Strategic Policy Changes - 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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Strategic Policy Changes


Article Date: 07-03-2006
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.

65% of CEOs will make major changes to their strategic plans in the next 5 years.

Continuous improvement is something we are 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 the kind of trouble many "continuously improved" companies are in today. I don't believe there is an industry or line of 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 an on-going process that management has to participate in on a regular basis.

In fact, a recent survey of CEOs indicates about 65 percent of them feel major changes in their strategic plans will be required within the next five years.

Business schools and consultants are doing a great job of bringing this to our attention and devising ways to make planning more focused and results-oriented. Numerous examples to support this are represented by use of the Balanced Scorecard, KPI's (key performance indicators), benchmarking and system improvements. In addition, Lean Distribution needs to be added to the mix.

After comparing today's business environment to 10 years ago or even 20 years ago, it's no secret that the life cycle of a business or industry evolves at a much faster pace today. Be out of touch for three to five 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
  • Information
  • Capital
are the keys to properly managing and growing your dealership. Without this "management mix," dealing with upcoming industry trends will be tough to navigate. This is what it now takes to plan, implement, budget, manage and reap the rewards of your efforts.

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

Further digging reveals - in most cases - that 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 rewarded when goals are met.

This demonstrates both the management effort required and the level of funding needed. Systems are not cheap, and to maximize the full benefits of the system, you need to spend and spend and spend on training to make it work at the level you expect it to.

And since people are hard to find, hard to please and hard to keep, management needs to understand all the training in the world only works if your people stay with the company.

For example, technicians are one of your most important assets and management has to change how they find and keep qualified technicians. Today you have to pay and nurture employees to keep them.

This while this may be hard to swallow, your after-market staff may be more important than your sales staff. With the potential trends effecting the industry, dealers may have to earn the bulk of their profits with parts, service and rental. The new business model may have a gross profit mix of 30/70, sales to after-sale support.

Dealers still bring value to the table, but it may take a different form. (The 2006 AED/QUALCOMM Executive Forum:"Lean Distribution" would be a great place to generate some strategic thinking.)

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Article Categories:  Financial