Salvage Yards Aim to Replace Rusty Processes With New Technology

As a member of a family that’s been in the automotive salvage business for four generations and almost 100 years, APFusion Founder and CEO Alex Smith has seen firsthand how things are done in the industry.

There’s opportunity for technological advancements in all aspects of their operations, from ordering aftermarket parts to handling data entry in the antiquated systems they use to making payments, Smith told PYMNTS.

“There’s just a lot of inefficiency and waste that exists in the salvage industry, and I believe that can all be solved through technology,” Smith said.

Providing Additional Software Tools

APFusion offers a business-to-business (B2B) marketplace that connects providers of new aftermarket parts with salvage yards, giving the salvage yards easy access to new parts they can sell alongside the used ones they already offer.

In July, the company announced that it had raised $6.5 million in seed financing to continue modernizing the auto salvage industry. Beyond the marketplace, APFusion is working to expand its platform to include software tools to help salvage yards become more efficient throughout their daily operations.

Related: Supply Chain Woes Prove a Boon for Cargo Salvage Companies

“I think with a lot of SaaS companies, it’s really important to build a moat around your primary product to reduce churn,” Smith said. “That’s why we’re so focused on delivering a world-class product and providing all of these additional software tools around them.

“The way to reduce churn is by adding so much value that the salvage yards say, ‘We’re getting so much more in return for what we’re paying.’”

Helping Subscribers Increase Conversion Rates

Smith said presently, the marketplace’s streamlined, online access to new parts offers two things to salvage yards that also sell used parts: It gives them additional inventory to sell, in case they don’t have a used part the customer is looking for, and it increases their conversion rates by enabling them to offer the customer a choice of new or used.

“Providing a customer with additional options has been proven to increase conversion rates,” Smith said.

Because the new parts will ship from the vendor that’s stocking them, the salvage yard doesn’t have to invest in inventory, stock it at their facility or even touch it.

Online access to these parts also enables them to see the parts’ real-time quantity and price. Traditionally, Smith said, salvage yards have not had access to vendors’ real-time inventory — even if there was a web portal — and had to email or call a sales representative.

See also: Expanded Truck Part Search Tool Reduces Downtime, Keeps Customers in the Loop

Accelerating Transition to Modern-Day Payments

With its new funding, and within the next few quarters, APFusion plans to build out a centralized payment model. The aim is to consolidate all the statements going between vendors and salvage yards into one statement for each yard with their choice of ACH, credit card, net 30 or other options. The company is now in conversations with some payment providers to make this happen.

“If we can have vendors come in and essentially assist our suppliers in easing that pain point for them, that’s a huge advantage because it allows the yards to transact in their time and allows the suppliers to not be constrained to continue to grow with lack of cash,” Smith said.

Currently, salvage yards that order parts on the platform create purchase orders within their existing yard management system. APFusion then sends those to the suppliers on the platform, and the buyers and sellers handle the payments outside the platform.

As APFusion is a Software-as-a-Service offering, salvage yards pay a monthly subscription fee to access its marketplace. Although checks are commonly used by salvage yards throughout their operations, APFusion doesn’t accept checks. Instead, it uses an automated billing system to charge their credit cards.

“They’re open to it, it’s starting to become more commonplace, but I think with the APFusion centralized billing module, we will be able to accelerate that transition from check to, say, more modern-day payments,” Smith said.

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