In a year when most rental companies and manufacturers face declining volume, one software supplier has more than doubled its revenues by providing a service that helps rental companies as well as manufacturers to save money by operating more efficiently.
SmartEquip is best known as a parts procurement system, but it also provides capabilities to purchase whole goods ranging from large earthmoving machines and aerial work platforms to contractor supplies and even basic consumables such as solvents and office supplies. But looking at a larger picture, in addition to its procurement efficiencies, SmartEquip can have a dramatic effect on operations, minimizing equipment downtime by streamlining the operational workflow around the assets.
Even if parts procurement was the only benefit SmartEquip provides, the savings it can bring are startling. Some rental companies say each time it makes a parts order it costs it between $100 and $200, considering the manpower and various administrative procedures involved to complete each transaction, the time it might take a mechanic to complete the order, the time that mechanic could be spending turning wrenches rather than finding a parts manual, finding the right part, making a phone call — possibly multiple rounds of phone tag in this multi-tasking era — not to mention the double-digit percentage of parts orders that turn out to be mistaken and all the costs and delays such errors produce.
“Across the 1,500 rental store locations projected to be live on the SmartEquip Network by the end of this year using conservative estimates, we are on track to regaining more than 1 million hours in previously lost service mechanic ‘wrench time,’” says SmartEquip president and CEO Alex Schuessler. “That's the equivalent of more than $45 million in service technicians each year. Put another way, we have freed up, in terms of efficiency, about a thousand full-time service mechanics. This does not include parts guys, contractor supplies people, equipment purchasing personnel and more.”
It's not surprising that SmartEquip's latest growth has occurred during a recession, with companies almost desperate to find improved processes that can save them time, money and manpower.
“This is due to two factors,” Schuessler says. “First, companies have become significantly more efficiency-focused, and our technology is very much part of the lean paradigm. And second, virtually all fleet owners and OEMs have gone through massive headcount reductions, and their reliance on technology such as this has become more critical than ever before.”
SmartEquip's measures indicate that the average rental company location, with about $5 million in first-cost fleet, saves about 580 hours annually in lost wrench time using SmartEquip. A mechanic's time can be spent researching parts information, including serial-number-specific information, supercession information and more; looking for service documentation; filling out work orders, purchase orders and requisition forms; returning misordered parts; calling service support, parts support and more. “If you multiply 580 hours per location times 1,500 locations on our system, you get about 870,000 hours,” Schuessler says. “If you add the roughly 15,000 to 20,000 users on our web-based system, we quickly get past the 1 million-hour mark.”
For those who haven't seen a SmartEquip demo in action, the parts procurer finds the part he requires on a visually graphic SmartEquip screen with 3-D type technology and simply clicks on it to order. He doesn't need to know the correct part number, which may have changed. He doesn't need to know the precise name of a part, which may have been changed by the manufacturer.
Once ordered through SmartEquip, the manufacturer has automated any human mechanisms to instantly respond, and the parts procurer on his end has no more paperwork to do to process the requisition because the parts-procurement system is integrated with the rental company's accounting software system. The process is similarly streamlined on the manufacturer's end.
If the customer needs additional data from the parts manual, the manual is electronically available. He doesn't have to look through shelves for a manual that may be missing or outdated, the online manual is connected to the procurement system so that if the mechanic reviews the information in the manual and figures out which part he needs, he just has to click on it to order it.
A rental company might deal with dozens or, more likely, hundreds of different categories of equipment and more than one vendor for each of those category classes.
Hence hundreds of manuals to look up information about a part are available in one system. Rather than have databases with hundreds of vendors to contact, different websites to order from, different procedures and passwords for each of those websites, dozens or hundreds of phone calls to make to order parts, it all is reduced to one essential point of contact. SmartEquip serves as a funnel, reducing these multiple contact methods, points and actions to a single portal where rental company personnel, once logged on the system, can order directly from an array of manufacturers.
Once the order is made, the process is simplified further as the act of ordering automatically generates a purchase order in the rental company's management software. “Everybody struggles with paperwork and record keeping,” says Brad Coverdale, director, product support for Fort Mill, S.C.-based Sunbelt Rentals, which Schuessler says has taken SmartEquip technology farther than any other rental company. “With SmartEquip, they don't even have to keep records anymore because the order to the vendor is created at the same time the purchase order is created, so there's no double entry. Before we used SmartEquip, our guys would write an online order on the vendor's website, and then they'd turn around and log in to our RentalMan system and they'd write a P.O. in RentalMan. So every part order would be recorded twice. That's a big time savings.”
Considering that Sunbelt transacts more than $1 million in parts through SmartEquip each month, the back-office savings are significant. “At Sunbelt we have now proven a greater than 5-percent reduction in labor costs associated with processing payment of parts invoices using SmartEquip to automatically reconcile the matching of purchase orders, receiving reports and invoices,” says Charles Snyder, Sunbelt's executive vice president of fleet operations.
The time savings is multiplied by the number of vendors a typical rental company deals with as well as the number of hats a service technician might wear at a rental center. “Think of a rental operation as opposed to a dealership operation,” adds Coverdale. “In that dealership you have a parts procurement guy and that's what he does. In a rental operation, we're combining that parts procurement guy with the service manager and in some cases, with the technician as well, the same guy wearing all those hats. SmartEquip gives them a sole source opportunity to manage one process rather than 250 active equipment vendors from sewer augers to manlifts.” Through SmartEquip's Vendor Portal application, Sunbelt was able to upload more than 50 OEMs not presently on the SmartEquip Network, and is heading towards having 100 percent of all equipment-related ordering conducted electronically.
“Our shop foreman, on some level, manages the product support of each of those, which means different websites,” Coverdale says. “This provides a common platform for sourcing high-volume parts as well as seldom-needed parts from multiple OEMs using the same sourcing process and the same number of keystrokes. When he needs to shop for a product that he doesn't buy every day, he's got a portal or shopping mall that he's already attuned to. Instead of logging into John Deere or calling John Deere and waiting on hold, he gets on our SmartEquip system, places his Deere part order, and within seconds can order from JLG, Wacker, Multiquip, Genie and more. Whether it is orders or looking up schematics or other product support information, it's all right there with a few clicks. So you strip all that non-value-add time out of his day and it makes him much more efficient.”
The efficiency has also enabled Sunbelt, and other rental companies, to dramatically reduce parts inventory. Sunbelt has noticed company improvements in other areas as well. “The whole process of receiving a piece of equipment back on our yard that was on rent, checking it back in, determining repairs or service needed, processing those repairs and service and getting that machine back out on the ready-to-rent line has been, based on our analysis, significantly improved,” says Snyder. “That doesn't mean if we save X,000 man hours per year because we're more efficient, that those man hours translate into cost reduction because we sent mechanics home. It means that we have freed up service technician and service management time to focus on more preventive maintenance as opposed to corrective maintenance. The percentage of fleet available to rent has significantly improved. My belief is that is a result of our service management team and service technician team having more time available to focus on prevention rather than correction. They aren't firefighting all the time.”
The reduction of errors adds to costs savings. Every mistaken parts order leads to a re-stocking fee, additional round-trip freight charges and, more critically, increased equipment downtime.
Many of the industry's largest rental companies are SmartEquip users, such as long-time advocate United Rentals, more recent partner Sunbelt Rentals and Hertz Equipment Rental Corp., which joined the SmartEquip Network last month. Cat Rental Stores and Volvo Rents franchise rental centers are also SmartEquip users.
Once primarily a tool for large rental companies, SmartEquip has concentrated on making its system functional for the smaller rental company. A number of middle-sized companies such as Fort Worth, Texas-based RentalOne, have fared well with the system and SmartEquip will soon be announcing a series of products designed for independent rental companies. As a result of the recession, SmartEquip recognized rental companies were having difficulty affording the investment to join the SmartEquip Network, so it recently switched to a subscription-based revenue model: fleet owners pay a monthly connection fee and then rent the services they need. They pay according to the amount they use the Network, and that scales with the company's number of locations and the particular SmartEquip functionality in use. Similarly OEMs pay a monthly connection fee and services fee and then pay according to the number of transactions. As a result, companies have a zero-dollar Capex budget as they sign up and the fees are in the form of expenses, subscribing to a service.
“They essentially minimize risk exposure, smooth their cash flow and expense as much as 100 percent of the cost,” Schuessler says. “As a consequence, we are able to demonstrate a positive return on investment within the first 60-90 days of being on the Network, as well as offering the flexibility to unsubscribe if the value is not what they expect. They can pay as they go, as opposed to making massive investments upfront and then capitalizing this over years to come.”
Manufacturers have been effusive in their praise of the value of the SmartEquip system. “We have adopted SmartEquip as a go-between between our back-end systems and the back-end and front-end systems of many of the national accounts,” says Chris Barnard, president and CEO of Wacker Neuson, Menomonee Falls, Wis. “They have allowed us to not only save at our end but also allowed us to go to those accounts and offer value to them by taking the cost of their processing orders, which were very significant in the manual days, down to virtual levels.”
Barnard says Wacker's costs of processing each parts order was just below $100 and for most of its rental customers the costs were higher. “With the thousands of orders we process, the savings add up very quickly,” he says. “We could never have achieved the efficiencies in our back-office organization so it was the right idea at the right time.”
“There were significant numbers of mistaken orders before,” says Pat White, sales operations manager for Peosta, Iowa-based Mi-T-M. “It's much higher with a phone order and you're working with different people who use different nomenclature for different components. One person might call an item a ‘loader valve’ and another calls it a ‘safety release valve.’ That can cause a lot of confusion.” Mi-T-M has adapted its technology so that even rental companies that are not on the SmartEquip Network can have access to SmartEquip's support.
“The costs savings through parts procurements has been a big piece of it, but I think we'll end up with warranty, remanufacturing, rebuilding, sales of used equipment, pretty much everything that happens after the initial sale,” says Craig Paylor, president of JLG Industries, a SmartEquip user since 2001. “There is used equipment and the aftermarket, new equipment sales and delivery tracking. The opportunity for that system is endless.”
Information from service bulletins are integrated into the system and any change in equipment specifications, parts numbers or other details related to the equipment is automatically updated. Customer's warranty information is handled in a similarly seamless manner. If there are any updates on that particular part or piece of equipment, it is automatically downloaded to the customer's system.
Ease of access to equipment data and knowledge is another area SmartEquip is working on, which will help rental companies comply with environmental regulations. “Registration processes in California are probably going to expand into other states across the country before we know it, and the ability to get to detailed information in a fast time period and from a large volume at one time is a big challenge for everybody in the industry,” says Coverdale. “Every fleet owner and every OEM has been trading data for the last couple of years about which machine serial numbers have which engine built into it. The application is giving us access to accurate information in a much faster timetable.”
One of the latest manufacturers to join the Network — Deere & Co. — brought about the integration of equipment dealers into the process. In the past, processes such as parts procurement were primarily involving the rental company and the manufacturer directly. A new application has brought the dealer into the mix. “As opposed to other manufacturers that get an order from the application and the order goes to a central clearinghouse and then is shipped, the Deere application takes the order, sends it through the Deere system within seconds and delivers it to local dealers,” explains Coverdale. “We can pick up the order from the dealer will-call or have them drop-ship it to us directly, whatever works. It's the first relationship that really brings the local service providers that we work with into the fold from an OEM perspective.”
As Paylor says, SmartEquip, barely a decade old, is now becoming a household name in the rental industry. In another decade, it may be as indispensable as a point-of-sale rental management system, easing the rental industry into the lean era.