Making It Better than New

Thirty years ago when I first started covering the trucking industry, I worked for a company that had a magazine called Renews. It covered the rebuilding industry. I always liked the name Renews — to make new again.

In the ensuing years rebuilding has given way to remanufacturing, a much more sophisticated process. And instead of making new, remanufacturing often makes products better than new.

However, in a recent survey sent to distributor readers of Truck Parts & Service only 3.6 percent of survey respondents said they thought remanufacturing made a product better than the original product, while 38.4 percent believe a remanufactured product is as good as a new product.

While attending this year’s Heavy Duty Aftermarket Week, I had the opportunity to present the survey findings to the Motor & Equipment Remanufacturers Association’s Sales & Marketing Council. MERA is comprised of the many businesses, both large and small, that make up the remanufacturing industry.

The group recently launched an education and awareness campaign called Manufactured Again. The purpose of the campaign is to heighten the understanding and acceptance of remanufacturing.

The group has developed a definition of remanufacturing: a standardized industrial process that recovers and recycles end-of-life products (cores) and returns them to their “same as new” or better condition and performance.

It is interesting that MERA has taken time to define reman because several survey respondents commented on the need for not only a definition, but a set of standards. “At one point our industry should consider a set of standards for remanufacturing. As it stands now, the term means many different things to many different people,” one respondent said.

Defining remanufacturing and developing a certification process are the next steps in its growth.

MERA is going beyond just defining what reman is. The association also is developing a certification program “that will let customers know that reman parts from MERA member companies are truly remanufactured.”

According to MERA, the program will define minimum process criteria for products to be eligible for certification.

This is good news, especially since reman products have so many advantages and benefits. Reman is a sustainable activity. Products that otherwise would be scraped are reused.

MERA says remanufacturing contributes significantly to the reduction of CO2 and landfill wastes as well as conserving energy and natural resources. How could you not be in favor of that?

But reman does more than that. It also contributes local manufacturing jobs at a time when job creation is vitally important. And it seems to me that that is the kind of publicity the trucking industry could use.

Reman has a great deal to offer to vehicle owners, and the efforts of MERA are positive steps in spreading the word about the value of remanufactured products.

The group is working to make sure that when you sell a remanufactured product to one of your customers or install a reman part on a customer’s vehicle you have some assurance that the part is of high quality and will be reliable. And in many cases it will be even better than the original part.

Now that is the kind of effort we can all get behind.

For the most part the truck parts after market did okay in 2011.

It is nice to see people upbeat for a change. Two years of some growth have a way of doing that. It seems like the stars have aligned to make things a bit easier for distributors and repair garages.

A steady recovery in the general economy, an aging truck fleet, the increased cost of new equipment and even some recent legislation have combined in a way that means distributors are selling more parts and repair garages are fixing more trucks.

We all are very pleased about that.

But now is not the time to coast.

I think it is time to move out of survival mode. Don’t get me wrong, you still need to maintain a steady course and keep doing the blocking and tackling that got you through the downturn, but you also need to start looking at ways to grow your business.

There is no silver bullet, as Dave McCleave, director of aftermarket/technical service for Hendrickson International, recently told me.

There is no one thing that will guarantee that your business will grow. However, there are areas you can explore to see if they fit with your company’s value proposition.

Now is not the time to coast.

A simple place to start is with your inventory. Are you carrying not only the parts your customers need but enough of them?

Some of you pared back your inventory during the downturn and were reluctant last year to bring the levels back up.

I am not telling you to go wild with adding inventory, but remember he who has the part on the shelf when the customer needs it, wins that customer. Not only for that sale, but potentially for future purchases as well.

You might even want to consider adding product lines you did not carry before so you can tie your current customers even more closely to your business.

If you have put off an investment in technology, I strongly urge you to rethink that strategy. Trucks are not going to get less complex and the first wave of vehicles with emissions-compliant engines are coming out of warranty.

If you want a chance at the parts and service business that comes along with them, you need to make sure you have the tools, equipment and a trained staff in place.

Several of the folks I spoke with for the cover story were adamant that distributors need to add service of some sort to their portfolio.

Whether that is true or not remains to be seen, but one thing is certain it could not hurt distributors to align themselves with independent repair garages, as some of you are already doing through your marketing groups.

Business as usual may get you through 2012, but the bigger question is will it keep you in the game long term?

I am guessing it won’t because the one thing I know about the truck parts aftermarket is that doing what you’ve always done is a sure way to become extinct.

It’s a new year, so take a look at some new opportunities. I am positive you won’t regret it.

You probably think you have a good handle on your expenses; knowing exactly what you are spending your money on. But do you really?

drondini@randallreilly.com

I recently spoke with Doug Austin, founder and president of Performance Management Group, a division of Strategic Source Inc. Performance Management primarily works with dealers to help them improve their profitability. But I happen to think the things they suggest are applicable to your businesses as well.

One of the first things Austin suggests his clients do is something called expense mapping. This is a process that requires you to look at every one of your indirect expenses on an individual basis.

You can set up a spreadsheet that shows the vendor name and how much money you spent with that vendor during the previous 12 months.

Once you have that list, you need to establish categories such as office supplies, uniforms, insurance, etc. and assign a code to each invoice. After that you need to analyze each of those categories.

Expense mapping can result in a 15% to 23% cost reduction opportunity.

If you discover that you have five office supply vendors, you probably need to ask yourself why. Having that many vendors for an indirect expense category means you probably are not using your leverage with one vendor to get the best prices.

Obviously, the number of vendors that makes sense varies by category. You don’t just want one brake parts supplier for example. However, having multiple vendors for some categories makes no sense at all.

Once you have all your expenses categorized you can then develop a strategy and goals for each category. That could include reducing expenses in that category by 10 percent. One way to do that might be to reduce the number of vendors so you are in better position to negotiate discounts.

“If you go to a supplier and tell them you are interested in their best pricing you are going to get one answer,” Austin says. “But if you give them another bit of information that says ‘I spent $100,000 last year on office supplies,’ all of a sudden they are going to become much more aggressive.”

In addition to establishing your strategy and goals, you also need to set a timetable for when you want to achieve your goals and assign someone the responsibility for seeing the goals are met.

With all of this information in a spreadsheet you end up with “A document or a process that says here is the category, here is what I spend, here is how many suppliers I have, here is what our target is next year for reductions, here is my strategy, here is who is assigned to it, and here is when I am going to work it,” Austin says.

He adds, “It is a pretty comprehensive tool. If you follow that logic down to the bottom of the page, you can sum up very quickly what you think the savings opportunity is if you get aggressive on those categories.”

If this all sounds like a lot of work to you, think about this. Austin says clients of Performance Management who have used expense mapping have seen a 15 percent to 23 percent cost reduction opportunity.

Not bad for the few hours you or your CFO spend compiling and analyzing the data. The end of the year is a great time to implement this so you start off the New Year informed and focused.

Look over the crowd at any aftermarket meeting and you will notice one thing: there are a lot of gray hairs out there. As one of the gray-haired participants I like to think there is value in my years of experience in this industry. I think that is true for all of us who have been in this industry for any length of time.

lrondini@rrpub.com

But most of us don’t want to work forever and if this industry is going to thrive in the future we need to pass our knowledge down to the next generation. Almost everyone I speak with — whether a distributor, manufacturer, repair garage, supplier or dealer — tells me they have difficulty finding young people who want to work for them.

I think part of the problem is that not enough young people know what a great industry this is. But you have the opportunity to change that. And you can do that with a group of young people who actually have some knowledge of the heavy-duty aftermarket.

As part of Northwood University’s Aftermarket Management degree program, all students have to take courses like Intro To The Automotive & Heavy-Duty Aftermarket and Heavy-Duty Parts & Service Marketing.

On top of that, according to Northwood’s Jim John, each student is required to complete an internship between his or her junior and senior year.

This is your golden opportunity to step up and bring a student into your business for 10 weeks. Ten weeks where you get to sell him or her on the advantages of working for you after graduation. Ten weeks in which you can raise enthusiasm for being part of your growing business.

Some aftermarket companies have already stepped up and are doing their parts. Jim mentioned Tenneco and Horton specifically as companies who have had success with Northwood interns. Some truck dealers even are jumping on the bandwagon. Jim referred to a large dealer group that came in and recently interviewed 15 students for internships or job.

Getting involved is simple. Right after the first of the year, contact Jim at 989-837-4341 or jjohn@northwood.edu. Since Northwood has three campuses, Jim will put you in touch with the person at the campus nearest you. The best part of Northwood’s internship program is you chose who interns at your business.

You can attend the job fair at Northwood’s Midland, Mich. campus in the spring and interview students while you are there, or you can arrange a campus visit and interview potential interns there.

On average, Jim says, he needs to place 25 students each year. That means we have 25 opportunities each year to convince some pretty bright kids that the heavy-duty aftermarket is every bit as dynamic, challenging and rewarding as the automotive aftermarket.

So what are you waiting for? Pick up the phone and call Jim or email him. You’ve got nothing to lose and a lot to gain.

The next time someone I am interviewing for an article brings up the challenge of getting young people into our industry, I am going to stop them and ask them what they are doing about it. If they say they haven’t contacted Northwood, I am going to stop listening because there is no reason to complain when there are options available.

I am not naïve enough to think that 25 people a year will solve our industry’s people problem, but it is a damn good start.

Contact Jim, and I am guessing you won’t be disappointed in the caliber of employee you find at Northwood. And who knows, if the Northwood student likes working for you, he or she may tell a friend and that can bring more capable young people to your door.

The list of things that can — and often do — go wrong in today’s service shops is exhaustive.

drondini@rrpub.com

From improper torque, to failing to add lube, neglecting to check related parts or installing components the wrong way, the list goes on and on.

No one sets out to deliberately mishandle a repair. Technicians take pride in their abilities to diagnose and repair medium- and heavy-duty trucks.

But mistakes do happen as you can see in the stories in this month’s cover feature, Terrifying Tales From The Shop.

The biggest lessons I garnered from the stories you shared are that many, if not most, of the errors that occur in the shop can be prevented.

A lot of the errors seem to be the result of lack of communication, rushing to complete a job, an outside distraction or failure to use available repair information and tools. These all can be fixed fairly easily.

Lack of communication most often occurs as a repair is handed off from one technician to the next at shift change. To make sure the technician who is taking over the repair knows exactly how far the repair has progressed, allow time for the two technicians to review what work has been completed and what remains to be done.

Then have the technician who is taking over the repair do a quick visual review paying special attention to little things like loose bolts and attaching hardware.

While the goal of all shops is to get the vehicle repaired as quickly as possible, speed should not take precedence over accuracy.

You can reduce shop errors by instituting a few simple policies and procedures.

Examine the behavior of your shop foreman. Is he putting undo pressure on technicians to get through repairs as rapidly as possible, which could lead to shortcuts that could come back to haunt you? Rather than focusing on speed, you should strive for efficiency — repairs that are done quickly but also properly.

Anything that causes a technician to take his attention away from the repair for even a minute can lead to a misstep. The Technology & Maintenance Council’s Service Provider’s Committee is working on this issue with a task force that is looking at ways to keep technicians in the bay.

Some ideas to consider are parts runners who can deliver parts to the technician or an automated parts ordering system that would allow the tech to place parts orders using a laptop located in the bay.

Perhaps the most disturbing reason for the errors is technicians who do not think they need to use technical information, drawings and schematics. Some technicians even feel they cannot ask a question if there is something they do not understand.

As the shop owner, you need to make sure you invest in diagnostic tools and that you ensure all of your technicians are trained on the proper way to use that equipment.

More importantly, you need to set the tone for the shop so that technicians will not be afraid to use all the tools at their disposal to execute a proper repair. Do not allow a technician who has a repair manual at his side to be ridiculed.

Technicians who are aware of what they don’t know and who rely on established repair procedures are more likely to get things right than is a tech who is flying by the seat of his pants and feels that reliance on manuals and tech bulletins is a sign of weakness.

By instituting these changes in your shop you can keep the demons at bay.

If You Believe All The Talk

drondini@rrpub.com

The trucking industry is reshaping itself within rapid market changes, said Jim Hebe, Navistar’s vice president of sales and marketing, while speaking at the recent Commercial Vehicle Outlook Conference.

“The conditions since 2006 have changed our industry forever,” he added. “The next 10 years will change the industry faster than any other time in the history of heavy-duty trucking.”

And Hebe is not alone in this thinking. Sandeep Kar, global director, commercial vehicle research for Frost & Sullivan, spoke about the possibility of low-cost trucks coming to the U.S. market and about the growth in safety technology and telematics.

While Max Fuller, co-chairman of U.S. Xpress, agreed that we likely would see more advanced technology options for trucks, he said whether those options would be installed would depend on what their payback was.

Technology has already changed business for truck dealers as evidenced by Kyle Treadway, president of Kenworth Sales Co., seeing a quadrupling of his dealership’s training budget in the last few years.

No one can argue that technology has had a major impact on trucks and on the trucking industry. But I am not sure that I agree with Hebe when he said, “technology is replacing experience and expertise.”

I’ve been covering the trucking industry since 1982 and during that time I have seen many changes.

Each one was heralded by an announcement that the latest technology was going to diminish the importance of personal relationships. Frankly, I have yet to see that.

I would be naïve if I said new technology won’t have some impact and may indeed narrow the edge that experience and expertise have. But Cliff Beckman, director, president and CEO of USA Truck, also speaking at CVOC, commented on the industry trend toward shorter hauls and regionalization.

Will technology really replace expertise?

He said that today four out of five of USA Truck’s truckloads move under 500 miles. Add to that the fact that Marc Rogers, senior vice president of van truckload for Schneider National, said that he expects regional hauls to grow from today’s 45 percent of Schneider’s current operation to 55 percent in the next two years.

This seems like good news for the aftermarket to me. Sure you need to stay up to speed on technology and admittedly some of you are already a little behind on that, but I also see the trend toward more regionalized fleets as a good thing for the independent aftermarket.

Seems to me this type of fleet is a perfect fit for you since you are tops when it comes to establishing and nurturing relationships.

Regionalization may give you more opportunity to be involved with more fleets and for them to come to realize they can count on you for timely repairs, parts availability and excellent customer service.

Without a doubt you must invest in the training and tools to understand and deal with all the new technology. You need to make sure you use technology to streamline your operations and reduce costs.

I don’t see technology as replacing experience and expertise. Rather I see mastering technology as the cost of entry to the truck parts and service aftermarket and a relentless focus on customer service as your competitive advantage.

So don’t avoid the new technology, but don’ fall so in love with it that you lose sight of what brought you to the dance: your ability to connect with customer, feel their pain and make it disappear.

What to do With Lemons

It is no surprise that the results of the Truck Parts & Service mid-year survey show that an overwhelming number of distributors and repair garage owners finished 2010 in the black and that many of them expect to see higher sales in 2011 as well. (For more detailed survey results see article on page 26.)

In part, this is the result of some cost reductions, but it also reflects movement in the general economy. People are optimistic about the year overall, however there are some concerns about business in the second half.

Several people I recently spoke with are very concerned about the anemia of the construction segment in particular, and about a disturbing pattern of firms stretching out payment of invoices for longer periods.

Concerns over government policy decisions also have some aftermarket players worried.

So is it going to be a good year or a bad year? I think that depends in part on where you are located and the types of customers you service. But I also think it may depend on something less concrete.

In reading the comments of survey respondents, I noticed that while some of them focused on all the things that could go wrong, others took a different approach. They chose to reflect on being successful in spite of the challenges.

Does seeing the glass as half full rather than half empty give you an advantage?

I read comments like, “We have become very aggressive and are doing what we have to do to please the customer.” Or, “We have added two product lines and are searching for more profitable lines to increase our sales.” Or, “While it takes longer for (manufacturers) to fill orders, this gives us an opportunity to expand our inventory and be the distributor with parts on the shelf. You can’t sell from an empty wagon.”

Or, my personal favorite: “It is a combined effort in all our departments to make it successful. If you’re given lemons, make lemonade or lemon pie. Be positive and most of all don’t be lazy.”

I can’t help but wonder if the distributors and repair garage owners who are more upbeat and positive are going to end up having better years than those who are negative.

Will having an optimistic attitude make them more open to opportunities that may be out in the market? Does seeing the glass as half full rather than half empty give you an advantage?

Attitude is contagious and I have to believe that owners and managers with negative attitudes are going to transfer that negativity down to their employees. Those employees may then not make the extra effort to get the sale because, after all, what’s the use. Business is going to be bad for the balance of the year.

Maybe I am off base. It wouldn’t be the first time I’ve been wrong.

On the other hand, what have you got to lose by turning those lemons into a lemon cake? It surely will taste better than the lemons themselves.

It is human nature to sit around and complain about things that we don’t like. One of our favorite things to complain about is the government and how its policies impact our lives and our businesses.

drondini@rrpub.com

While complaining can make you feel better, it does not accomplish much. If you want to affect change in Washington, you have to be part of the process. I am sure some of you are nodding your heads and thinking to yourselves that because you are a member of a trade association like CVSN or HDDA that your interests are being well represented.

Trade associations, in fact, do a good job of trying to make your voices heard, but they can’t have the same impact on an individual legislator as you can. Think about it.

How much more impactful would it be for you to go visit your Senator or Representative and explain to him or her how the laws they are enacting are adversely affecting your business?

Not sure how to go about visiting a legislator? CVSN is going to make it easy for you by hosting its first ever legislative summit in conjunction with its upcoming convention from September 18-21 in Washington, D.C.

It is time to stop assuming that someone else will take your message to Capitol Hill.

On the afternoon of September 20 the association is going to conduct a briefing and prepare attendees for the next day’s meetings with Representatives and Senators.

The briefing will not only cover the issues impacting the aftermarket, but also will give you tips on effective meeting strategies and explain the importance of follow up.

While it is a safe bet that most legislators know what a truck is and maybe even understand a little bit about the challenges fleets face, they probably are completely in the dark about what the aftermarket is and the important role it plays in the economy.

This is your opportunity to educate them about what you do and the challenges you face.

While you are meeting with our elected officials why not extend an invitation to them to visit you at your place of business so they can really see what you do?

The American Truck Dealers is encouraging its members to do just that and many of them already have hosted a Senator or Representative at their dealerships. According to ATD, in the last six months more than a dozen Congress members have visited truck dealerships.

Dick Witcher, ATD vice chairman, says, “We face so many policy challenges in the nation’s capital. These Congressional visits are our way of making sure our voices are heard. When Congress members visit your dealership, they will walk away with a better understanding of how the decisions they make in Washington effect what we do every day.”

This is equally true for distributorships and repair garages, which face even more challenges.

If you want the folks in Washington who are enacting the laws that are impacting your business to understand how what they do affects your ability to make a living, you have to stop assuming that someone else will take your message to them.

It is time for you to take your own message to Capitol Hill and maybe even bring Capitol Hill to your place of business.

You never know what might happen if our elected officials actually understand and appreciate the hard work you do. One thing is certain, if you don’t tell them no one else will.

Keep It Going

drondini@rrpub.com

Your business is your passion and you take pride in its success. You either built it from the ground up or helped steer it through the ups and downs of the trucking industry.

Many more families depend on you for their livelihood. Unfortunately, less than 20 percent of businesses pass successfully from the first generation to the second and 10 percent or less pass from the second to the third.

If you are one of those distributors whose business has made a successful transition from one generation through the next, congratulations. You know that transition did not take place accidently.

Passing a business from one generation to the next successfully takes planning and communication.

While wills, life insurance policies and trusts are a good start, they are just the tip of the iceberg. Succession planning experts say it is not usually the financial details of the transition that cause the failure but rather the emotional ones.

According to Hugh Roberts, partner/director in The Rawls Group, a firm specializing in family business succession planning, fear keeps many business owners from planning.

Passing a business from one generation to the next successfully takes planning and communication.

The business owner may be afraid of giving up control, or of making a bad decision when choosing which of his children to leave the business to and the ensuing family friction. And, of course, planning to pass on your business means you have to deal with your own mortality.

The industry is filled with a number of stories of successful businesses that ended up closing down following the demise of the owner who had failed to plan for the orderly transition of business.

If you are not currently in the process of planning who will take over your business, I advise you to at least take a few steps in that direction.

Begin thinking about some of the elements that go into a succession plan including business structuring, leadership and management continuity, management synergy and teamwork, personal financial planning, business performance, strategic planning, successor preparation, family governance and family dynamics.

Be less concerned about treating everyone fairly; rather focus on trying to be equitable and to give meaningful assistance to each child.

While you will never take all the emotion out of the process, writing covenants of expectations can help determine roles and responsibilities. This clarifies and defines core operating values, the scope of authority for each person, problem-solving protocols, expectations for keeping each other informed and performance expectations.

Starting the planning process early, detailing expectations in writing and continually communicating throughout the process can help ensure, when the time is right, that your business will successfully pass to the next generation who will keep your legacy alive.

Keeping Your Edge

I recently got back from the American Truck Dealer’s convention where most everyone was feeling hopeful about this year. Orders for vehicles are coming in slowly, but at least they are coming in.

Parts departments seem busy although some dealers are starting to see fill rates from suppliers drop a bit and a few have even experienced some parts shortages.

Service bays are filling up and customers are demanding more from their service providers, especially quicker diagnosis of vehicle problems.

The independent aftermarket always has done a good job of taking care of its service customers even picking up work because dealer shops were too full and a fleet did not want to wait a week to have a truck looked at — let alone repaired.

That was an advantage for independents; they could get trucks in more quickly than dealers. But things have changed. Most truck manufacturers recognized the need for their dealers to be able to respond, at least with an initial assessment of what the problem was, in a relatively short time frame.

What resulted was the development of programs that fall under the umbrella of Rapid Repair Assessment. While each manufacturer’s program has a unique name and certain things that are particular to its program, they all work off the same premise. Get the customer’s truck in a bay and diagnose the problem within two hours, locate the necessary parts and determine the cost of the repair. At the end of that period the dealer gives the customer an initial diagnosis as well as an indication of how long the repair will take, when it can be started and an accurate cost estimate.

Dealers are responding to the demands of customers and are changing their business models to become more nimble.

This has removed the old scenario of a fleet’s truck sitting in the dealer’s lot for days only to find that the repair is quick and easy when the truck is brought into the bay.

Kenneth Calhoun, vice president of customer relations at Truck Centers of Arkansas and chairman of the Technology & Maintenance Council’s Service Providers Committee, explains fleets want quick notification of the vehicle’s problem in order to make decisions on what to do with the cargo on a disabled truck.

Knowing within a short time span how long the repair is going to take makes it easier for the fleet manager to make decisions on how to get the load where it needs to be.

More and more dealers — either by choice or at the insistence of their OEMs — are setting aside at least one bay to be used to rapidly diagnose customers’ trucks. They are responding to the demands of customers and are changing their business models to become more nimble.

As this trend grows what once was a competitive advantage is quickly becoming business as usual, and those service providers who are not on the rapid repair bandwagon run the risk of being left behind.

In light of this new move by dealers, the questions becomes what are independent service providers going to do to regain their edge? My guess is the savvy ones already have something in the works.