To technology manufacturers, offering something that’s proprietary is a selling point, implying superiority and properties that can’t be matched by competitors. To some users of that technology it’s a tool vendors use to trap them in an exclusive relationship—thus giving them the ability to command confiscatory prices.
Place a technology distributor in the middle and you have the makings of a Bermuda Triangle of distrust—out of which no winners can emerge. That is, unless, the three parties in this triad treat their relationship as something proprietary in itself—something that gives each one of them a competitive advantage none of them could achieve by themselves.
This kind of thinking follows the wisdom of modern supply chain management. Competition between companies is out. Supply chain vs. supply chain is the ticket to viability.
What to Expect from Distributors
Material handling equipment distributors maintain a key position in the logistics technology supply chain. Aside from being the service arm of an OEM, they’re also eyewitnesses to how these technologies are applied and advisors on how they can be applied better. The key for end users is to recognize this role.
“Customers should allow and also expect their servicing dealer to manage their data and get closer to their operations,” says Kenneth Mac Donald, president of M & G Materials Handling Company (www.mandgmaterialshandling.com), a privately owned Yale forklift dealership supplying Southern New England. “Too often today the customer doesn’t utilize that knowledge a distributor brings.”
Part of the reason is cost. Companies looking to cut budgetary corners often do so on the services side of their purchasing practices. However as staffing becomes more challenging for these companies, they may turn to their local distributors to fill that manpower gap—particularly on the equipment maintenance side. Just remember, however, many distributors face similar staffing issues.
“The customer should be prepared for a labor cost increase beyond the pace of inflation as aging technicians retire and the lack of young people entering the industry will create a shortage,” Mac Donald adds. “I sometimes tell customers we will be like plumbers; when the stink is up to your nose you will pay to clean it up.”
But dealers face their own budgetary constraints, and that will begin to show in distributor pricing, according to Buddy Smith, president and CEO of CMH Services (www.cmhservices.net), a South Carolina provider of Crown and Nissan forklifts.
“After a couple years of holding pricing constant through the recession, I believe dealers will begin to raise prices in the aftermarket area,” he says. “This is due to inflationary prices in their own cost structure regarding fuel costs, medical premiums and unemployment taxes.”
This will make it harder for distributors to offer labor discounts or more flexible payment terms, or any repeal of fuel surcharges, as input costs continue to grow, adds Jason Milligan, vice president and general manager of the mobile equipment at Hy-Tek Material Handling (www.hy-tek.net), a Yale lift truck and Hytrol conveyor distributor serving central Ohio. “The cost simply to add a new employee is moving higher,” he says. “As health insurance costs rise, the increasing costs of additional technical training are placed on the dealer’s shoulders.”
That doesn’t mean distributors will allow their service standards to fall as prices rise. Service, after all, is the secret sauce in an era of technological commoditization—and that value is their self preservation.
“Customers minimally should expect best-in-class service response times, a high percentage of repairs fixed upon the first response, excellent communication from all dealer personnel, and accurate and timely billings,” says Doug Carson, vice president of marketing and sales for Fallsway Equipment Company (www.fallsway.com), a Northeast Ohio distributor of Cat, Crown, Mitsubishi and Manitou equipment. “Beyond these basic service expectations, customers should expect us to proactively consult on management of their material handling fleet. This entails collecting and reporting fleet data and partnering with them to maximize their equipment uptime and utilization at the lowest cost per hour of operation.”
Maintenance plans are also filling a widening capabilities gap for customers, says Buddy Smith. These not only include preventative and break-down work, but also wheels, tires and equipment abuse.
“Customers can pay a flat fee per month to take them completely out of the maintenance business,” he says. “Another item that adds value to the relationship is online viewing of their service history. Our customers can log in to their account through our website and access their service history by truck. This is available 24/7.”
The Manufacturer’s Role
The best chance for taking costs out of the distributor/customer relationship comes by involving the OEM, according to George F. Brown, Jr. and Atlee Valentine Pope, authors of CoDestiny: Overcome Your Growth Challenges by Helping Your Customers Overcome Theirs. The authors are also founders of Blue Canyon Partners, Inc. (www.bluecanyonpartners.com), a strategy consulting firm. They recommend taking a systems perspective in dealing with technology and service providers.
“That perspective goes far beyond what each of the firms can do on their own,” these authors say. “Manufacturers and distributors have to map the costs associated with their relationship and the cost to serve in their markets, and figure out where they can increase efficiency and take the savings to their bottom lines. … We believe that the way to ensure stability in terms of end customer planning involves explicit discussion and never allowing end customer ownership to become the elephant in the room that no one is willing to mention.”
When OEMs and distributors collaborate, opportunities for eliminating end user costs become both a priority and an opportunity.
“Some of the neatest tools are coming from our lift truck OEMs,” says Fallsway’s Doug Carson. “The latest truck monitoring systems connected real-time to the web are providing tools to assist in OSHA compliance, reducing truck and product damage, maximizing operator productivity and truck utilization, and tracking/monitoring diagnostics related to a truck’s service status.”
Although such a system is an option provided through many distributors, Duncan Murphy, president of Omaha, Nebr.-based Riekes Equipment Company (www.riekesequipment.com), believes it should be a requirement for any service partner. As a Yale dealer, Murphy believes the information generated by vehicle management systems is invaluable to customers—when accompanied by the appropriate analysis.
“These devices hung on forklifts monitor use in a variety of ways,” he says. “The key is to match the sophistication of the device to the level of information desired. That takes some thought and expertise.”
Beyond the customer/distributor/OEM triad is a fourth player that solidifies these connections: the industry association. In the case of material handling equipment distributors that solidarity comes through the Material Handling Equipment Distributors Association (www.mheda.org), which offers its members ways to enhance their service offerings and to stay more economically viable at the same time.
One of those ways is through the Distributor Statistical Compensation (DiSC) Report, which guides distributors through financial planning based on member income statements, balance sheets and operating data.
“The benchmarking opportunities offered through the DiSC program is something that many dealers could not afford on their own,” says Bill Rowan, president of Sunbelt Industrial Trucks (www.sunbelt-industrial.com) of Dallas/Fort Worth, distributors of the Komatsu, Nissan, TCM, Flexi and Big Joe brands. “And even after 30 years in this business, there is still plenty I don’t know. Regular interaction with other dealers, bigger and smaller than us, provides many ideas and insights that have proven invaluable in running a material handling dealership.”
M&G’s Kenneth Mac Donald concludes that ultimately, it’s the distributor’s customers that make best practices better.
“Our customers are demanding but they challenge us to greater performance,” he says. “That gives our manufactures an advantage. The material handling industry is the blood stream of other industries and we are healthy and strong.”