A rental company wants to order an expensive piece of construction equipment. After two days of playing phone tag with a sales rep, the purchasing official reaches the rep by phone to arrange the order. The rental company wants a few modifications. The sales rep, talking by cell phone as he drives amid static on a crowded highway, suggests the buyer fax the specs he wants to his office.
After two days the fax doesn't appear and the sales rep begins another round of phone tag with the buyer, who did of course send the fax, but the sales rep never found it. After the delivery is eventually made, there are problems. It isn't built to the exact specs the buyer wanted and the manufacturer sent the wrong attachment. The buyer goes to his out-of-print parts catalog, gets on the phone and places an order for an item that no longer exists and the order taker doesn't know where to find it.
Does this sound familiar? Obviously most manufacturers operate far more efficiently or they would no longer be in business. But suffice it to say that at almost every step in the process of ordering equipment, modifications, attachments, parts and the fulfillment of those orders, miscommunications and delays frequently take place, making these procedures complicated and subject to human error, wasted time and money.
Will electronic commerce solve all of those problems and make everything automatically easier? Not by a long shot, but systems are being created by a number of software suppliers in partnership with manufacturers that will facilitate a wide range of processes that are part of everyday business in the construction industry.
Although the dotcom bubble burst over the past year, and people realized that a web site or an electronic service wasn't an automatic path to an IPO or early retirement, the need for electronic services to enable companies to save time and money and go to market more efficiently has never been more apparent. And although many manufacturers view e-commerce as a passing fad and remain content with 20th century communication methods, others have been eager to enter the new electronic world and have aggressively sought dialog with their customers in search of ways to make it easier and more efficient to do business.
“In this industry, 75 percent of the calls that come in to a typical manufacturer are about routine matters,” says Ethan Zoubek, CEO of Conduit Internet Technologies, a software company specializing in Internet applications for construction manufacturers based in State College, Pa. “Did you receive my fax? Is my order being processed? I just want to check that you got the order correct. When was it shipped? In how many days will I receive it? If many of those calls could be eliminated and transitioned to a personalized web site, everyone could be much more productive and customer service and satisfaction would increase.
“We're not talking about removing the personal element from the relationship. Rather, we're talking about freeing up sales and customer service reps to spend more time with the customers who need them. That improves profitability.”
One of the ways manufacturers and their customers can become more productive is finding ways to make the learning and training curve of personnel at both ends more cost-effective. “If somebody at a rental branch is placing an order for a piece of equipment with a pin hitch even though all mixers ordered by that company need a ball hitch, the system can correct that person,” says Zoubek. “Maybe the person placing the order or the person taking the order is new and doesn't know. We can replicate and automate those rules. That is a tremendous resource for a manufacturer, because there is always going to be turnover — on both sides of the channel.”
Suppose the order taker processes the order as it was called in. The machine will be built according to the wrong specifications, then it will be packaged and shipped to the branch and the package will be opened. Eventually the rental company will return the machine and the manufacturer will do more paperwork and order a new one built to the proper specs, and ship it out. Hours of time and paperwork will have been devoted, and many dollars will have been wasted in shipping and handling costs because of simple human error that could have been avoided by an e-commerce system that automatically noticed that a mixer bound for United Rentals should have a certain series of specifications.
That's just one of the many ways e-commerce is being used by manufacturers to run more efficiently and help rental companies and equipment dealers do the same. And with e-commerce being such a new terrain, new systems are being formed and created on an ongoing basis according to need, essentially a new industry in the process of inventing itself.
“We have a software platform developed specifically for construction manufacturers that sell through channels like dealers,” says Zoubek. “Once we install the product, we can tweak and customize the application to the unique business processes of the customer. Part of the enterprise is to enable the customer to download product data in whatever format they require. If they need pictures of trench rollers, for example, they may need high resolution images for a print catalog, low res[olution] for a web site, they need all the specs, we provide access in whatever format they require.”
Saving money is likely to become even more important for rental companies over the next few years, particularly as the industry passes through a rough economic stretch. Global satellite systems with onboard diagnostics are another electronic service gaining in popularity. With the current trend on the part of many rental companies, particularly larger ones, to age their fleets and lower capital expenditures — for example, United Rentals spent about $350 million on new equipment purchases this year as compared to more than $900 million in 2000 — service needs are likely to be increasingly important. Their service departments will be challenged and stretched to capacity. Hence fleet management services that enable them to spot equipment problems in advance may be worth some investment.
Where's my order?
To most manufacturers, one of the primary functions of e-commerce is their order-processing system. “Manufacturers are trying to do three main things — marketing, selling and finally servicing equipment,” says Aseem Mital, vice president of marketing for Tavant Technologies, Santa Clara, Calif. “On the selling side, the first step is to automate the order-management process.”
Most order-management systems have people staffing call centers, fielding order calls and inputting the data or inputting order information from faxes. A considerable amount of staff time is spent in organizing the data to process the data. One primary drawback is that order numbers of equipment models are generally drawn from print catalogs that may have sat on the desks of equipment distributors or rental center purchasers for years. Equipment categories and model numbers are frequently outdated. E-commerce advocates point out that a real-time electronic catalog could be consistently updated on a web-based system.
“These orders often come in from outdated catalogs so often the orders are for outdated models because paper-based catalogs are difficult to keep current and get dated quickly as manufacturers continue to innovate,” says Zoubek.
Web-based ordering systems could go a long way to eliminating paper trails on orders from multi-branch locations. “National rental chains may want to set up an equipment procurement portal to automate these interactions so that each branch can select from an approved catalog, with approved models and pricing,” says Mital. “Otherwise each transaction, once the initial negotiation is done, is a sort of free-for-all, resulting in a lot of paperwork between branch and corporate and branch and manufacturer.”
Mital points out that until now this technology has been expensive. But, like most electronic developments that start out expensive, prices are now becoming more affordable for rental companies of all sizes.
Many rental companies welcome the opportunity to order items electronically. “By ordering electronically, it's easy to figure out what we want to order or to resurrect past orders,” says Ellen Steck, vice president of ebusiness at Rental Service Corp., Scottsdale, Ariz. “This used to be a more cumbersome process, using fax and phone and often signature issues were created. And manufacturers have information and detail that helps us to be sure that we're ordering the right equipment and parts to begin with.”
To some manufacturers, ordering online has already become standard for their dealer networks. Pooler, Ga.-based JCB's distribution system was designed to facilitate rapid electronic ordering of machines and parts. Dealers log in to a secure site and have access to machine and attachments pricing, with configuration and order codes and a quotation function. More than 95 percent of JCB's worldwide dealer orders are now received electronically.
By being able to scan a company's product catalog, purchasers can be sure that the particular model number they are ordering has the right specs and options. And many manufacturers have online configurators where the customer can build the product they want.
“It's like a computer-buying experience on a Dell Computer web site,” says Mital. “You start off with the base, and you build the product by configuring a series of options.”
Not only can purchasers have a machine custom-built to the unique specifications they want for their customers, but multi-branch rental companies can set up parameters for all their branches. Then when a particular branch calls in to order that machine, the system can be set up to automatically provide it according to the specifications already agreed upon, charging prices already negotiated by the corporate office.
Parts of the whole
For most manufacturers, the parts business is the most lucrative segment of their business, where the highest margins can be realized. But distributors and rental companies often seek out other after-market sources rather than the original manufacturer. They don't only use alternate sources because of price — they are often motivated by convenience factors. Rental companies particularly face great time pressure when repairing machines that are being utilized on job sites. They need convenient and quick sources for parts.
Recognizing that they have lost a lot of parts business, providing current parts catalogs online has been a major e-commerce priority for many manufacturers. The catalogs are kept up-to-date, featuring built-in order functions, and often have online pictures and schematics designed to help customers ensure they are ordering the right parts, along with explanations of what the part is used for and insertion instructions.
“It's so much more efficient and effective, because they can make changes at any time and the users have all the current information,” says Jack Shea, CEO of Solutions by Computer, Springfield, Mass. “It's a huge efficiency item that can save manufacturers millions.”
Parts services go well beyond parts manuals. Manufacturers want to see their dealers be more profitable and enable them to lower the amount of inventory and parts stock they have to carry, yet still be able to service customers quickly. It behooves manufacturers to enable their dealers to be able to access parts quickly and easily without having to carry huge quantities on site.
Some manufacturers, such as Komatsu, have set up their electronic ordering systems so that end users can order parts directly from their local dealers' inventory. Komatsu dealers have access to real-time data and can search for parts by full or partial number, description, remarks, serial numbers and graphics within seconds.
And Earthking, an electronic services provider owned by Terex (See accompanying story, page 14), offers used, refurbished and generic parts as well as OEM parts.
Used but not forgotten
Disposal of used equipment has always been integral to an overall inventory and fleet management policy for rental companies and distributors. Manufacturers have placed great emphasis on helping their dealers dispose of their used equipment profitably. This need has taken on even greater urgency for manufacturers in recent years as national rental companies have insisted that their suppliers buy back used equipment as part of a preferred supplier relationship.
National rental companies such as United Rentals, Hertz, RSC and others, have their own used equipment web sites, but smaller rental companies and dealers often need assistance to dispose of equipment quickly and profitably.
In recent years independent Internet marketplaces came on the scene offering online opportunities for used equipment disposal, attempting to challenge auctions for supremacy in the equipment disposal arena. Although a couple of these marketplaces are growing, such as Pleasanton, Calif.-based Iron Planet, many manufacturers prefer private channels for used equipment disposal.
“Now manufacturers are more comfortable with the ability to have a hybrid model where they can advertise to find used equipment within their channel,” says Mital. “They would rather make their own equipment available through their own dealers, offer a factory warranty, and have a manufacturer-endorsed inspection rather than a third-party inspection.”
One such Web site is Caterpillar's www.catused.com, powered by Point2 Internet Systems, one of Canada's leading Internet players.
Earthking is customizing web sites to help customers list their used machines, and driving traffic to those sites. Earthking also helps end users with large equipment inventories — such as Martin Murietta Space Systems — to dispose of equipment by serving as their primary used equipment disposal vehicle. Earthking's global size and reach enables used equipment sellers to connect with buyers from around the world and can help supply purchasers with parts, attachments and other needed components of the used machines they purchase.
JCB's North American web site was re-launched recently, powered by Louisville, Ky.-based Ironmax, a major e-provider to the construction industry. The “e-zone” allows them to list comprehensive details of their used machine stock on the web, and includes the facility to check rental rates and machine values through web-driven databases.
Filing a claim
One of the most time-consuming, often-delayed equipment services is the warranty claims process, which can take months.
“These claims usually come in by fax or are electronically submitted through e-mail, but then still have to be data-inputted into back-office systems,” says Tavant's Mital. “People still have to manually review them, review the rate and the parts that were used. All this can now be done electronically and of course they can be reimbursed electronically as well.” Lynne Woodworth, president and COO of Honeoye, N.Y.-based Stone Construction Equipment says Stone's new system can process and review warranty claims “instantly.”
Re-renting made easy
When a customer inquires about purchasing or renting a particular type of equipment with a certain set of options, one of the most dangerous responses a dealer or rental company can make is “I'll get back to you.” The customer probably knows what that means. The dealer will get on the phone to the factory or to several other dealers or rental companies to see if anybody can fill the specific request.
That process, if followed through at all, is likely to take a few days while the busy rental person plays phone tag with a number of contacts. The experienced contractor knows this and will make other calls on his own. By the time the rental person gets back to him, if he can find the piece, he may discover the customer, whose sense of urgency is greater, has already found it. Studies have shown that rental companies and dealers lose more than 10 percent of their business this way.
There is an electronic solution. If the rental company or distributor is part of a dealer network, he can go online and do a search of neighboring dealers in that network. This type of network search is common in the automobile business and benefits dealers immeasurably. While the customer sits in the dealership, or waits on another line, he is able to come up with an answer in a matter of minutes.
In the car business, typically the original dealer will then initiate the transaction, do the paperwork with the customer rather than send him elsewhere, and the two dealers can split the profits in an equitable way. If this can be done in the car business, it can be done in the equipment business. The technology is already here.
Technical service online
Starting with relatively simple services such as viewing service manuals online, the service area is one of the most sought after electronic features. “We have all our technical services available online, troubleshooting, service manuals and parts catalogs,” says Woodworth. Komatsu's Russ Walker says the strongest request his company has had has been for service support tools.
“It's a tremendous benefit when mechanics can go onto a suppliers' web site and look at the tech specs and details they need,” says RSC's Steck. “It also prevents the need for them to store all this material. Sometimes all they need is a quick check, other times they may need to study details for long periods and it's all archived so well online.”
Putting out service bulletins on models becomes much easier as well. When preventive services have to be performed because of certain problems discovered by the factory, or recalls have to be performed, it is much easier to notify customers. “You know exactly who has purchased what and you can send notifications electronically about what has to be done,” notes Mital.
Give the people what they want
One of the biggest challenges for manufacturers is accurate forecasting. Predicting customer demand and economic conditions is a difficult art even in times of growth; and much more difficult in tumultuous and unpredictable economic periods. Often more difficult than predicting demand is figuring out what models are likely to be desired.
Manufacturers often make production decisions based on sales reports from distributors. Using past methods, these reports often are slow, sporadic and inaccurate.
E-commerce relationships between manufacturer and dealer can significantly speed up and pinpoint this process. Now manufacturers can maximize efficiency by being able to tell exactly how many units are in a dealer's inventory at any time. Also they can know what models are selling (or renting) and can chart the trends in demand. With that knowledge it is much easier for the manufacturer to plan production according to the likelihood of demand.
Listen to the customer
Getting feedback from customers is always a challenge. Focus groups and surveys are common methods, but require a lot of planning and organization. Although face-to-face contact will never be completely replaced, online user forums using web-based teleconferencing are becoming valuable communication tools.
Online chats are another method of enhancing customer service, enabling customers to obtain immediate response to questions about availability or service with an online customer service representative. Companies are also using online systems to register people for conferences and dealer meetings.
Take it to the bank
Manufacturers, distributors and rental companies can benefit from new developments in online banking, which can help them in their own ability to chart their company's economic situation.
“Having bank account records directly on the web makes a difference in our financial reporting,” says Bill Veneris, CEO of Interactive Management Systems, Colorado Springs, Colo. “We don't wait for the bank statements at the end of the month anymore. Our general ledger is reconciled and balanced out daily because we have access to that information. It makes us more efficient.”
Also, increasingly, manufacturers offer financing programs to aid their customers in the equipment purchase or leasing process. Electronic methods enable them to perform credit checks more quickly than ever.
Which is which?
Veneris is also enthusiastic about the ability of rental centers to integrate e-commerce systems with rental management software. “Many of our users are thrilled with manufacturers that have equipment specifications directly available electronically,” Veneris says. “They can be in the middle of writing a contract, and if their customer has a question on a product, they can click directly on the manufacturers' site and pick up the information they need. So basically at the counter you don't just have the counter system anymore, but you really have access to anything that the manufacturers will provide for you. In the future, sometimes the counterperson won't really know if he pulled something off the rental company's server or the manufacturer's.”
The check isn't in the mail
Electronic invoicing and payment is a new service many manufacturers are offering and if they aren't offering it yet, many are making plans to have this service available. Deere & Co., for example, recently instituted a system called PowerTrack, which enables electronic accounts payable and receivable, and links logistics and financial processes for greater efficiency and management control through complete electronic payments from the beginning to the end of the shipping cycle. Service providers can receive payment as quickly as 24 hours after service completion, in contrast with 30 to 90 days when a paper-based process is used. Credit checks are also quickly facilitated through online means.
Jobs.com
In this era of fast turnover, manufacturers and rental companies can post job openings on their own web sites, often enabling companies to fill employment vacancies without having to wait for newspaper ads to be published. The job is posted, the resume received, and background checks conducted through fast electronic communications.
Training 101
Many manufacturers are relying increasingly on the Internet to train their employees and operators using their equipment.
“We try to identify the training needs for operators,” says Norbert Dudek, vice president of marketing for Earthking. “We create customized training, which doesn't just focus on the machine but on productivity. Detailed hands-on training can go from operator training to train-the-trainer programs, to policy creation, to training assessments for particular customers.”
In many respects, e-commerce is a way of doing business whose time is now for many and will be soon for many others. While one might consider many of these services a luxury during an economic downturn when many manufacturers are cutting down on production facilities and laying off valuable employees, many are beginning to look at e-commerce's potential for cost savings with a new eye as a result of these realities. Providers of electronic services say they are getting more calls than ever from manufacturers concerned about cost-cutting over the long haul even though an initial capital investment would be required.
“Manufacturers may not be able to do all of these services, but automating the warranty-claim process and the order-management process can be done for a reasonable investment,” says Conduit's Zoubek. Tavant's Mital agrees that for a limited investment, smaller manufacturers can concentrate on those two areas for quick cost-savings. “Even limiting investment [to those two areas], manufacturers can expect to realize 2 to 3 percent improvement on their margins, even more in some cases.”
And the very fact that many rental companies are cutting down capital expenditures and aging their fleets will inevitably be putting greater demands on their service departments, thus making electronic relationships between them and their suppliers more important than ever.
“Information is going to become real valuable to the fleet maintenance people at rental houses who are concerned about preventive maintenance and cost containment,” says Larry Thomas, director of national accounts in rental markets and industrial business for Cummins Engines, Columbus, Ind. “Some rental companies may be interested in real time technological information on high end rental equipment where it does go out for longer rentals and downtime is a real big revenue loss. Many of these engines can provide information to help them stretch out that ownership and make more money off the machine.”
Although many manufacturers still believe the old ways will work and electronic commerce is a passing fad, more money will be spent on the development and installation of e-commerce systems over the next year or so than ever before. And, hopefully, more money and time will be saved and more efficient ways of doing business created.
Electronic Tracking: The Future Is Here
The service department of C.C. Mangum Contractors received an alert of an engine overheating condition on an articulated truck one recent late afternoon. An immediate check showed that the operator had turned off the machine and therefore could not verify the problem. A service rep checked the machine first thing the next morning and discovered water in the oil, indicating either a cracked engine liner or a bad o-ring in the area of an injector tube.
By catching this problem early, C.C. Mangum avoided a catastrophic engine failure and probably saved as much as $5,000 off the approximate cost of $12,000 for a complete engine rebuild.
It's not exactly what is usually defined as e-commerce, but electronic equipment monitoring as practiced by Fleetedge in this case and other companies as well in an emerging new field, can save fleet owners vast sums of money by discovering problems service departments don't notice.
By use of a cellular-enabled “black box,” similar to those utilized by airlines, companies like Fleetedge can determine the amount of hours a machine is used, the precise location of a machine, and mechanical problems that often have yet to produce symptoms of disrepair. Reports are made daily, allowing maintenance teams to view which machines have problems and which are due for maintenance.
In addition to cutting maintenance costs, electronic tracking systems can help rental companies protect their equipment from theft and ensure accurate utilization readings.
“We use Fleetboss, Deere's tracking system, on a number of our Deere backhoes,” says Mark Musgrove of Tejas Equipment, McAllen, Texas. “We recently had trouble with a customer who ran up to his time limit on a backhoe, so we called and said he had to pay additional rent,” says Musgrove. “But he wouldn't come in. We gave him a deadline, he agreed, but then failed to pay. We went to the location and couldn't find the machine. We looked on the Internet, and saw that he had moved it. When we showed up at that location, his jaw hit the ground. So he came in and paid. Just that one deal paid for the monthly cost of using the system.”
Musgrove already has yielded substantial cost savings in the service area. “We can know before a mechanic even goes to the site if the vital signs are normal, if it's a small problem like a battery connection and if there's a likelihood that he can fix the machine on the spot,” he says. “Like all electronics, it's expensive when it first comes out, but then becomes affordable. It will have a huge impact on insurance rates. It's going to bring major changes in the industry.”
