Walk into most rental centers and you'll see a counter with somebody behind it, and hear telephones ringing. You'll see the counter person answering questions, giving quotes and writing up contracts either for a contractor who called in or a tradesman standing by the cash register. The fluid, hectic flow of business being done gives the impression of a busy company involved in the day-to-day transactions of the rental world.
At Red Mountain Machinery you'll see none of that. There is no rental counter. And the phone, if it is ringing at all, is probably going to a cell phone of a salesman out in the field, or to a landline upstairs in the office. And while a general rental center might be doing a hundred or more transactions a day, renting air compressors, jack hammers, chain saws and generators, a Red Mountain Machinery branch typically rents about half a dozen machines a day and might go through a whole day sometimes only renting one or two. But when it does write a contract, for a Caterpillar D-10 150,000 pound track-type tractor, or a combination of several units, the deal could be worth several hundred thousand dollars, with an average rental adding up to about $5,000.
But for Red Mountain, a typical rental transaction is often the result, not of a quick phone call or somebody dropping by the yard for an air compressor, but of weeks or months of careful preparation and negotiation.
“Most rental centers, even Cat Rental Stores, will serve the retail customer,” says Scott Johnson, sales manager for Red Mountain Machinery's Escondido, Calif., branch. “A homeowner can call up and say, ‘I'd like to rent a dozer, here's my credit card.’ We only deal with companies. Every person we deal with signs our credit application and provides insurance and is an established entity.”
Red Mountain Machinery, based in Chandler, Ariz., with branches in Escondido and Las Vegas, is the brainchild of owner Owen Cowing, who is no newcomer to the heavy equipment business. After starting with a major equipment manufacturer, then going on to a successful career working in sales for Phoenix-based Caterpillar dealer Empire Machinery, and later working with a Phoenix-based grading and paving contractor, Cowing noticed that very few companies concentrated on dedicated rentals of heavy machinery and decided to try it on his own.
Cowing knew that the key to success in heavy equipment rental would be mechanical expertise with meticulous attention to detail. He set out looking for the best mechanics he could find and raised the bar as high as possible on maintenance. Although all rental companies have to deal with the importance of maintenance and what downtime costs their customers, the stakes are considerably higher with equipment of this size.
When equipment belonging to a typical construction equipment rental company breaks down on the job, the company can quickly dispatch a mechanic to fix the machine on the job site or, if the repair requires more extensive service, swap out a machine to take its place. Most rental companies are structured to be able to deliver quickly. But delivery of machines the size Red Mountain offers is far more complicated. One can't just load a D-10 onto a tractor-trailer any time and send it on its way. Delivery of equipment that large requires a permit. In San Diego County, for example, where Red Mountain's California facility is located, there are 17 cities, each with its own permit process and varying hours of delivery. If a machine needs to be swapped out, it may be a matter of days before the company can get a substitute machine to that job site, causing expensive delays to that contractor.
“The smallest of our machines weighs more than 30,000 pounds,” says Johnson. “Frequently our deliveries require special trip permits. We have five-axle trucks that can haul up to a D8, but they can't haul a 140,000-pound excavator or a D9 or D10, so we have to hire specialized haulers. Some of the machines are so large they require a California Highway Patrol escort. It might take three or four days to get an item delivered, not because we wouldn't like to get it there sooner, but because the roads in some areas can't accommodate the rig.” It is imperative that Red Mountain Field Mechanics have the expertise and equipment to make fast repairs in the field.
Deliveries often call for accompaniment of pilot cars and typically cost from $75 to $100 per hour, with a fee schedule based on what the heavy-hauling industry charges, rather than what typical rental companies charge.
“Not only does each community have its own policing entity, but we need to know what the customer needs to permit a job,” says Barry Fickett, sales manager in Arizona, where, he says, permitting and hauling issues are even more stringently controlled. “The customer might need a water permit, a dust permit, a permit to commence work, and there are others that might come along.”
Why does the Red Mountain staff need to concern itself with the customers' permit issues? “It affects scheduling,” says Fickett. “If a customer wants four machines by Monday and we have to make ready four machines that each take two to five days to prepare, we have to consider mechanical needs and curfews. While we're preparing those machines and preparing the delivery permits, we might get another call to rent that machine. If we put our time into preparing the machine and turn down a rental opportunity and then the customer says they can't use it for a month because they don't have their permits, it hurts our business. So we engage in constant communication with our customers.”
Cowing knew early on that to succeed in heavy equipment rentals, extraordinary attention to mechanical detail would have to be the bedrock of success. But for Cowing, that type of knowledge and training began long before he took his first job in the equipment business. It began growing up on a farm in South Dakota.
“When I was a farm boy, my dad always maintained our equipment,” Cowing recalls. “He changed oil exactly on time and we were taught never to abuse the equipment. When it came time for him to sell that machine and buy a new one, he was always very successful at getting a good premium price for it, because it was always well maintained.”
As a young boy, perhaps unconsciously, Cowing learned a critical key to success in the heavy equipment rental business: not only is excellent maintenance important for customer satisfaction, but it is key to the profitable buying and selling of equipment.
“We buy low-hour machines to put them in our fleet and then at the other end of their life, we sell them,” Cowing says. “We typically get a premium dollar for our used machines because we can demonstrate all the service we give them. We do regular oil samples and use those to document the machine's condition.
“In our business, the operations aspect is just over break-even, we don't make huge profits from operations. Month to month, with equipment payments, depreciation and overhead, there's not significant profit. You might not realize profit until you actually sell the machine.”
Complete inspection
When a machine comes back from rental, no matter its duration, the Red Mountain staff performs a complete inspection. That involves a mechanic climbing inside and underneath a machine with a tape recorder, looking at every nut or bolt to see if anything is out of place, looking for possible leaks, worn hoses or belts, anything that could cause a defect and result in down time to the next customer.
“We are managers,” says Johnson. “We manage downtime, we manage planned maintenance, we understand our fleet. Our strongest selling point is our reliability. We may not have machines as new as a Caterpillar dealer, but they are just as reliable.”
Red Mountain also does a complete videotape of each machine after each rental and before it goes back on rental, which, in addition to helping its maintenance practices, helps protect it from liability.
“If there is glass broken or fenders bent or steps torn off when it returns from a rental, we can reassure ourselves that it didn't go out that way. We can mail the dated videotape for the customer to look at,” Cowing says.
Red Mountain Machinery spends between 20 and 25 percent of its rental revenue on maintenance, which far exceeds the typical rental company. But its reputation for mechanical excellence is one of the company's top selling points.
“I remember being at an open house for a rental company and its staff talking about how fast they could turn machines around from one rental to the next,” Cowing says. “We've never been very good at that. We don't just take it from one lowboy, drop it off and have another lowboy pick it up. It's not an issue of speed. I'd like us to be fast, and we may lose rental income because we won't rush it through like that, but our foundation has been to provide a machine to the customer that is going to run and not send anything out if we aren't sure of its condition.”
Red Mountain primarily rents Caterpillar equipment, although it also handles Volvo articulated trucks and is a dealer for Maintainer service trucks. But, unlike Caterpillar dealers, it buys used equipment and doesn't sell new machines. Its technical staff devotes itself completely to its rental fleet, without having the responsibility of repairing customer-owned equipment as Caterpillar dealers do.
“Our guys concentrate on our own units, and because of that, each machine is almost like a person to them,” Cowing says.
Mutual benefit
Not only do technicians need to be extremely well prepared, but the work of a sales representative for Red Mountain involves far more than just quoting rental rates. With customers dealing with complex application problems, heavy equipment rental specialists have to be able to intelligently discuss applications.
In addition to general knowledge gained through experience, Red Mountain uses a computer production analysis program written by Caterpillar. The user inputs a variety of factors, such as the grades of the haul roads, the density of the material, the lease and operating cost of all the machines they are considering, the support equipment and the capacities of the various machines. The program helps determine what machine would be most cost-effective.
“It's a valuable tool for us because it shows the customer what machine would help them make money,” says Cowing. “It gives them a comparison as to what alternative would be most cost-effective for them to do the project. We provide that service to our customers on a repeated basis. We can run articulated trucks and excavators versus scrapers and so forth. We offer all the machines, so we don't really care which alternative they choose.”
To Cowing, providing that service is part of living up to the company's mission statement, which he takes very seriously.
“‘We're here to provide heavy equipment services for the mutual benefit of all — our employees, our customers, and our vendors,’ Cowing says. “If we can't provide a cost-effective means of moving dirt at a number where our customers can make a dollar, then we don't need to be in this business. The customer has to be successful in order for us to be successful.”
“Our salespeople need a certain temperament, for managing breakdowns and repair and explaining customers' responsibilities,” adds Fickett. “They need to cover a lot of issues with the customer regarding their responsibilities for maintenance, what happens in case of a breakdown, and the right machine for the job. With this size machine, tires are very expensive, so if a customer spin cuts or punctures a tire, it could lead to $2,500 worth of repair. If the customer doesn't grease something, he might cause $5,000 worth of damage. The salesperson has to deal with those issues. The bigger the machine, the higher its propensity for a job-related repair issue.”
Red Mountain's sales staff must take into consideration the type of soil a machine is to be used in when pricing a job. For example, in the San Diego area, most housing construction is taking place on hillsides and in rocky soil, because the soft, flat areas are already occupied. “We price our machines to reflect their use on rocks, particularly big dozers,” says Johnson. “If they're going to be ripping on rock, they need to get a premium rate as opposed to pushing soft dirt. The wear on the ripper, impact damage on track roller frames and the undercarriage wear is significant. To replace the undercarriage on a D-10 dozer costs almost $50,000. When you're working on rock, bolts come loose, machines are shaking around, there is much more likelihood of maintenance in the field. So some of our pricing reflects where the machines will be used.”
With his experience as a contractor, Cowing is sensitive to their concerns and pressures.
“I understand what their pressures are and what downtime costs them,” he says. “I understand their commitment to the project owners, production rates, completion dates. I understand how important cash flow is. When they get a check, and it's a joint check, and they're trying to make payroll, and they have to find a guy to sign off, we understand that, we do everything we can to make sure that we don't hold up the line.”
Such attitudes have helped Red Mountain Machinery maintain strong relationships with its customer base, which is even more important in the heavy equipment rental business where the customer pool is a lot more finite than the one that most rental companies fish from. Without repeat business, Red Mountain couldn't survive. With it, the Red Mountain foundation, based on the highest principles of mechanical expertise, appears to be solid bedrock.
