Using Telematics to Make MoneyBy Kim Phelan
Article Date: 06-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.
It's time to stop playing Where's Waldo with dozers - and dollars. Dealers discover innovative ways to find lost money, generate new revenue streams and help their customers survive.
What equipment dealerships need most right now is a healthy infusion of cash, but many find it would be as easy to move new iron off the lot as pushing it through a keyhole – so where do you turn to make money?
When contractors flat out tell you they aren’t buying new equipment it can stuff a stopper right quick into the conversation; that is unless you’ve got something else up your sleeve to offer, and dealers who have developed expertise with asset management technology – known as telematics – do indeed attract their customers’ attention and are both finding lost money under their own roof as well as creating new revenue opportunities.
“You can go to a customer right now but they don’t want to talk about buying hard iron,” said Clint Allaman, product marketing manager for John Deere’s JD Link telematics. “But if you’ve got something to talk to them about that will help them run their business better, they’re wide open.”
Telematics does that and more, and the more dealers adopt and model the efficiencies of asset management devices, the more contractors are listening. Fundamentally, telematics technology is a tool with which fleet owners and managers can thoroughly manage their physical (and even human) resources, as well as fully monitor and maintain the optimum health of their machines, a benefit that’s worth a loader’s weight in gold.
Varying levels of device sophistication are available to equipment owners, ranging from basic hours and location tracking to more elaborate machine health monitoring that’s tied to sensors and onboard computers. Allaman said John Deere’s recent rollout of three levels of JD Link telematics solutions was preceded by extensive field research among equipment owners that demonstrated a distinct need for lower-end, affordable hours/location tracking. In March the company introduced (1.) JD Link Express, a low-cost, low spec, brand new product, offering machine hours, location, geofencing, curfew and maintenance software; (2.) JD Link Select, a renamed version of Deere’s previous JD Standard, and (3.) JD Link Ultimate, the factory-installed option on most product-class machines that Allaman says compares similarly to what Caterpillar (Equipment Manager and Product Link), Volvo (CareTrack) and Komatsu (Komtrax) are installing.
Indeed, most major-brand, heavy models of new construction equipment and mining machinery roll out of the factory with telematics devices installed as standard; whether end users turn them on and use the information effectively is up to them – but again, dealers have an opportunity to lead the way.
When the value is recognized and customers see legitimate money savings, so too are revenue doorways pried open for entrepreneurial dealers. Abundant choices from OEMs and myriad other telematics providers (think Qualcomm, Trimble, Topcon and more) translate into a new paradigm in asset management: It’s not just for the big dogs anymore. If a contractor has spent even $15,000 on an asset, it’s worth keeping track of and maximizing its ROI.
Find a Need, Make Some Money
Best practices in taking telematics technology to the customer, however, means more than merely retailing another widget, slipping in one more impulse-buy at the cash register. In the case of one Komatsu dealer, an entire telematics-driven, product-support-focused CRM system was forged from scratch – not by taking his OEM’s Komtrax product and thinking how best to market it, but rather by closely examining what his customers needed most and then identifying which tools could help him best solve those problems. And, in the process, he’s built a telematics infrastructure through which new revenue streams are now flowing.
The dealer (who did not want to be identified because of the volumes of inquiries he fields whenever his system is discovered by others), worked for some three years with Komatsu and an outside IT firm to construct his company’s “CRM HE,” which integrates telematics data with his own operating system to fully track and manage his customers’ components, undercarriages and planned maintenance.
“It absolutely drives revenue,” he said. “Even today, when times are hard, the guy can see the sense when you show him where his machines’ components all lie in their lifecycle. He knows that if there’s a catastrophic failure it’s going to cost him $40,000 more than if he replaces it at a time that’s convenient for him. He’ll make those decisions and it gets you business. In tough times, the ability to help people save money and run at the lowest possible cost is going to pay off when things get better. People are going to remember if you were able to help them run their business.”
He attributes the success of his product-support CRM program, in large part, to the dedication of one employee who championed the concept, taking it home evenings and weekends to see it to completion. The dealership piloted the system within a few of its own star branches initially before introducing it to end users, first mining customers and then all construction equipment customers. He says the payoff for equipment owners is tremendous, enabling the dealer to help contractors precisely and accurately plan for all their maintenance and major repairs, prefailure, which means averting dealer overtime charges for emergencies.
“It helps us to be at the point of sale on things like undercarriages,” he said. “We know that we can be at that undercarriage when it’s at 100 percent wear, when a customer still has choices on turn or replace.”
Knowledge, as they say, is indeed power – and pleasure; contractors (especially publicly owned firms) have provided elated feedback after confidently strolling into budget meetings equipped with solid facts about each quarter’s specific and known expenditures.
“This is the kind of thing they expect distributors to be able to do for them,” the dealer said. “We try to take management functions away from customers – we’re equipment guys, they’re hole-in-the-ground guys. They don’t buy equipment because it looks good in their driveway. They want to make money with it, so any aspect of maintaining and running their equipment that we can do for them is a big deal.”
Because the dealer knows when and where the next component or undercarriage replacement and planned maintenance is going to occur, branches stock inventory more correctly – they also reap the invaluable benefit of holding on to their employees during the recession because they see the work that lies ahead.
Another dealer advantage: No more field service techs traipsing across the countryside looking high and low for a relocated machine they’re supposed to be working on. Do the math on those wasted fuel and personnel timecard savings.
The Komatsu dealer CED interviewed provides his tracking service to every customer at no charge, but there’s no need to bill for it – the product support business he’s generated over the past eight or nine months and that which is yet to come, plus the sheer asset-management efficiencies that customers are experiencing, are compensation aplenty.
“They may think, ‘That’s a nice service you guys are providing; thanks, but I’m not paying for it’ – but they are paying for it!” he said. “They’re giving me the undercarriage business, the PM business, and the ability to exchange their components. When we come in with a plan, they do the right things to keep their machines running better, and in the long run, they pay for it; they’re writing us checks every month.”
Rental is Reason Enough
The benefits contractors reap are ripe for the picking in a dealer’s rental fleet, as well. Well timed maintenance and parts replacements not only prevent jobsite machine failure for rental customers, but also ensure a better price tag when dealers are ready to turn their rental machines for resale. But beyond this, the advantage of retaining control over every single rental machine every day at every branch location is practically priceless.
Dan Moore, who is president of RW Moore, a John Deere dealership in Raleigh, N.C., was an early adopter of telematics and invested in Qualcomm (now branded as JD Link) tracking devices for his entire rental fleet more than two years ago. Placing less emphasis at present on the creation of product support revenue among customers and choosing, instead, to focus on his own cost savings, he says his company justifies the investment purely from knowing exactly where all his $50-odd-million in assets are at any given moment.
“We pursued this not as a sales tool but as a management tool,” said Moore.
Like many dealers, he says, his company struggled with the occasional missing rental machine or attachment – whether out in the wide world wherever a customer left it or even when a rental customer returns a machine without telling the dealer, the fact is, assets are just sometimes misplaced.
“We make our money because we find our tractors, we don’t lose them. And if one is stolen, we go get it and the bad guy,” Moore said. “If it’s rented and the guy says he’s not running it and he is running it, we bill him. We ran the numbers on these things and saw that it pays for itself.
“The absence of something is hard to measure, but we aren’t having those same issues anymore,” he added.
An Eye-Opener for Owners
Dealerships with refined telematics programs in place often share the common reward of witnessing that transforming moment when a skeptical contractor – who hasn’t the time or money for such shenanigans – suddenly sees the light.
Moore shares a tale that is typical among telematics-savvy dealers.
He was meeting with the fleet manager of a competitor’s customer and attempting to prove the power of GPS tracking. By coincidence the contractor had one of Moore’s machines on rent, and by another fluke, it was one of the early GPS-equipped pieces Moore was rotating into his rental fleet. It also happened to be a machine that one of the contractor’s site supervisors had demanded to have for a particular job.
“We pulled it up and it hadn’t been cranked in over a week,” Moore exclaimed. “That fleet manager’s eyes got as round as dinner plates! When it had been cranked, it had only been run about four hours since we delivered it three weeks before. I looked at him and said, ‘You know, you don’t need this rental.”
Moore continued: “The perception that is portrayed by our competitors is, ‘They don’t understand your business the way we do,’ but this technology lets us say, ‘Actually, we do.’”
Know More, Do More
Productivity is king, as dealers well know. Jeff Gartz, manager of technology products at Wagner Equipment, the Denver-based Caterpillar dealership, says telematics technology enables dealers to expertly offer contractors a host of information that is 100 percent productivity-enhancing:
And the list goes on.
- Knowing what a machine is doing at all times in real-time
- Knowing whether it has a function alarm that the operator is disregarding
- Knowing if (s)he has too many machines on the jobsite
- Knowing if the right mix of machines is on the jobsite
- Knowing if every piece of equipment is picked up when a job is finished, including that air compressor or generator sitting behind a tree
- Knowing where the nearest replacement is for a down machine
- Knowing whether every machine is operating at maximum productivity
- Knowing whether every operator is working at maximum efficiency
- Knowing whether machines are idling excessively (gravely important in California, and other states in the near future)
Another thing an equipment owner will always know, too, is how to catch a thief.
Gartz recalls a customer in Albuquerque who operated a small fleet of a dozen or so compact machines – over time several had been stolen, and the contractor suspected it was an inside job. When he’d had enough, he came to Wagner for help and the solution was the secret installment of Trimble tracking devices on all 12 machines.
“The only people who knew it was being done were our mechanics and the customer and his wife,” said Gartz. “The machines went back out on the jobsite and within a month one of those machines was stolen. It was recovered almost instantly – they found out who it was and they found a whole lot of other stolen equipment in a large warehouse as a result of using these devices.”
The theft recovery element of telematics also captures attention from insurance companies, and sources indicated that dealers and contractors alike frequently realize premium and deductible breaks from their providers.
But like anything worthwhile, a money-making telematics program in the dealership requires thoughtful planning to identify what customers need most – and how the dealer can package solutions and make use of their own core competencies.
“Anytime we can be a part of the solution, there’s an opportunity for revenue,” said Gartz. “You want to be there, to be the one who’s helping your customer be more productive with the equipment he has. He’s going to trust you to be the guy who is going to help him be more profitable.
“And obviously, he added, “if they come back and buy more equipment, that’s what we’re all looking for.”
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