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Blocking & Tackling
XV May, 2007 Truck Parts & Service
Turning
Point By Bill Wade
Wade& Partners
This month marks forty years since Bud Reese and Jim Moss
got together to form the Council of Fleet Specialists.
That event was a watershed 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 + % 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. Add an acute technician shortage and ongoing
government intervention. One could really question whether we’ll ever make it to
fifty.
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 beaurocracy.
- Constantly changing hours of service and CDL regs
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 2010, 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 affect 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). Also, what effect will a
major revaluation of China’s currency have?
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, 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 fifth of the parts and service locations now operating could change
owners or close by the end of 2010.
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 years ago. Take a moment to imagine the excitement of the next
five.
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