Hidden Cost of Variability
It is an honor to be the newest Aftermarket columnist for Material Handling Wholesaler. When Dave reached out to inform me that I was among those he was endorsing for this opportunity, I was anxious and a bit sorrowful at the same time. Sorrowful because I looked forward to reading Dave’s article every month as the knowledge he shared has always been an invaluable source of information for me. Anxious because I looked forward to the opportunity to talk with Dean Millius to discuss my experience and current role in this industry and how it would be a great fit for me to follow in Dave’s footsteps.
I have been in the material handling industry for 15-plus years, having held various roles such as service manager, quality assurance manager, and business development manager. I got my start at a lift truck dealership that represented multiple OEM lines; starting out as a management trainee, I was fortunate to learn the various facets of the many departments within a dealership. Operational processes such as damage and overtime billing in the rental department, service dispatch, billable hours and lost time, PM programs, to even looking at parts diagrams the ‘old school’ way on microfiche machines. I have seen first-hand the evolution of the modern lift truck dealership and independent service provider as they look to be a full solutions provider for all of the needs of their customers. In my current role, I get the opportunity to visit and meet with many of these dealers and manufacturers in the material handling market and other equipment markets such as rental companies and construction/earthmoving dealerships. I hope to deliver valuable and current content each month as it relates to the aftermarket. I also would welcome comments about topics, challenges, etc. that you are facing.
Enough about me let us dive into this article. Each year I look forward to reading the latest material handling business trends that MHEDA publishes. When their 2023 trends were published, to nobody’s surprise, the topic of supply chain challenges continues to be at the forefront of discussion as an obstacle to growth even as we approach three years from the start of the COVID pandemic and the start of chaos in the supply chain.
I think we have all become experts on the current state of the supply chain and its impact on not only your business but its impact on everyday life consumer goods. There have been countless articles and industry publications on this topic over the past few years, so although the topic is not a new one, I wanted to touch on a few points from my perspective of where we are at in the current chaos of the supply chain.
Inventory Lead Times
When lead times for your replacement parts inventory are unpredictable, you either have to take on the cost of carrying extra inventory or the cost of failure to meet customer expectations. The current variability creates challenges in scheduling your technician’s time. Some of your suppliers used to be able to provide next-day shipping or local same-day pickup. Weekly stock orders used to arrive on the same day as clockwork. All of these conveniences we used to take for granted have become unknown variables.
If you lose that service job or counter sale of that one customer to your competitor, have you now lost that customer to your competitor for good? Unfortunately, this scenario is a question that dealers face now more than ever. While the material handling industry is primarily B2B, those customers increasingly expect B2C convenience and customer experience. The ability to complete a same-day fix has become not a differentiator but rather an expectation of customers.
One option is to invest more cash into your parts inventory or you risk losing those service jobs, or parts counter sales to your competitors. While you cannot control the ports, railyards, truck drivers, or carriers, you can control the amount of inventory you choose to keep on hand, the amount of inventory you keep on your service van, and the visibility of your service scheduling to when and whether your service technician can complete a service job.
I am always amazed when I am at a dealership and see rental, sales, and parts departments operate independently of each other when it comes to ordering products, parts, accessories, equipment, etc. All of these departments are struggling with the same supply chain chaos, yet seem to go at it on their own.
The new equipment sales department is battling long lead times for new equipment from their OEMs. Some dealerships had already begun to sell conveyors, warehouse storage, sortation systems, and other integrated automation systems before the supply chain became a challenge. Therefore, some dealerships already have a dedicated department and sales staff to sell this type of product. If not, this is definitely a category of products to explore if your dealer has not already shifted to being a full solutions provider. If your dealership already has its own division for this type of product, what else can the new equipment salespeople sell?
One solution is if there is no dedicated parts and service sales team, they can shift their focus to selling parts and service. Do they know all of the offerings that their parts department’s suppliers offer? Depending on how your commission structures are set up, it may be a good idea to introduce the sales coordinators and new equipment sales staff to some of these suppliers. Commodities and specialty products like pallet trucks, attachments, safety items, PPE, etc. are common items that new equipment sales departments are not aware that parts departments have sources for too. Without a product to sell, you may run the risk of losing your salespeople.
Many dealerships I visit tend to have a dedicated rental department and rental manager that make the parts and service decisions for their fleet of rental equipment. In my experience, many rental departments operate with their own dedicated service technicians and order their own replacement parts. Obviously, they too are currently faced with variability from their suppliers. If this is the case, are they working with their parts departments to optimize inventory purchase decisions? Do they share the same suppliers? What is the cost of a piece of rental equipment that is down due to the variability of suppliers? It is definitely a good time to review the purchasing procedures of your rental departments to see if there is a variance as compared to your service and parts departments.
As the 2023 MHEDA trend as it relates to supply chain reads, “…extended lead times could result in order cancellations….need to creatively diversify your offerings”. What is your dealership doing to diversify its offerings? Are the various departments within your dealership working together to optimize purchases of inventory and products from your suppliers?
As you plan for next year, with the supply chain still in knots, will inventory planning and coordination between departments be the difference that helps your business grow?
About the Author:
Chris Aiello is the Business Development Manager at TVH Parts Co. He has been in the equipment business for 15-plus years as a service manager, quality assurance manager, and business development manager. Chris now manages a national outside sales team selling replacement parts and accessories in various equipment markets such as material handling, equipment rental, and construction/earthmoving dealerships.