The Shifting Sands of TimeBy Ron Slee
Article Date: 10-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
Isn't it about time we looked after capital equipment properly?
The old Chinese adage “may you live in interesting times” certainly applies to us today. We are coming up on a presidential election in which we have a historic choice to make; there is a shift in economic activity on the planet with much reduced activity in Europe and Japan and much increased activity across Russia and China, India, Brazil, Eastern Europe and Southeast Asia; there are continuing rapid advances in technology and increasing productivity here in America. All of these represent “interesting times.”We are seeing unprecedented demand for construction equipment worldwide. For some markets and some machine models orders are in hand for production well into the year 2010. This has put strains on many different supply lines. Components, tires, and many other parts are very difficult to find. Last month I spoke about pricing and the coming rapid increase in prices that we will be incurring as a result of the extremely strong growth in the price of commodities over the past several years. To some degree we are lucky that the construction equipment market in North America has slowed down. If it were still hot we would not be able to get product. I know many of you would prefer that problem, however, compared to that which you are going through at the moment.But as you know, I am a glass half-full guy. I tend to want to look for opportunities. Don’t forget we make money by exploiting opportunities not by solving problems. And as usual I see endless opportunities in the market in which we are now working. One of the most important opportunities that I see is the one presented by maintenance. In North America we have had a habit of focusing on selling new things, buying new things, constantly looking for new solutions to old problems with technology, with computer systems. Sometimes this gets to the point of fads like the iPhone or the iPod (remember the old brick mobile phone?) It is not that sexy to maintain things or to keep things that are old. But it makes money and it makes sense.I believe we can extend the life of equipment that is in use today by at least five years with proper maintenance. I also believe that this would be a wonderful opportunity as an entry point for the technicians of the future. You know the ones. The ones we can’t find today. And no I do not think this would jeopardize our equipment sales market any more than the market changes we are going through now.Rebuilding Loyalty Through Service
One of the many things that have troubled me over the years is the rate of customer defection. The defection of customers from the service department as shown in the Product Support Opportunities Handbook from 2002 and 2007 as you know by now has increased from 44 percent to 48 percent over a five-year period. This means our service customers are defecting at the rate of 15 percent per year. Isn’t this is pretty serious? I believe that if we can keep our customers happy in parts and service then the next replacement machine they buy will be the same brand. I sincerely believe that if parts and service do their jobs properly we will replace every one of our machines with another of our machines. I also believe that if we do not do our jobs in parts and service we have no hope of being able to maintain or increase our market share in equipment.So I put out a clarion call one more time with equal fervor: Please, when you sell new and used equipment, sell the machine with a maintenance agreement – and when your product support salesmen in the field see a machine that isn’t covered with a maintenance agreement, sell one to the customer.
And oh by the way, I don’t care what brand it is. I want to perform maintenance on all capital equipment. Even on trucks.The day is fast approaching when the economics of operating equipment will require us to have a longer life. A shining example of this is in my state, California. The new emissions standards that are in place now are causing equipment fleets to shrink in order to meet the new laws. How do we intend to maintain the same level of revenue in our dealerships if equipment fleets are getting smaller because of emissions regulations or if equipment will live longer because of better maintenance habits? We must manage and maintain the capital assets in a more cost effective manner.These are the shifting sands in our business. We will not continue to sell new equipment at the same rates that we have in the past three or four decades in the next three or four decades. How will we protect the dealership? Once more, parts and service has to stand up and get it done. Good luck.
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