North American marketplace (primarily Canada and the U.S.) The auto recycling industry has been optimizing our North American supply chains for many years, with a combination of technology and transportation services. Since the COVID-19 pandemic, there have been a steady stream of supply chain interruptions around the globe, including auto parts supply chain disruptions.
The Integrated Car Part Pro (iPro) marketplace integrates with the three primary estimating systems in North America (Mitchell Cloud Estimating [MCE], Audatex, and CCC One). The MCE integration is far superior, with its two-way part bridge that lets iPro replace parts on the estimate while keeping the correct labor times. The chart that accompanies this article shows the estimate difference between iPro parts and the parts on the estimate before using iPro.
The chart above shows the estimate difference before, during, and after the pandemic. There is a larger estimate difference today than there was pre-pandemic. If you assume part price is a reflection of marketplace activity, it shows the recycler parts supply chain is more robust and has held up better during the pandemic than other parts marketplaces in the estimating system (primarily OEM and aftermarket supply chains).
If you have questions about the parts reuse circular economy or would like more information, please visit http://products.car-part.com, email TimS@Car-Part.com or call 859-344-1925.