April 11, 2013
This month marks 45 years since Bud Reese and Jim Moss got together to form the Council of Fleet Specialists (now CVSN).
That event was a watershed moment because it was the first formal acknowledgment of the unique business problems and opportunities shared by independents in the heavy-duty field. It marked the early signs of organization within the market, as well as a clean separation from their automotive and light vehicle brethren.
The ensuing four decades have been a wild ride indeed, with fleet specialists having to navigate:
• 20+ percent interest rates in the 70s;
• Arrival of groups in the 80s;
• Distributor rollups in the 90s;
• Supplier turmoil since 2001
Throw in a liberal dose of OEM dealer challenges, customer consolidations and new technology. Then add an acute technician shortage and ongoing government intervention.
With all of it, one could really question whether we’ll ever make it to 50.
We will, but not without navigating some pretty treacherous crosscurrents, especially in the next two to three years. Our customers also face interesting times, including:
• The continuing encroachment of Euro-style vertical integration of components, and the possible attendant rise in proprietary parts and decrease in spec.
• Relentless tightening of emissions and safety standards. Even the remarkable progress in the past couple of years will not satisfy a Democrat-dominated Washington bureaucracy.
• Constantly changing hours-of-service and CDL regulations complicating driver retention and equipment scheduling and purchasing.
• Chaotic fuel cost patterns, alternative fuels and the next rounds of ‘EPA help.’
I feel that between now and 2020, we as an industry will have to get our collective arms around some intriguing distribution issues, most of which have not showed up on the radar nearly as prominently as they will soon:
Private Labels: The increased role of ‘house brands’ by group members will have a direct effect on the support relationship between traditional supplier and distributor. Further division of stagnant demand will call for new rules.
Extended Supply Chains: China, India and Turkey are great additions to the high-tech manufacturing capacity of most major suppliers. It will be interesting to see how flexible these ‘extended’ chains are when business spikes (unpredictably, as always). And of course, we’re only a tsunami away.
Selling of Service: Long predicted as the salvation of distributor profitability, fee-for-service has been slow to make significant inroads. We need this to catch fire soon.
Return of Rebuilt: Longer component life cycles dictate splintered replacement demand and make ‘new over rebuilt’ a tougher call. Economic forces including the ‘green’ aspects and unpredictable costs of copper, aluminum and zinc also bode well for a rebuild resurgence.
Torrent of Technology: New products and systems will be more complex than the traditional products they replace. Distributors will really have to climb the training curve, especially in areas such as vehicle and driver monitoring, alternate fuel handling, electrical systems, filtration / exhaust particulate control and vehicle stability.
Shift to ‘Pull Marketing’ of New Technology: Everything currently published on the future of industrial sales technique agrees that new product will be sold utilizing the Internet to do most of the pre-order ‘informing’ and ‘offering.’ What will the role of smaller supplier sales forces end up?
Independents will get these new hurdles figured out, but I’ll bet that there will be an unprecedented attrition rate at the same time. As many as one third of the parts and service locations now operating could change owners or close by the end of 2015.
Consolidation and the influence of alternative types of financing will reshape the industry’s map. Additionally, look at the demographics of both owners and employees. I’m not the only one getting old!
The next decade for this market will welcome visionary new approaches and increased sophistication in all aspects of operations. In general, distributor and service specialist profitability will increase, as will our industry’s visibility and ability to attract new talent.
The progress that we’ve experienced probably didn’t seem possible forty five years ago. Take a moment to imagine the excitement of the next five.
Bill Wade is a partner at Wade & Partners and a heavy-duty aftermarket veteran. He is the author of Aftermarket Innovations. He can be reached at firstname.lastname@example.org.