Posted by: Matthew Molinari | May 27, 2012

American Pickers or American Supply Chainers?

Over the last year, I’ve become a pretty dedicated viewer of American Pickers on the History channel. It seems a bit odd since almost every episode is identical: drive around, find a location, search for junk, try to buy it. However, just this morning something clicked – it’s the perfect example of supply chain management.

The way that Mike and Frank do business demonstrates several key components of supply chain management and logistics but I don’t think they are even aware of it. They always introduce of themselves in the same manner – “We’re pickers from Iowa”  – but maybe they should start introducing themselves as supply chain managers from Iowa.

Here are two of the more interesting ways in which Mike and Frank operate using the theories of the supply chain:

Location – Every person that Mike and Frank deal with could certainly sell these goods themselves directly to the consumer but why they choose not to brings to light the concept of location. First off, Antique Archaeology, the store that Mike and Frank use to resell the goods offers the items to a wider range of customers. Second, Mike and Frank know how to find collectors where the average person they visit has no real connections to resell the goods. The pickers also have an orgnized warehouse with the goods whereas when they find it, it is in a dusty box in a building that is about to fall over. Most customers wouldn’t be interested in buying the item under those conditions.

Much like Heinz Ketchup doesn’t sell directly to the consumer these people aren’t interested in taking  on the responsibility of selling. So much of operations comes down to what you think you can do best and whether the extra effort of selling to consumers rather than to retailers is worth it. For the people on the show, the time and effort of marketing to individual sellers isn’t worth it.

That is why they are willing to sell an item for $200 that Frank and Mike openly admit they can resell for $600. The convenience of having someone come to your location and take the goods is worth taking less than you could get on the open market. Supply chain management is about knowing where to find the items you need, and others will want, at the right price.

Demand – The most impressive thing that I notice about how Frank and Mike operate is that they must determine the current demand for items on the fly and in an instant. As they negotiate for items, they very rarely are able to contact an expert for what an item is worth. They operate mainly on the low margin end of the spectrum by buying lots of items and making a little bit on each one. Typically, the only purchases that they make a lot of money on are classic cars or motorcycles.

Many times, it seems like they are operating using at least a 50% margin but when you consider the travel costs and storage costs of holding the items, they probably end up only making about 3%-4% on most items. Their motto actually is quite a bit like Amazon who looks to sell anything they can make a buck on. Amazon started out as an online bookstore but quickly realized that they could expand to selling everything and anything as long as there was some profit to be made.

Frank and Mike operate in a very similar model with specific focuses (motorcycles, oil cans, bicycles) but they will buy anything that isn’t nailed down and they see some margin on. In order to do this, they must be aware of what they can sell the item for because if they buy too many rusty cans that don’t sell, they won’t be able to pick for very long. The common phrase used on the show is “there’s no meat left on the bone for me at that price” and they are very careful to purchase items they know they can turn quickly and for a profit. The supply chain is all about forecasting supply and demand and operating at a sustained profit within those parameters.

I think if you look at your business you’ll notice many similarities between how Mike and Frank operate and your own supply chain management. So how does your business operate like a picker?

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