Ask the MHM Editorial Advisory Board

April 1, 2004
What Good Are Dealers?


The margins on material handling equipment are marked up several places along the way, so why does the bulk of equipment sell through dealers? Why isn’t it sold direct? Why is there no Dell of the MH industry? I understand that there is a need for service and repair, but Dell provides service/replacements, etc., without a dealer network. Are people just not comfortable buying equipment online or in a catalog? Isn’t price a big enough incentive, or is the price difference negligible between direct equipment and dealer equipment?

MHM: The material handling industry wants to stay away from the image of commodity selling. Years ago, conveyor was conveyor and lift trucks were lift trucks. With the advance of information technology and system controls, these solutions are more engineered, not off the shelf. That’s why the value-added services dealers provide are so important. Some OEMs do service key accounts directly, but they don’t have the resources to do that with all customers. Dealers tend to have more intimate relationships with local customers, and know their requirements very well. Buying a customized computer from Dell is a lot different from buying an engineered material handling system from a Siemens Dematic or an HK, for example. Material handling equipment must fit an environment with many other elements in that environment — people, machinery, systems, etc. All these elements must interact in harmony. You can’t buy that in a catalog, online or on paper.

Tan Miller, Pfizer: I agree with MHM’s comments. I would simply add that particularly for large-scale companies, it is important to obtain customized equipment and solutions that meet the needs of your individual operations, but at the same time, effectively utilize and consolidate your internal scale so that you specify and purchase your equipment in a coordinated fashion; e.g., consider the requirements of your entire distribution network.

Laurie Nauman, Ace Hardware Corp.: Distribution efficiencies and productivity are maximized by selecting and properly utilizing the correct equipment in today’s fast-paced material handling environment. In our environment, partnering with the national account manager of an equipment manufacturer has several distinct advantages:

1. Having an experienced resource analyze your needs and recommend specific equipment to meet those needs. He also offers the ability to modify and customize equipment to meet those needs.

2. Help you decide if you will perform in-house PM’s and repairs, or if you will select a service and maintenance agreement.

a. If you choose in-house repair option, the national account manager can arrange factory training, dealer-based training, or on-site training for your maintenance technicians. He can make sure you receive PM training videos and technical service bulletins, to ensure you have the latest updates and repair information. He can also enroll you in a National Parts Program and help you establish a parts consignment at your facility.

b. If you select a service and maintenance agreement, the national account manager can assist in setting up that agreement and introduce the local dealer who will provide that service.

3. Additional value-added programs available from a national account manager include battery sales, service and disposal, parts usage analysis, wheel and tire compound verification, flexible financing options, lease and purchase plans, training and education programs, fleet management services, and aftersales service and support.

Choosing the proper material handling equipment, by establishing a long-term relationship with someone who understands your needs, who knows what equipment is available to meet those needs, along with the value-added services, is less costly overall.

David Lockman, L.L. Bean: We do have direct relationships with OEMs of material handling equipment. For small projects like conveyors, we may use a representative sales or integration form for the project. If the project is large scale, however, we prefer to do business direct with the manufacturer. I, personally, have not had any of the OEMs push back on this philosophy. We have seen more competitive pricing this way and we can manage the project directly with the folks who are doing the work rather than using a third party for coordination. For items like lift equipment, for example, we do use sales/integration firms for sales and support. For customized equipment like automation designed and built for our specific problem and to our specifications, we go direct. We are also lucky to have a group of maintenance and electrical technicians who are well versed in the maintenance and operation of the equipment we most commonly use. This allows us to keep service contracts to a manageable minimum. So, to sum this whole thing up, we do use both direct channel and third-party support services. It simply depends on the particular situation for how we will handle the project.

Brian O’Donnell, Liz Claiborne: In the past, the majority of our major material handling procurement has been handled direct through the material handling manufacturers. There are several key factors contributing to this approach for us.

1. A strong internal team capable of detailing requirements necessary for a particular project;

2. Size of the project: several large-scale projects where the economics were there to work directly with the OEM;

3. Size of our company made us a key account for the OEM;

4. Economics: eliminate the additional markup;

5. Faster turnaround: the advantage of being able to make modifications to the layout/plan and seeing the impact on cost, and schedule almost immediately allows us to make better decisions.

The above approach works effectively for us with the bigger ticket items/projects — conveyor, automation, rack, storage (flow rack/bins) and systems. When it comes to the miscellaneous equipment (manual tape machines, ladders, scales, carts, etc.), I’d rather deal with local distributors. This way, I am able to build a relationship with local suppliers for procurement, maintenance, as well as handle smaller facility modifications.

David Rogers, Rockwell Automation: We have a good relationship with equipment dealers. We often make large purchases direct with OEMs and the smaller ones from dealer/integrators. We do not make online purchases of material handling equipment. It would be difficult to do because of the exchange of information required.