TEARDOWN & CONSIGNMENT Project Contribution
The Secret Sauce
Probably the most exciting development in teardown and consignment. Consignments are infamous for the lack of proactive thought after 9 months with Tier 1 and most of Tier 2 material sold. Despite the ability of lower Tier material to provide the cream the low sale probability discourages the expenditure of time and thought on how to get more.
Through the two-pronged processing of Tier levels exciting packages can be created through looking at the required modelled contribution by PN to the project. These contributions are fundamental to the original model values, especially the upside – and thus allow the right cat to get the cream. So how do we get there and how do we use it?
First Step; PN Model Pricing
Modelling for Dummies; The Tier level is driven by demand, so; quantity sold, price as a % of CLP, time to sale, quote activity, and stock level. Where available market price is used for price modelling, if no market price for a PN is available a % of CLP, Tier dependent, is utilised. In SellUe’s two way model the higher of both, if both are available, is used for modelling. PN ABC123, Tier 3 PN, the expectation could be that the market price would be 25% CLP SV Condition, CLP $40k, Model $10k.
Second Step; PN Model Probability
Modelling for Smarties; Utilising the Tier level probability of sale is then applied, essentially coming down to the probability of sale per PN. This differs by Tier level and reflects the markets need for a part within consignment timeframe, generally driven by yield rate although can be impacted by repair turn times, pool requirements, and repair cost. PN ABC123 has a shipped set of 10 parts, it being a Tier 3 part could reasonably have a sale probability of 35%, so 3.5 parts of 10.
Third Step; Integrating PN Model Price & PN Model Probability
Modelling for Mavens; Bringing these two contexts together allows not just for a solid initial model, it is the fundamental platform for dynamic pricing and, properly set up, gives an ongoing end of project forecast.
PN ABC123, Tier 3: PN Model Price; 25% CLP = $10k, PN Model Probability of Sale 35% = $3,500. PN Project Modelled Contribution per Shipset of 10 = $35,000. This allows you to move away from market price and focus on project returns.
The Cut & Thrust of The Right Price
Why is it so impactful? Using the example let’s look at a couple of the alternatives and how this PN could be reasonably expected to be managed and then let’s take an example of project contribution utilisation.
Traditional Lower Tier Packaging: Good PN modelling allows for a starting point, but where do you go from there? PN ABC123 with the modelled market value at $10k each, $100k for the ship set. There are 5 requested in the package so $50k with a package (multiple PNs) volume discount of 20% bringing it to $40k for the 5. Once calculated package needs to be validated and approved. Time becomes the enemy and probability of sale reduces – so price and time dictate probability.
End of Consignment Fire Sale Packaging: Expectations reduce at this point; the driver is closing out the consignment. There will at this point be an understanding of what the consignment needs to meet its initial model value, however that may be where the model validation stops as a fire sale can be a race to the bottom. There will not be an understanding of how to break up the package if you have more than one buyer and the ability to validate the pricing approach more unlikely.
Project Contribution Lower Tier Packaging: Predictably the better value achievable is in consignment rather than fire sale. With the Market Price and Probability combined you have all you need at your fingertips – the dynamic pricing gives you a min./max. pricing in both AR and SV condition. Using the ABC123 package of 5 parts as used above the 5 parts could be sold for as little as $17.5k and the project retain its ability to achieve modelled projection. No validation/approval needed.
What else do you need?
More to Come
Dynamic pricing, deep dive modelling, and project contribution articles done. Next week about Multi-Option Whole Asset Modelling, then the benefits experienced through all of the above.
The Bottom Line
Nothing here changes the mission: squeeze enough extra value out of a retiring asset so that choosing SellUe/OPTIC is the obvious call — more money for you, more business for us. The only question is whether you believe we can deliver.
You decide if our next level is enough.
SellUe is a Teardown & Consignment (T&C) Project Management company with a dedicated T&C digital platform called OPTIC. If you would like more information, please visit www.sellue.com.