Part cores. They’re dirty. They can seem hard to track. But do not fear them. At the end of the day, cores are just like any other part: you buy them, sell them, they can go obsolete, and can vanish if you don’t carefully track them. If you want to move the needle on shop profitability, start tracking part cores.
What are part cores?
At the most basic level, a core is just a used part. And if a part continues to have value after its original application, vendors may charge you some sort of bounty to return it. This bounty is an incentive for you to return the core to them to be either recycled or reconditioned. This bounty or incentive is often called a “core charge” or “core deposit”. Batteries are a classic example of valuable cores being assessed a core charge. In fact, core charges on batteries are required by law in over 30 states.
However, just because a used part has value doesn’t mean the vendor will assess a core charge. Tire casings are a classic example of this. In the commercial tire world, tires can be retreaded many times. The “core” of a tire is referred to as a tire casing. But it’s really just a core. Even though vendors don’t typically assess a charge on tire casings, you should still be tracking these like any other core. That’s because tire casings have value after their original application.
Inherent cores vs Dirty cores
There are two types of part cores: inherent and dirty. When you first buy a part, there is a core “inherent” to that part. (“Inherent”, because it’s inseparable from the part itself.) That is the inherent core. The inherent core is sometimes referred to as the “clean core”. In contrast, the dirty core is the actual used part removed from the truck or equipment. A core charge is technically for the inherent core. But, as explained above, at the end of the day it’s really just an enticement to return the dirty core.
Being able to distinguish between inherent cores and dirty cores is critical if a commercial repair shop sells any parts with cores. Why? Because there are at least five points where you could lose track of part cores:
- Purchasing parts
- Receiving parts into inventory
- Selling parts
- Giving customers credit for part cores
- Returning dirty cores to the vendor
1. Purchasing parts
When purchasing parts, the vendor will charge you for the parts and for the inherent core. You should track each of these costs separately. If you lump the two charges together, you’ve already lost track of the core!
2. Receiving parts into inventory
When you receive parts into inventory, you need to track the part and the inherent core separately. That means separate line items on the inventory listing for the part and the inherent core. This is because their costs could change independently from time to time. For example, today a battery may be $150 with a $40 core charge. But tomorrow it could be $165 with a $50 core. If you don’t separate the two, you won’t have a good idea of what to charge the customer for the inherent core.
3. Selling parts
When you sell a part with a core, there should actually be three lines on the invoice:
- A charge for the part itself
- A charge for the inherent core, and
- A credit for the dirty core
If the customer returns the dirty core immediately, it makes sense to give them credit for it right on the invoice. If the core is returnable but in poor condition, you would reduce the credit amount accordingly. And if they don’t give you the dirty core immediately, you would remove the credit completely.
Why three separate lines? You need to still track the fact that you sold the inherent core along with the part. And you also need to track that you took a dirty core into your possession (more on that in #s 4 and 5 below).
Let’s say you sell a battery for $200, with a core charge of $50. You would show the following on the invoice:
- Battery: $200
- Core charge: $50
- Core credit: -$50
The net amount charged to the customer, if they immediately return the dirty core in good condition, is still only $200. This is because the core charge and the core credit offset each other.
Now let’s say the customer gives you the dirty core, but it’s in poor condition. You assess it to be worth half what a core in good condition would be, so you reduce the core credit to $25. The invoice would look like this:
- Battery: $200
- Core charge: $50
- Core credit: -$25
The net amount charged to the customer would be $225.
Finally, if the customer didn’t return the dirty core immediately, the invoice would look like this:
- Battery: $200
- Core charge: $50
You would charge the customer $250 because there is no credit at all for the dirty core. If they return the dirty core you can give them a separate credit or refund at that time.
4. Giving customers credit for part cores
As soon as you remove a dirty core from a truck, you should inspect and, if possible, assign it a value. This value determines how much credit you give to your customer against the inherent core charge. If the core is not in returnable condition, or if the vendor will only give you partial credit, it’s important to deduct that amount from the dirty core credit before you invoice the customer for the repair.
If you aren’t sure what value the vendor will give for the dirty core, remove any credit for the dirty core completely when invoicing the customer. Once you get word from the vendor what value they gave for the dirty core, you can then issue the customer an appropriate credit or refund.
Regardless, when you take the dirty core from the customer and place it on the shelf in your parts room, you should enter it on your inventory listing. The dollar amount you gave the customer in the form of a core credit becomes the value of the dirty core in your inventory. If you don’t do this, you’ve lost track of the core.
5. Returning dirty cores to the vendor
If you give a customer credit for returning a dirty core, you should track and protect that dirty core until you return it to the vendor. The parts manager should be able to run a report at any time showing the total quantity and value of dirty cores “in stock”. And when doing inventory counts, a shop should count cores like any other part.
Dirty cores are ugly, messy, and a hassle to deal with. They’re not in neat, clean boxes and don’t look great on shelves. It’s easy to give into the temptation to squirrel them away somewhere out of sight. Don’t do this. Cores need their own visible, secured area in the shop. This is often in the parts room, where the parts manager can count and control them. In the parts room they enjoy the same physical protections against theft as the rest of the parts. They should never be “out of sight, out of mind”.
The A word
At the end of the day, someone needs to be accountable for tracking part cores. Parts managers make the most sense, because they handle all five points listed above. Technicians are also accountable for dirty cores they remove from customer equipment. You should tie a dirty core to the specific technician that removed it. And owners need to understand the amount of money they have sitting in cores, so they hold parts managers accountable for them and provide the resources needed to track and protect them.