In this shaky economy, the service department of a rental company is more important than ever. Indeed, its performance can make or break a rental company in an era where contractors have more choices on how to fulfill their equipment needs.
Not only is service performance more important because of the heightened nature of competition, but with rental rates as low as they've been in years — and perhaps lower than ever in terms of percentage of investment — many rental companies are looking to the service end to supplement lost profits.
As rental companies attempt to increase the community of customers that rent rather than purchase equipment, one of their top selling points is that rental can help the contractor eliminate fixed costs. However, without offering top mechanical performance, that selling point is lost.
“One of the reasons many contractors are going toward rental is they don't have the shops, mechanics and lube trucks that they used to have,” says Bill Escue, corporate equipment manager for Fort Worth, Texas-based Crescent Machinery Co. “They've reduced their support infrastructure because they don't want that expense any more, they want the rental company to do it.”
Although not all rental companies want to expand their service capability or take on outside service work, many companies are looking for ways to run their shop more effectively and economically. RER asked a number of rental companies what makes their service departments tick.
Ounce of prevention
The ability to repair equipment is important, but nothing is more essential than preventive maintenance, thus making the old “ounce of prevention” cliché an important axiom to keep in mind. Organizers of tightly run rental shops adhere strictly to manufacturers' recommendations about service interludes and for good reason. Not only are breakdowns on job sites more costly than preventive maintenance, but observance of recommended service intervals — and the ability to document adherence — is a must for warranty claims, sale of used equipment at a good price, legal defense in product liability claims and general overall equipment health.
Keeping track of required service intervals is easier than in the past because of computerization. Software programs are designed to remind shop managers when machines are due for particular inspections and some can interface with hour-meters to let service managers know when a piece of equipment in the field is due.
Many rental companies subject their equipment to complete inspections every time they return from a job site, and some companies send service technicians out to perform scheduled maintenance onsite.
“We run every piece of equipment through the shop when it returns from a rental,” says Ron Peterson, director of operations for Phoenix-based Sunstate Equipment. “Our service work orders have an itemized list of things to check for after equipment is returned, and it doesn't matter if the piece was on the job for one hour, one day or one year, we run it through those checks. When a piece is returned, we generate a return contract that automatically prints the machine's service record so no matter which branch it's returned to, that service sheet tells the shop personnel what procedure it might be due for.”
“Each returned rental item undergoes a rigorous test and run procedure before it is put back into inventory, regardless of the duration of the rental,” adds Lister Fielding, managing director of HSS Hire Service Group, which owns Denver-based HSS RentX.
“Test-and-run procedures may involve anything from oil contamination inspections to simulated function tests. Our information technology tracks the equipment from the time it is logged off rent to its physical progress through the shop, and records its suitability for re-entry into the rental fleet.”
When a machine is on a long-term rental contract, the rental company may not be able to wait for the machine to be returned. Rental companies send service staff to perform the procedure onsite, or a replacement machine while the machine is being serviced.
While almost all service managers agree on the importance of preventive procedures, flexibility and practicality have a place.
“We try to be flexible in our approach to customers and to customize programs around customer needs,” says Jerry Eastburn, service manager for Roland Machinery, Springfield, Ill. “We look at the customer and consider several questions: Is the customer transient, that is, a road builder that moves around? Or is it a quarry that stays in one location? We look at the distance from our location to the jobsite. Some lines such as big compactors, milling machines and road paving machines, are hard to move in and out. So with those machines we do a lot of onsite service.”
But onsite preventive maintenance can present daunting challenges. “We experimented with performing all preventive maintenance tasks immediately no matter where the machine was, and we have some branches that cover very large geographic regions,” says Ken Sharp, vice president and general manager of Salt Lake City-based ICM Equipment. “Our costs went up dramatically because of the distances. We decided that it was easier to absorb an occasional problem than to chase every piece of equipment everywhere for every PM task.”
ICM, like many other companies, expects customers to participate in servicing machines they rent on long-term contracts. “Our rental contracts say that the customer is responsible for routine maintenance including oil changes,” says Sharp. “We ask them if they want us to do it for them, and we charge to do that. Some prefer to pay extra for us to come out and do it.”
Sharp admits that it is difficult to enforce customer compliance. “It's after the fact when a machine comes back and we see that they never changed the oil,” he says.
“We prefer to do the maintenance ourselves, although some customers are expected to perform it and in those cases it is agreed upon from the beginning of the contract,” says Doug Dougherty, a district manager for Greenwich, Conn.-based United Rentals. “It has to be a customer that we know well enough that we can trust them to do it, and it has to be spelled out in the contract.”
On the road
While service in-house is usually preferable, it is not always possible and the better equipped a company's service trucks are, the better field service mechanics are able to perform. Nowadays, field service trucks are often sophisticated traveling repair facilities, equipped for almost every aspect of maintenance and repair, with diagnostic equipment, parts, hoses and hose-making capability, air compressors, welding equipment, 10,000-pound cranes and almost every tool a field service mechanic might need. Well-equipped service trucks enable personnel to change oil and other fluids, change filters and dispose of fluids and filters in an environmentally correct manner.
A service truck might cost $70,000 or more, but is a critical component of any rental business and can save a company many times more than the cost of the truck.
Repair for hire
A growing number of rental companies are looking at repair of customer-owned equipment as a valuable service. Many offer this service without seriously pursuing it, simply using it as a way to satisfy a customer's needs rather than send him elsewhere. Many rental companies would rather keep their customers coming in their doors, in hopes that continued contact will keep them in the customers' mind as an indispensable source of equipment and service. The philosophy is that the more the customer comes to them for whatever type of service, the more they will remember them for the core service of equipment rental.
“We feel like we're in the equipment business, we're not just a Caterpillar dealership,” adds Donald Charbonnet of Louisiana Rents, Reserve, La., the rental division of Lousiana's Caterpillar dealership. “Sure, we prefer to handle brands we represent because we have easy access to parts and service, but these days we can have access to almost any brand, so if we can help a customer that owns a piece of equipment, we want to do that for them. We want to build relationships with them, and we need the ability to fix equipment we don't represent.”
Some such as David Griffith, CEO of Bristol, Pa.-based Modern Equipment, see the equipment repair end as a profit center in itself. “Given where rates are you'd better find other revenue streams to make your money, and service and training are major sources for us,” says Griffith. “Probably 18 to 20 percent of our revenue comes from customer service and parts. We made a conscious decision to grow that. We do a lot of forklift repair and crane repair, regardless of who sold the machine. We have a lot of guys on the road in service vans, because service and parts is where we make our money. We make money in rental when rates are good, and we might make a little on sales, but it's the aftermarket part of the business that is providing our current growth.”
Some distributors, such as Corona, Calif.-based Pacific Coast Machinery and Toronto-based Wajax Ltd., are taking the service capability a step further by creating teams of technicians that can work independently to drum up service business for the distributorship, handling repair work for distributor customers and customers they generate themselves. They earn a percentage of what they bill and of parts sales.
For rental companies that want to do service work on a smaller skill, it can be a valuable revenue source during slow periods, especially in colder climates.
From the ground up
Obviously rental companies cannot provide effective service without well-trained technicians. While most rental companies depend heavily on manufacturers to provide training courses for mechanics that work on their machines, some also have developed effective in-house training and even offer the service to customers. A combination of both approaches seems to be most effective. Some rental companies look for opportunities to send their personnel to mechanics' courses at local trade schools and community colleges, covering broad topics such as small-engine repair.
“We build all our own mechanics from the ground up, that's the hardest thing we do in the dealership,” says Jerry Zagami, whose San Diego-based Clairemont Equipment is a Komatsu dealer with a long-running short-term rental division. “We have in-house trainers who develop their skills and we have schools at least once a quarter with factory people coming to our location.”
Komatsu is one of several manufacturers that sponsor university programs. Roland Machinery, for example, provides scholarships for students to Oklahoma State University's mechanics' program sponsored by Komatsu, where the student can attain a two-year degree and receive training in equipment maintenance and service in addition to a general curriculum.
Don't ruin your best mechanic
A good service department cannot function well without an organized and effective shop manager. Years ago, small rental companies would often take their best mechanic and put them in charge of the shop. The logic was if they were the best at diagnosing mechanic problems, then they would be best at organizing others to do the same.
While that tendency might still exist in smaller rental companies, and few shops can afford the luxury of a shop manager who doesn't spend some of his time with a wrench in his hand, the skill-set required for an effective service manager is different in this more complex era.
“Service managers are very unique individuals,” says ICM's Sharp. “They have to be good with people, good with customers, and they have to be savvy with systems and on the Internet as well as understand the nuts and bolts of equipment. Good service managers are hard to find and very valuable.”
A good service manager must be skilled in diagnosing problems, juggling the constantly changing demands of a customer base that expects immediate service and must know how to source parts, services, manuals, schematics and information for a wide-ranging variety of inventory. The demands on a rental shop change frequently, often with each phone call, and a rental service manager must be adept at functioning in a fast-paced environment where emergency calls are the norm, and customers demand immediate satisfaction around the clock. They also must be able to advise upper management on the economic effectiveness of equipment and help make decisions on disposal and replacement.
“Service managers work with locations to identify areas of strength and weakness, to coordinate the training of people,” adds United's Dougherty. “They keep up on updates from manufacturers about electronics on machines, they need to make sure we have the correct tools and equipment. They do cost and replacement analysis and they must make sure records are kept up to date.”
Clairemont's Zagami advises against turning crack mechanics into shop foremen. “You need a businessman to run the service department, because it's truly a business, and he should have a technical advisor,” he says. “Mechanics' hours are inventory and every hour needs to be accountable. You take a great mechanic and make him the manager and you've ruined your mechanic.”
Quest for improvement
Not all rental companies can perform all the services big companies can. But there are always ways to improve performance and rental companies would do well to analyze their shops performance on a continual basis.
“There is a constant need to minimize downtime, so we are always looking at workflow,” says Charbonnet. “Does it make sense to unload a piece of equipment, cross the yard to refuel, cross it again to do the repair? So we always look at workflow and look for ways to do things more efficiently.”
The continual quest to improve efficiency and expand the level of mechanical expertise is driving the internal development of many rental companies as they attempt to survive and prosper in difficult times.
