The Dealer Lives - 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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The Dealer Lives


Article Date: 10-02-2006
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.

Dealers who adopt a Lean program are sure to be more resilient and less susceptible to market swings.

I've just returned from the AED/QUALCOMM Executive Forum, am in the middle of finalizing the program for September's CFO Conference, and am working on AED's new dashboard product. As a result, I have so much on my mind, I'm having a tough time deciding what to discuss this month. After thinking about it, I've decided that what all my activities this week are telling me is that - the dealer lives and most construction equipment is going to move through a dealer network.

Although I think dealers will continue to be part of the equipment distribution process, there may be changes in what they do and how they do it that may determine how well they do financially.

After listening to "Lean Distribution" at the Forum for two days, I'm fairly confident Lean will be a requirement for dealers. Pro-active dealers will continue to improve their processes, reduce costs, become more efficient, communicate better with their customers, and provide a service experience that will drive sales.

Forum speakers demonstrated that implementing a continuous improvement environment at equipment dealerships is doable. The program contained examples of Lean applied to service companies, construction companies and manufacturers. And there is no way to justify the "our business is different" claim dealers often make.

Examples conveyed some major improvements, including transaction cycles being reduced 30 percent to 70 percent. Think what you could do with a 30 percent reduction is cycle times and what it would add to your bottom line.

For example, GE Capital reduced their loan processing time from about 90 days to 14 days, and the goal is to cut that in half. A maintenance inspection and oil change on a crane looks like it could be done in half the time with some prior planning and changes in procedures.

When polled at the Forum, more than 50 percent of manufacturers present indicated they are spending money on Lean. Don't underestimate the importance manufacturers are gong to place on Lean at your company. They're spending money, lots of it, to make it work and they realize that to make it work properly, it has to involve dealers.

Why are dealers key to the process? Because the service experience will drive sales and market share for the manufacturer. It's completely possible that as equipment becomes more of a commodity, the dealer with the highest satisfaction index will command the market no
matter what they're selling. If so, can see why manufacturers are going to insist their dealers be that dealer.

Proactive dealers who adopt a Lean program are sure to be more resilient and less susceptible to market swings. Their balance sheets, profit margins and cash flow will be stronger. The "lack of capital" issue will not apply to these dealers, and I bet there will be buyers lined up at the door if they decide to sell.

So what if you stick to the status quo? Chances are your vendors will not be pleased with you. Your cycle times will be longer than your competitors. Your pricing for service may be higher because your service department is less efficient. You may not get in on as many deals because you're not managing your sales department. And, if customers have a choice, they may find it easier, faster and cheaper to do business with a competitor.

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Article Categories:  Financial