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What customers are teaching equipment vendors

July 13, 2010
In a troubled economy, how a company serves its market says more about it than sales numbers can. That’s why in this exclusive interview with Jim Moran, senior vice president of Crown Equipment Corp., MHM focused on the company’s aggressive go-to-market strategy during these dicey economic times and what Crown hopes to achieve with it

In a troubled economy, how a company serves its market says more about it than sales numbers can. That’s why in this exclusive interview with Jim Moran, senior vice president of Crown Equipment Corp., MHM focused on the company’s aggressive go-to-market strategy during these dicey economic times and what Crown hopes to achieve with it.—Tom Andel, editor-in-chief

MHM: According to ITA’s numbers, demand at the factory level for electric lift trucks in 2009 ended up at about 62,000 units. How would you characterize that performance and what are your expectations for this and next year?

Moran: Last year was a real jolt for the entire industry. If you look at the first six months of this year, the electric truck market looks as if it would annualize at about 79,000. While this number is still well below sales in 2008 and 2007, it is trending in the right direction. In fact, total demand for electric and IC powered trucks has increased by 43% in the first half of 2010 when compared to the same period in 2009. We’re seeing customers who had put off capital expenditures last year start to reinvest in new forklifts.

Ultimately, I believe the pace of growth will likely slow as we go forward in 2010. The industry will consider itself fortunate to end the year 20% ahead of 2009. I hope it ends up better, but there are so many unknowns in the global economy that it is difficult to be any more optimistic.

MHM: What have you learned from the IC side in the eight months that Crown has been in it?

Moran: We had a unique opportunity to approach the IC market with a clean sheet of paper. We set out to address the market’s expressed, unmet needs for a durable IC forklift that could withstand tough, dirty and hard applications. Our timing and our targets were deliberate.

We continue to hear time and again of the accepted IC forklift deficiencies related to engine performance, overheating, operator comfort and maintenance. The market has been dealing with difficult maintenance situations on the IC side, and although these products haven’t changed much, maintenance costs continue to go up. Because this equipment operates in high cycle environments with dirt, dust and heat, customers buying these trucks can’t tolerate excessive downtime. We’ve been able to help them manage in those environments. As our sales force continues to get deeper into this market, they are indentifying customers in manufacturing and trucking where the hard usage requires a truly industrial truck that is reliable and durable.

After eight months as an IC forklift manufacturer, I can say that our entry into Class IV has played out as we expected. It’s clear to me that our customers’ executive management teams understand the return on the investment of the product after considering the total cost of ownership.

MHM: What is Crown learning from the data you and your customers are collecting through the data systems you’re making available on lift trucks these days?

Moran: There is a lot of focus on managing costs throughout the supply chain in support of increased profitability. Because the distribution center is often one of the first areas under scrutiny, it is imperative that supply chain officers have visibility all the way down to the forklift fleet moving product throughout their facilities. In order to achieve the necessary visibility, DC managers must manage their fleets based on real-time, actionable knowledge that drives decision making and reduces cost.

Admittedly, our first attempt at fleet management tools wasn’t sufficient for what the market truly needed. We gave customers a lot of data and information about their trucks, operators and maintenance. It didn’t take us long to figure out that the reams of data didn’t drive decisions. Customers wanted tools that helped them manage operations and drive profitability.

We quickly moved to a dashboard system that allows DC managers to optimize their fleet for performance, safety and maintenance. These dashboards identify immediate opportunities for performance improvement and operational efficiencies. In turn, managers are able to report up this information and the continuous improvement actions they’ve taken.

MHM: Give us an example.

Moran: We have a well-known client in food retailing that is installing this throughout its fleet. They estimate they already have a rack damage bill of $5 million. We know the payback by their standards was less than 15 months. That’s what understanding impacts has done for them. It answers questions such as, “Are my distribution processes profitable?” And, “How can I take cost out and increase efficiency?” Real cost savings more than justified the nominal investment in the software.

In this example, knowledge of meaningful impacts directly saved the customer millions of dollars. We defined meaningful impacts by living in our customers’ world and setting our criteria and benchmarking to that. For example, our team recorded video at locations showing trucks impacting racks and demonstrating what type of impact can cause rack damage. We’ve also leveraged our own research efforts to develop impact-sensing technologies that measure G-force and momentum changes to accurately record meaningful impacts.

Impacts, log-on hours, battery-charging cycles, charging the battery prematurely, waiting too long to charge so the battery gets discharged at too deep a level – these are all common issues that cannot be ignored.

MHM: What about safety? OSHA has been talking a lot lately about increasing enforcement, even pursuing criminal sanctions against flagrant abuses by employers.

Moran: Safety remains as important as ever in our business. ITA has an alliance with OSHA that has allowed us to conduct OSHA inspector training sessions about the numerous benefits of a thoroughly trained operator. Also, we’re working with customers on how they can use fleet optimization tools to comply with OSHA guidelines. For example, these tools should demonstrate completion of daily operator checklists and operator training. Safety is not a cost that can be reduced. It’s an investment that the most successful companies consider a priority.

MHM: Have these kinds of priorities changed the way you sell?

Moran: The economic climate heightened customers’ desire to do more with less. Corporate sustainability initiatives placed a brighter spotlight on manufacturing processes and lifecycle costs. Technology is enabling forklifts to complete tasks at higher heights at faster speeds with more precision. And, we’re talking as much about the technology outside the truck as much as we are about the truck these days.

MHM: Let’s talk about what’s happening in global markets. Workers are starting to strike in China and labor costs are starting to rise. What does that do to international markets?

Moran: What’s going on in China in terms of labor is not surprising as it is a natural evolution of the economy in the country. If you spend time in China you can see it between trips. Consumers don’t want to wait to be well paid. Even though the increases from a percentage point of view are significant, China is still a relatively economical place to manufacture. The demand for consumer products will continue to increase there as the population gets wealthier. You’re seeing big investments made by people in the freezer and cold storage business in China, and all over Southeast Asia.

MHM: How is Crown taking advantage of that?

Moran: Our business throughout the world is growing, particularly with multi-national companies. As consumer demand increases in these developing countries, the need for pallet loads of merchandise starts to grow. That’s when we can do business locally through our global network of Crown-owned and certified dealerships.

When you look at how these countries are growing compared to last year in terms of lift truck consumption, they’re growing at a much faster pace percentage-wise than in North America. This will continue to be a real opportunity. Crown is in a good position to pursue it because we have a full range of products specifically developed for the local market needs.

MHM: What does this say about U.S. markets and how you serve them?

Moran: This says that it is important to understand the nuances of the regions where we operate. We believe in developing products specifically for the region and applications where they will be used. As an example, I don’t see a one-size-fits-all solution in narrow aisle equipment and case picking applications.