Continuous Improvement - On The Numbers
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
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SECTION: On The Numbers

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Continuous Improvement


Article Date: 04-03-2006
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.

Will you be prepared to make more profits with fewer sales?

Continuous improvement is something we're all taught to strive for. And at times, even if the continuous improvement process is active and working, it's not enough. Just read any issue of Forbes to see what kind of trouble many "continuously improved" companies are in today. I don't believe there's an industry or business that is not affected. No matter what business you're in, staying in business and growing profits through strategic planning and implementation of new policies and processes is something management has to consider on a daily basis.

The business schools and consultants are all doing a great job of bringing this need to our attention, while devising ways to make your planning more focused and results-oriented. If you had the opportunity to attend AED's annual convention last January, there were numerous examples to support this.

Use of the Balanced Scorecard, KPI's (key performance indicators), benchmarking and system improvements were just some of the items discussed at the convention. In addition, the key topic at AED's Executive Forum September 7-8 will be Lean Distribution. In between, AED will present two CFO conferences, one in April and one in September, where lean distribution and KPI's will fill the bulk of the agenda.

After comparing today's business environment to 10 or even 20 years ago, it's no secret that businesses and industries cycle at a much faster pace. Be out of touch for 3-5 years in today's environment, and it may be impossible to recover. In other words, your cushion 10 years ago was a lot longer than it is today.

Many years of involvement with equipment industries coupled with personal experiences lead me to conclude that

  • Trainable people
  • Education
  • Systems
  • Capital

are the keys to properly managing and growing an equipment dealership. It takes all the requirements listed above along with money to make it work right. Without this "management mix," dealing with industry trends will be tough. That's what it takes to plan, implement, budget, manage and reap the rewards of your efforts.

When visiting clients today, it's not unusual to hear: "Revenues are down but profits are up." And when I inquire how they did that, the answer is: "We knew we had to do more with less, and we challenged management to make it happen and they did."

Further digging reveals that in most cases systems were upgraded, services were outsourced, headcount was reduced, more attention was devoted to profitable business segments, training was upgraded and people were held accountable for performance and in turn rewarded when goals were met.

This example demonstrates both the management effort and the funding requirements.

Systems are not cheap and without adequate, constant training all available benefits do not get transferred into the procedures of the business. People are hard to find, hard to please and hard to keep. The way we looked at the HR function in the past no longer applies. Employees, especially technicians, are your most important assets and management has to change how they find and keep qualified people.

Today you have to pay and nurture employees to be able to keep them. This may be hard to swallow, but the value of your aftermarket staff may be higher than your sales staff. With the potential trends effecting the industry, dealers may have to earn the bulk of profits with parts, service and rental. The new business model may have a sales mix of 70/30, with aftermarket representing 70 percent.

This business is changing rapidly. Dealers still bring value to the table, but it may take a different form in the future.

Will you be prepared to make more profits with fewer sales? Do you know what you have to do to get there? If you don't, keep reading those business magazines and try to attend an AED function (send your managers too) for insight into dealing with these issues.

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Article Categories:  Financial