Members of the construction equipment industry have little doubt that digital technology is going to transform the industry, according to a recent Associated Equipment Distributors (AED) survey.
Conducted by XAPT Corporation, the survey of 133 AED members showed that 60 percent of respondents think the digital transformation is already happening, and another 25 percent think it will occur very soon.
“It’s already happening,” Jim Barber, parts manager for Gibson Machinery in Ohio, said in a follow-up interview to the survey. “It’s going to happen more quickly, and the dealers that don’t embrace the change are going to be left behind.”
The majority of respondents also believe the digital transformation will challenge their existing business models, with 66 percent agreeing overall.
Mace Gjerman, training manager with California-based Peterson Holding Company, concurs:
“A lot of people have had to learn a lot of new skills and it’s been a tremendous challenge.”
Those people range from technicians, who now have to be as much computer scientists as they are mechanics, to customers who find themselves able to access a vast new world of parts and service online – assuming they are savvy enough to navigate the latest technology and identify which parts match their machines.
“There’s that education of getting the customer to the right point” once they figure out the manufacturers now offer just about everything online, Gjerman said. “Trying to help them figure it out is something we’re seeing more and more as the newer generation of operators and equipment owners are coming on board.”
All the new technology has also opened up the marketplace to new competition, according to survey respondents.
As a result, the majority said territory exclusivity has become more vulnerable, with 25 percent somewhat agreeing, 37 percent agreeing and 15 percent strongly agreeing.
“Clearly that’s a fact of life,” Gjerman said. “The customer can go somewhere else now pretty easily.”
To keep the customer coming back, Peterson Holdings, like other successful construction equipment distributors, has had to learn to embrace the never-ending change that comes with all the new technology.
“First you have to be open and accepting of the technologies and the opportunities, and we’ve certainly done that,” said Gjerman. “We’ve tried to be aggressive about seeing how we can help our customers, because there is a lot of opportunity there. An example would be online parts sales. We offer an online parts store. At first there was some real resistance from some of our customers and some of our employees, who were feeling like we were trying to cut our parts people out of the work.”
Gjerman said that once the customers and employees were able to accept the change, the majority of them have loved the online store.
“(Our customers) find it far more efficient to go online, look at the parts pictures, find the part they want exactly instead of, say, for example, sitting on the phone and asking the parts person and trying to decide with them where that bracket is,” he said. “Our parts people also have been freed up and now are far more proactive about doing things like researching backorders. I think, by and large, our parts counter staff is doing work they find a lot more productive and enjoying it more rather than simply answering endless phone calls and looking up and entering parts numbers.”
Another issue that concerned the majority of survey respondents is the growing chance that OEMs may start selling directly to customers, with 23 percent of respondents saying they somewhat agree this is a legitimate fear, 31 percent agreeing and 18 percent strongly agreeing.
“The manufacturer-to-customer business model, that’s always a concern as a dealer,” Gjerman said. “You always have that thought that they’re getting all that information; they know exactly where the machine is (through the telematics); they know exactly who purchased it. There’s always that worry that they could go right behind your back.”
The good news, however, is that most of the respondents (80 percent) believe they have sufficient knowledge about their customers and can offer personalized products and services as long as manufacturers allow them to. The same percentage of respondents also believes their companies are effectively utilizing data to drive and develop business. And most of their businesses are ready – at least to some degree – to take on new digital initiatives, with 30 percent saying they somewhat agree they are ready, 31 percent generally agreeing and 18 percent strongly agreeing.
An overwhelming 77 percent of respondents said their companies have someone driving the digital initiatives and channels, which no doubt is why they are confident they are ready for the digital transformation.
Yet Gjerman cautioned that the industry will never truly be 100 percent ready.
“It’s coming faster and faster, so you can do a good job but that doesn’t necessarily mean you’re ever caught up,” said the training manager, who has spent 29 years with Peterson.
In an attempt to at least stay in the race, 20 percent of respondents said they plan to change their DMS/ERP systems within a year or two. But the majority (63 percent) don’t expect any changes within the next five years.
Canada’s Strongco Limited Partnership was fortunate enough to be able to update its system in 2015, switching to an SAP cloud platform, according to branch manager Terry Jensen.
“The intent behind that was it gave us the ability to add on the newer technology,” he said. “We haven’t taken advantage of that yet, but it is something that the system will allow us to do when we get there.”
Cost is one thing that has held back this company, and others, with 36 percent of respondents saying the expense of updating to a new ERP/DMS system is their main concern. This is understandable, given that 78 percent of survey respondents said their dealerships are facing some profitability issues.
Yet, 36 percent of those who responded said they believed more investment is needed in software system capabilities if they are to remain profitable; 42 percent said OEMs are increasingly interested in their dealers’ IT systems’ capabilities and 44 percent believe customers want more integrated services.
“You have to temper the needs of the business with the cash flow that it takes to invest heavily in new technology,” Jensen said.