What’s Your Goal, and Is It Enough? - Aftermarket
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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What’s Your Goal, and Is It Enough?

By Ron Slee

Article Date: 01-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.

There's a lot of catching up to do in parts and service, and the growth you may think is adequate may only be enough to keep you in the game.

Now that we are in a new year, and many of you operate on a calendar year, I thought we could spend a moment or two looking at our ability to set targets. When Jeffrey Immelt became the chief executive of General Electric he set a new growth target: "We believe that GE can grow two to three times faster than the world gross domestic product." How do you set your targets for growth?

Mr. Immelt is saying that his company will grow at a rate of 8 percent or more each year for the foreseeable future. Should our parts sales grow by more than 15 percent per year? Should our service sales grow by more than 15 percent per year? Of course, I am excluding any price inflation in those growth numbers. The growth should be in real terms after any price adjustments.

How many of you have sales targets in parts or service greater than 15 percent in 2008? How many of you are below 15 percent? Well let's look at this from some other perspectives.

We have seen equipment unit sales growth over the past 10 to 20 years that has doubled the working machine population. We have seen a broadening of the machine types that we have available in the market from mini-excavators and all manner of loaders, tractors, excavators, trucks, loader backhoes, and on and on. We have seen the skills of the contractors increase dramatically - they have evolved in many more sophisticated ways than just the tools they use to
dig holes and move earth. In many cases they run their businesses better than we equipment dealers do. We have seen an unprecedented increase in commodity prices over the past three to four years and we continue to see a scarcity of skilled personnel.

All of this leads me to the place of my concern. How are we going to hold onto our position in the market if all we are after is a 15 percent increase in parts and service business?

I believe that just holding our own market position requires us to grow at a real rate of greater than 15 percent. The new Parts and Service Opportunities Handbook shows that we are losing ground in the period of 2002 to 2007 in service. More customers are going to other suppliers than the OEM dealer now than a mere five years ago. It is now almost 50 percent who go to someone other than an OEM dealer for service. That is a defection rate of 15 percent per year. And one
very important fact that most people overlook is that when we, as OEM dealers, get the labor we also get the parts business. When we lose the labor business, our parts business is vulnerable. Many of the manufacturers are paying much more attention to helping dealers become better at managing the service business for this very reason.

The parts business is equally at risk. The parts business, in my mind, is split into several sectors: wear parts, maintenance parts, consumables, accessories, component repair parts and general repair parts. But many of you have become part number operating businesses where, when you get a phone call or a walk-in customer, you help them find the part numbers and then process an order. It has become quite a normal part of our business. And what makes me even more nervous about us is that everyone thinks they can run that sort of a business. Well, that puts you in the part number business not the parts business and that is not a good thing.

We are in a new year - 2008, as every year before it, gives me hope that this will be the year during which we will get serious about parts and service. Many of you have heard me describe the need to change our parts and service business as being like a mule braying in a tin barn, making a lot of noise but getting little action. How about this year we make a difference?

Here is a short list of New Year's Resolutions I would like to suggest to all of us in the parts and service businesses:

  • Let's sell more
  • Let's be more professional
  • Let's attract more and better people to our ranks
  • Let's be more customer-focused
  • Let's be more empathetic
  • Let's satisfy more customers
  • Let's make more money
  • Let's start regaining our market
I am hopeful - are you? I am counting on it. It has to happen one of these days, and it should be now. In athletics, it is always too early to start losing and never too early to start winning. Let's make 2008 a winner for all of us.

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