November 2013
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True Grit Key behaviors that distinguish highly profitable dealers
Plus: You’re not a polluter, are you? Opportunities that flock to you Someday soon leaders will be scarce
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Contents
Winner 2012 Journalism Award Construction Writers Association
NOVEMBER 2013 Vol. 79, No. 11
Editorial Team Executive Editor and Director of Programs KIM PHELAN kphelan@aednet.org
FEATURES
FROM THE COVER
Product support is what makes you special.
Contributing Editor JOANNE COSTIN pr@aednet.org
Editor’s Note 7 Manufacturers face more regulation.
Graphic Production EVA BELMONTE design@aednet.org eva@neggie.net
On the Numbers 47 Tax bite will hurt, twice.
Recruitment & Retention 49
Columnists GARRY BARTECKI AED Vice President of Finance CHRISTIAN KLEIN AED Vice President of Government Affairs and Washington Counsel ELI LUSTGARTEN ESL Consultants JERRY RANDECKER & CHRIS SITTER Jordan-Sitter Associates
Opportunity Galore – CONDEX Brings New Products and Services to You 20 Products and services line up at CONDEX in conjunction with AED Summit on Jan .15-17, a unique, dealer-centric event for all AED members.
True Grit: Behaviors of WKH +LJKO\ 3URÀWDEOH Dealer 26 There’s more than one single reason why CE dealers struggle with financial performance, and there’s more than one solution.
Aftermarket 51 Why you need the Product Support Opportunties report
Washington Insider 53 AED PAC goal: electing pragmatic candidates
Inside AED Groundwork Industry Beat Play It Safe Advertisers’ Index Dealer Data
Advertising Contacts Vice President–Sales/ Publisher DAVID W. GORDON 800-388-0650 ext. 334 dgordon@aednet.org
8 12 14 18 55 56
Plus:
Advertising Sales Manager ALBERT J. RAMIREZ 800-388-0650 ext. 311 aramirez@aednet.org
600 22nd Street, Suite 220 Oak Brook, IL 60523 630-574-0650 fax 630-574-0132 www.aednet.org
Sell the job to top candidates with clear communication.
DEPARTMENTS
RON SLEE R.J. Slee & Associates
Production Manager MARTIN CABRAL 800-388-0650 ext. 313 mcabral@aednet.org
COLUMNS
From the Chairman 5
Through a Grinder and In The Shrinking Back Again – Joplin, Mo., Talent Pool, Find and Two Years Later 32 Grow Your Leaders Within 40 An entire community was left in pieces by a terrible tornado, but Joplin has come a long way and the pieces are still coming back together.
The future shortages will be alarming, but you’ll have a headstart by developing talent that’s right under your own roof.
In the Physics of Business Don’t 6XFFXPE WR %L]QHUWLD™ 24 Could You Be Sued Over a Tier-4 3UREOHP" 38 A Closer Look: Real-Time Information Equals Real Value 44
November 2013 | Construction Equipment Distribution | www.cedmag.com | 3
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From the Chairman President & CEO - TOBY MACK Associated Equipment Distributors Oak Brook, Ill.
Why Are You So Special? It’s Obvious
Executive Vice President & COO ROBERT HENDERSON Associated Equipment Distributors Oak Brook, Ill.
OFFICERS
Chairman - MIKE QUIRK Wagner Equipment Co. Aurora, Colo.
Delivering product support excellence is what we do – use AED’s latest report to raise the bar even higher.
Vice Chairman - TIM WATTERS Hoffman Equipment Co., Piscataway, N.J. Sr. Vice President - DON SHILLING General Equipment & Supplies, Inc. Fargo, N.D. Vice President - RICK VAN EXAN Toromont Industries Inc. Concord, Ontario Vice President - WHIT PERRYMAN Vermeer of Texas Inc. Irving, Texas Vice President of Finance MICHAEL D. BRENNAN Brandeis Machinery & Supply Co., Louisville, Ky. Past Chairman - LARRY GLYNN CMW Equipment St. Louis, Mo.
AT-LARGE DIRECTORS RON BARLET Bejac Corp. Placentia, Calif.
PAULA BENARD C.N. Wood Co., Inc. Woburn, Mass. GREGG R. ERB Erb Equipment Company, Inc. Fenton, Mo. DENNIS J. HELLER Stephenson Equipment Inc. Harrisburg, Pa. MIKE ROONEY Thompson Tractor Co., Inc. Tarrant, Ala. MICHAEL J. SAVASTIO Groff Tractor & Equipment, Inc. Mechanicsburg, Pa.
REGIONAL DIRECTORS BRUCE A. BOWMAN Upper Midwest Reg. Star Equipment, Ltd Des Moines, Iowa
GARY FRELICK Western Canada Reg. Douglas Lake Equipment Langley, BC PATRICK MCCONNELL, West Reg. Clyde/West, Inc. Portland, Ore. CHRISTOPHER PALMER Northeast Reg. Wood’s CRW Corp. Williston, Vt. MARK ROMER, Southeast Reg. James River Equipment, Inc. Ashland, Va. JEFFREY SCOTT Rocky Mountain Reg. Intermountain Bobcat Salt Lake City, Utah RICK VAN EXAN Eastern Canada Reg. Toromont Industries Ltd. Concord, ON GARY D. VAUGHN South Central Reg. OCT Equipment, Inc. Oklahoma City, Okla.
BY MIKE QUIRK
As we rapidly approach the end of another year, we find ourselves headlong into the fall planning process for the upcoming year. While 2013 is not yet in the can it looks like we will have done pretty well in spite of lingering stiff economic headwinds and more uncertainty than I would ever like to operate in. While traveling around Canada and the U.S. this year I have found those involved in our industry to be engaged and upbeat. It kind of reminds me of interviews with race car drivers after a big wreck or a bull rider waiting his turn at the rail. If this is the new normal it has become a more exciting “normal.” If 2013 is the test, we have passed it. In spite of an economy that remains stuck in low gear, the twinkle seems to have returned to the eye of the equipment world. That part feels pretty good. The new machine sales industry has continued to recover. The primary reason for this is that the rental segment is strong and most of us have increased our inventory and upgraded our fleets to meet demand and balance the age of the fleet. Rental demand will remain strong at least until consumer confidence improves to the point that our customers will reinvest in their own fleets. That will likely still be a ways down the road. Also, some geographic areas require Tier-4 equipment, driving some new machine sales. Overall, architectural demand has increased and construction forecasts indicate continued growth in both residential and commercial construction for most of North America. That is really good news for our industry. If you operate in a region with natural resource development you have seen strong engine sales and construction activity. Mining has once again proven to be perpetually cyclical. Although it has cooled off due to decreased global demand and relentless government regulation, it still has some activity. Fortunately, our equipment distribution channel is as strong today as it has ever been. Manufacturers are committed to the model, and, whether it is by default or design, they
value the dealer and the people who make up the dealership. There are at least two major reasons for this. They are obvious. First, ours remains a relationship business. We are on the ground with our customers. We are local and unique. The second is our commitment to product support. These relationships, along with our parts access and service capability are the heart and soul of our business. They are key elements to our profitability and the success of our customers. They are what make you so special. AED has kept their eye on the ball. They recognize that product support is centric to the overall success of a dealership. The association provides numerous webinars and onsite educational events for our employees in these areas of our business. There are several sessions covering a variety of topics still available to you in November and December, and parts and service programming will of course be on the agenda at the upcoming Summit in Houston – just two months from now. Soon to be released is the latest edition of AED’s “Product Support Opportunities Handbook,” containing brand new research that concentrates on key customer trends and demands relative to dealership parts and service departments. This report will allow dealership personnel to identify key indicators for performance standards that are specific to the parts and service areas. Every AED member dealer should acquire this relevant data when it becomes available at the end of this month. Click on aednet.org/products to order your PDF after Dec. 1. Remember, if this business were easy, anyone could do it. I for one am glad that we still have a lot to look forward to.
MIKE QUIRK (mquirk@wagnerequipment.com) is vice president of Operations at Wagner Equipment Co., Aurora, Colo.
November 2013 | Construction Equipment Distribution | www.cedmag.com | 5
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Editor’s Note
Just What Manufacturers Need: More Regulation Fragile U.S. uncertainty not a reassuring backdrop for those exporting to EU. BY KIM PHELAN
Equipment manufacturer diversion. Why is it that when the gov“You might have a hydraulic hose optimism is beginning to wane, ernment uses the term “reform” I can that you’ve been using for 30 years in and is it any wonder? only picture Inigo Montoya of “Princess your product that you source from [for Addressing the annual conference Bride” fame dryly retorting to Vizzini, example] China, and suddenly now, of the Construction Writers Associa“You keep using that word; I do not because of some substance in there, tion, AEM President and CEO Dennis think it means what you think it means.” you cannot use that hose anymore,” Slater cited numerous causes for signs But alas, these are just the icySlate illustrated. of manufacturer unease, but basically it fingered tips of Washington’s regula“It’s another headwind manufacturall boils down to one word: uncertainty. tory iceberg. Slater said the combined ers must deal with, in an economy that The slow growth trend of the construcaftershocks of sequester and shutdown is already rather sluggish,“ he said. And tion industry means equipment users are going to cost us big time in GDP as he likened the overall potential impact to the R&D challenges manufacturing are uncertain about future projects. well as in consumer behavior, busihas experienced through the emissions That uncertainty has bred quite a flurry ness spending, mortgages, tourism, control technology phases. of business commotion on the rental small business and financial markets. Granted, this just potentially affects side of the industry, but, says Slater, And imagine if this statement is true: manufacturers exporting products to rental’s good story is only telling a piece “Overall uncertainty surrounding the of the bigger picture. For manufacturers, U.S. political gridlock is causing foreign Europe, and volume of more than 1 rental is the byproduct of a fragile situa- nations to re-evaluated the dollar as metric ton per year is where requiretion, because the absence of purchase is the international currency.” ments to register kick in. But ours is a the absence of a solid positive market. global economy and a global industry; Speaking of the nations, Slater So if rental is the symptom, what’s and never underestimate the power of a warned of yet another government the root cause of the uncertainty? You regulatory idea (especially one involving regulatory issue that is showing up on surely can answer that as readily as I. environmentalists) to spread like spilled the stress-o-meter of the manufacturGovernment policy, right? Think about ing community, and – not that this is paint. Croatia, Serbia, Switzerland every issue that plagues the CE industry comforting – it’s not a U.S. government and Turkey are moving in the REACH now and as we look over the ropes into direction, and China, too, is apparently issue, for a change. The latest regula2014. Well, there’s Tier-4 Final that is tory burden is a European Union legisla- looking at a coherent system to control influencing pricing now and value of tion called REACH – Registration Evalua- chemicals in compliance with a global future used machinery. Hmm, governtion and Authorization of Chemicals. At classification system. Do you think anyment regulation. And there’s Obamacare, its simplest, REACH regulates chemicals thing to do with exports of construction machinery to China would have an another major overhaul of a different that are imported into EU countries. effect on North American markets? sort – ah, government policy strikes Actually, REACH regulates chemical AEM is preparing to roll out trainagain. Oh, what about the wind-down substances, preparations (a mixture ing to help its members understand of MAP-21 and renewal of adequate of two or more chemical substances) REACH compliance, and be assured funding for surface transportation – all and articles – in other words, think AED will be keeping dealers up to date in the government’s dependable hands, tires, hoses, components, etc. that go on any far-REACHing consequences to naturally. If tax liability isn’t worrying you, into the production of say, a piece of your business. (aem.org and export.gov and you believe that ignorance is bliss, construction equipment. are helpful resources on this topic) then don’t talk to AED’s Garry Bartecki, Slater said that for equipment, it’s Thanks for reading. because he will burst your balloon faster all about what breaks down in the than you can say “like-kind exchange.” recycling process. So, if a banned sub(or “last-in first-out accounting”) Brace stance is in a manufacturer’s machine, KIM PHELAN (kphelan@aednet.org) is the executive editor of Construction yourself for tax reform that is about as, they’ll have to get it out of their supply well, reforming as “health care reform.” chain – and out of the machine – in the Equipment Distribution and director of programs for AED. Time for a brainless movie quote next two or three years. November 2013 | Construction Equipment Distribution | www.cedmag.com | 7
Inside AED
Insight and Tools to Bridge Generational Gaps Gen Y expert Jason Dorsey to speak at AED Summit. As business continues to rebound, your dealership will need more Gen Y workers to take on key roles in your company. No one needs to tell you about the huge divide between Gen Y and the other three generations at work in your business. Gen Y workers are known for a unique mindset that can frustrate even the most experienced leaders and managers. Enter Jason Dorsey, the Gen Y Guy, a best selling author, speaker and generational expert who has appeared on 60 Minutes, 20/20, The Today Show, The View, The Early Show and many more. As a featured speaker at AED’s Summit, Dorsey will offer insight and tools to help Jason Dorsey, you bridge this generational gap. the Gen Y Guy Don’t miss his keynote on Thursday, Jan. 16 at the Hilton Americas Hotel in Houston, Texas. Summit registration is now open at aedsummit.com. Come alone for $795 or bring two more people for only $400 more! See website for this and even better package savings.
See the Good Dorsey believes diversity adds tremendous value and creates stronger teams. “The key is to recognize it and integrate it,” said Dorsey. He offers new generational truths that can directly impact the success or failure of leaders and organizations. Dorsey will share surprising data, emerging trends and specific actions that lead to measurable results. Dorsey authored his first bestselling book at age 18. His newest books are Y-Size Your Business and My Reality Check Bounced! He was one of the youngest winners ever of the Austin Under 40 Entrepreneur of the Year Award at age 25. An accomplished speaker, Dorsey has received more than 1,000 standing ovations. Find out what audiences are raving about at AED Summit. Key Take-Aways Put each generation in the context of your generation Leverage emerging trends to drive communication and innovation Implement specific strategies proven to solve tough generational challenges
An Economic Forecast to Guide Your Business Strategy U.S Chamber Economist Marty Regalia shares economic insight at AED Summit As we welcome a year that brings uncertainty over tax reform, staggering government debt and full implementation of Obamacare, AED is fortunate to have one of the nation’s leading economists to help you make sense of it all. Martin Regalia, Ph.D., senior vice president for economic and tax policy and chief economist for the U.S. Chamber of Commerce, will address AED Summit attendees on Jan. 16. A regular on national television news and debate program, Regalia’s forecasts for the U.S. Chamber of Commerce help guide more than three million business and organizations of every size, sector and region through the ups and downs of the business cycle. USA Today named him one of the nation’s Top 10 economists Martin Regalia U.S. Chamber of based on the accuracy of his 2008 forecast. Commerce
Be there as Regalia offers insight on the latest economic data and identifies the key economic indicators you need to watch in 2014.
Special Event to Spotlight Dealer Opportunities in Shale Oil, Gas An expert panel that includes American Petroleum Institute Chief Economist John Felmy will address key threats and opportunities involved in being a supplier to the unconventional oil and gas industry. The discussion will cover economic impact of unconventional energy development in North America, John Felmy regulatory challenges that lie ahead, as well as dealer and manufacturer perspectives.
Proposed New Members Cadeci International Corp. Wellington, Fla.
Hawthorne CAT San Diego, Calif.
This list is published each month as required by AED bylaws. Comments on the applicants should be directed to AED President Toby Mack at 800-388-0650 ext. 326 or jtm@aednet.org. 8 | www.cedmag.com | Construction Equipment Distribution | November 2013
Stronger. SANY America is bringing global equipment leadership to North America. We offer our dealers and customers equipment solutions, including crawler cranes, rough terrain cranes, crawler excavators, port container reach stackers and empty-container handlers. We’re expanding our world-class dealer network. We invite you to learn more about SANY America and the global SANY brand. Together, let’s change the world. To learn more about SANY America dealer opportunities, contact Kirk Erlinger (kerlinger@sanyamerica.com) for cranes and port equipment, or Eric Teague (eteague@sanyamerica.com) for excavators and earthmoving equipment.
318 Cooper Circle, Peachtree City, GA 30269 Tel: 678-251-2869 | Fax: 770-632-7820 Email: sales@sanyamerica.com www.sanyamerica.com
Equipment. Performance. Dealers. Innovation. SANY.
Inside AED
MARK YOUR
CALENDAR
For information on any upcoming AED events, visit www.aednet.org or call 800-388-0650. Nov. 20-21 - Service Management Unit III: Realizing Market Potential Palm Springs, Calif. Presented by Ron Slee Nov. 20-22 Leadership Academy Orlando, Fla. www.aed-leadership.com Dec. 3 Webinar: Parts Management In-store Merchandising 11 a.m.-Noon CDT Presented by Ron Slee
and Webinar: Parts Management Purchasing and Expediting 2-3 p.m. CDT | Presented by Ron Slee
Dec. 4 Webinar: Parts Management Best Practices 11 a.m.-Noon CDT Presented by Ron Slee
and Webinar: Parts Management Standards of Performance 2-3 p.m. CDT | Presented by Ron Slee
Dec. 6 - Webinar: Industry Financial Updates for CEOs/CFOs
10 a.m. CST Moderated by Garry Bartecki Dec. 10 - Webinar: Service Management - Flat Rating/ Standard Jobs
2-3 p.m. CST | Presented by Ron Slee
Dec. 10 - Webinar: Service 0DQDJHPHQW /DERU (IÀFLHQF\
11:a.m. - Noon CST Presented by Ron Slee
Dec. 11 Webinar: Service Management – Shop Floor Scheduling 11 a.m.-Noon CST Presented by Ron Slee and Webinar: Service Management – Standard of Performance 2-3 p.m. CST Presented by Ron Slee Jan. 15-17, 2014 AED Summit & CONDEX Houston, Texas
2013 AED
Product Support Opportunities Handbook This is the ultimate sales tool for every product support manager and product support sales rep.
The answers to maximizing product support sales are complex – many are the customers, and many are their needs. The AED Product Support Opportunities Handbook is tailored to give distributors an inside understanding of where the business is going and why, as well as a detailed analysis of the customer service skills it will take to bring the lion’s share of product support work back where it belongs – in the AED factory-authorized dealership. Part 1 presents survey results, question by question, providing analysis and insight into where contractors are going for each specific type of repair, maintenance and parts need. Part 2 will take a look market potential along with market capture rate by product family. Then take action to maximize every opportunity in your territory.
Don’t let this opportunity pass you by. Adobe Acrobat PDF download
AED Members: $595 Nonmembers: $1,095
Order today at www.aednet.org/psoh Report published in partnership with
10 | www.cedmag.com | Construction Equipment Distribution | November 2013
Groundwork OFFICERS Chairman CHRIS PERA Eastern HighReach Company, Inc. Horsham, Pa. Vice Chairman A. ROY KERN Equipment Corporation of America Coraopolis, Pa. President BOB HENDERSON The AED Foundation Oak Brook, Ill. JOHN CRUM Treasurer Wells Fargo Equipment Finance, Inc. Pittsburgh, Pa. Immediate Past Chairman WALTER BERRY Berry Companies, Inc. Wichita, Kan. AED Board Representative WHIT PERRYMAN Vermeer Equipment of Texas Irving, Texas Executive Director STEVE JOHNSON The AED Foundation Oak Brook Ill.
DIRECTORS GARY BRIDWELL Ditch Witch of Oklahoma Edmond, Okla. MIKE FESTING-SMITH NORTRAX, Inc. Tampa, Fla. MIKE HAYES Komatsu America Corporation Rolling Meadows, Ill. TIMOTHY KRAMER Kramer Ltd. Regina, SK DR. WAYNE LONGBRAKE Former Dean, Penn. College of Technology Williamsport, Pa. SONJA METZLER Ohio CAT Broadview Heights, Ohio KENNETH SILVERMAN Volvo Construction Equipment Shippensburg, PA MARK TEEL Caterpillar, Inc. Peoria, Ill. KEITH TIPPETT Kirby-Smith Machinery, Inc. Oklahoma City, Okla.
AED Foundation Presents Hilarious Guitarist Virtuoso Mike Rayburn Summit Cabaret Night proceeds support workforce development, professional education. In the first 90 seconds you’ll be amazed at Mike’s guitar wizardry. Another 30 seconds and you’ll realize you’re in for one of the most hilarious, musically remarkable shows you’ve ever seen. Mike Rayburn has been called “The World’s Funniest Guitar Virtuoso” (he’d settle for Cleveland’s Funniest Guitar Virtuoso, but whatever). From Bach to rock, Rayburn’s “Classically Trained, Comically Derailed” performance is an energetic odyssey of masterful guitar, outrageous comedy, and musical combinations you won’t believe – imagine Bruce Springsteen singing Green Acres or Led Zeppelin singing Dr. Seuss. This is the show that has earned Rayburn standing ovations at all eight of his appearances at Carnegie Hall, has him starring on the strip in Las Vegas, and along with his keynote presentations, keeps him booked more than 100 times per year for corporations, associations, churches and theaters.
Start your Summit experience with the Cabaret Night Benefit for The AED Foundation, featuring Mike Rayburn on Wednesday, Jan.15! Sponsored by Sentry Insurance, this event is sure to entertain you and your guests with a mix of music, comedy and impersonations. Reserve a Table Cabaret Night provides a perfect entertainment opportunity for manufacturers and service companies. Reserve a table for eight for you and your guests with a package that includes VIP seats and 16 drink tickets for $1,000. Individual tickets will also be available for purchase with your AED Summit registration for $95 per person. Reserve your table(s) today by contacting Rebecca Rakers at 630-4685113, rrakers@aednet.org. All proceeds benefit the AED Foundation workforce development and professional education programs to better service the needs of all AED members.
And The Winner Is… On Oct.1-2, teams comprised of various heavy equipment dealers and manufacturers competed in AED’s dealer simulation event, Test Drive, led by PriSim Business War Games. The war game requires team members to compete against other teams as they operate a virtual dealership. Teams must make decisions over several simulated years that will make their companies sink or swim. Many teams flounder as the virtual environment changes each round.
12 | www.cedmag.com | Construction Equipment Distribution | November 2013
Congratulations to the winning team, (left to right): Stephen Luby and Doug Juergensen, Luby Equipment Services; Heather Sheffield, Cars.com; and Thomas O’Grady, Komatsu America Corp.
Industry Beat
TRIP Report Shows Urban Roads Will Worsen with Highway Funding Shortfall TRIP, a national transportation research group, recently released “Bumpy Roads Ahead: America’s Roughest Rides and Strategies to Make our Roads Smoother,” a report examining urban pavement conditions, transportation funding, and economic development in U.S. cities. The study highlights how inner-city road conditions will continue to worsen at current surface transportation funding levels. TRIP estimates that in order to maintain the existing
roadways through 2032, the country needs an additional $146 billion investment. To make modest enhancements, an extra $374 billion is needed and $670 billion is required to significantly improve urban road conditions. The study also found that more than one-quarter (27 percent) of the nation’s major urban roads contain substandard pavement, which costs the average urban driver $377 annually – up to $800 each year for motorists in certain areas – totaling $80 billion nationwide.
Wells Fargo Survey Shows Improving Construction Activity
Case Construction Equipment Teams with Author McNichol for Dire States Road Tour
The construction industry continues on an upward path with steady improvement in construction activity for the fourth year in a row, according to the latest Construction Executive Survey from Wells Fargo Equipment Finance. More contractors and equipment distributors (57.7%) have seen “somewhat higher” or “much higher” activity over the past year, compared to 47.8 percent in 2012. Conducted Aug. 20 through Sept. 6, the survey recorded the responses of 348 construction industry executives from across the U.S. The percentage of dealers renting out a portion of their inventory is essentially unchanged from 2012. Forty-seven percent of dealers say they are renting “somewhat more” or “much more” than normal compared to 47.8 percent in 2012. Contractors, however, appear to be renting more than a year ago with 26.3 percent saying they are renting “somewhat more” or “much more” compared to 20.9 percent last year. Almost half (49.7%) say they are renting about the same amount as last year. A significant percentage of construction executives (77.9%) are seeing “somewhat higher” or “much higher” equipment prices compared to a year ago (80.5% in 2012). Twenty-one percent say equipment prices are “about the same” compared to 17.9 percent a year ago. When asked what is the one thing that dealers could do to better meet your needs 47.9 percent of contractors responded “Improve Price,” while 19.8% responded “Improve Service.” Additional survey results can be found in the company’s Q3 Quarterly Newsletter at www.wellsfargo.com.
Shedding light on America’s aging infrastructure by creating awareness of challenges facing the nation is the purpose of a partnership between Case Construction Equipment and noted infrastructure author Dan McNichol. McNichol will lead the Case Dire States Road Tour in a rundown ’49 Hudson – symbolic of the country’s old, rusty infrastructure. “Dire States: The Drive to Revive America’s Ailing Infrastructure,” is the title of the U.S. tour that has McNichol visiting more than 20 Case dealers in an effort to bring together citizens, government officials and construction professionals to build a community dedicated to advancing infrastructure-related projects. The primary focus of the tour and local meetings is to identify new and innovative ways to spur the growth and development of American infrastructure and to showcase projects and communities that are already succeeding at it. The tour began in Massachusetts in early October with a series of events that will include stops at Case dealers throughout the country. It will culminate in March 2014 at CONEXPO-CON/AGG in Las Vegas. The tour will be documented at DireStates.com, CASECE.com and through related social media channels.
14 | www.cedmag.com | Construction Equipment Distribution | November 2013
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Industry Beat
IN THE NEWS Tim Frank has resigned as chairman and CEO of Sany America Inc., the Georgia-based heavy equipment company, according to an e-mail from Frank. The resignation was effective Friday, Oct. 11. No official statement or announcement on new leadership was available from the company. Sany America is a subsidiary of Sany Tim Frank Heavy Industry Co. Ltd., the fifth-largest manufacturer of construction equipment in the world. Prior to coming to Sany America, Frank held executive and management posts at Volvo Construction Equipment, CNH Global and Caterpillar. Terramac LLC appointed Joseph Nota to the position of general manager of operations at the company’s facility in Elburn, Ill. Nota Joseph Nota will oversee business strategies and growth initiatives and will be responsible for plant production, personnel and sales. Kolberg-Pioneer, Inc. named Jeff May president. May will lead and manage the activities and functions of KolbergPioneer, Inc.
Coy Drewry, 71, passed away on Oct. 2. He was the sales manager at Clark Machinery Co., Little Rock, Ark. He began his career in the construction equipment industry in 1962, and joined the company in 1984. Odell Pfeiffer, chairman and CEO, said, “He leaves a big void at Clark Machinery Co., and his attention to detail will certainly be felt. Everyone who associated with Coy had the highest regard for his honesty and integrity. CNH Industrial N.V. announced that the merger of Fiat Industrial S.p.A. with and into CNH Industrial N.V. was completed on Sept. 29. John Deere, in partnership with RDO Equipment Co., is expanding its C&F Tech initiative to include North Dakota
State College of Science in Wahpeton, N.D. The John Deere dealer technician job-training program is a two-year associate’s degree that enables students to troubleshoot, service, repair, and rebuild diesel equipment. BOMAG Americas will cease manufacturing operations in Kewanee, Ill., by the end of 2014. The company will relocate its business to a yet-to-be-determined location in the southern United States. Single drum rollers, asphalt rollers, and the MPH364 reclaimer/stabilizer, which are currently manufactured in Kewanee, will either be relocated and/or replaced with marketaccepted products manufactured in existing BOMAG facilities located in Oklahoma, Germany or China.
HOLT CAT hosted a groundbreaking celebration at its headquarters campus in San Antonio, Texas, in early October. The company is building a new $11 million, 40,000 square-foot Super Bay facility to provide additional shop space for customers in the San Antonio and Eagle Ford Shale regions. It will feature eight super bays with monitored oil dispensing and four 10-ton and four 15-ton cranes. The construction is part of HOLT CAT’s $80 million investment in facility upgrades, new buildings and expansions across the state of Texas in the past two years.
Jeff May
Genesis Attachments promoted Blaine Archibald to national account manager charged with developing, managing and maintaining national accounts focusing on the scrap industry. Blaine Archibald
State and local dignitaries, employees and veterans attended the Holt groundbreaking ceremony including (left to right): Richard Perez, Greater San Antonio Chamber; San Antonio Council-person Rebecca Viagran, and County Commissioner Tommy Adkisson, County Judge Nelson Wolff; HOLT CEO Peter Holt; Tom Shaw of the South San Antonio Chamber; Senator Leticia Van de Putte; HOLT Executive Vice President and General Manager Dave Harris.
16 | www.cedmag.com | Construction Equipment Distribution | November 2013
Industry Beat
Chicago Machinery Co. has been named a SANY America excavator dealer covering a 150-mile radius surrounding Chicago in northern Illinois and northern Indiana. Illini Hi-Reach Inc. celebrated its 20-year anniversary in August with a rousing customer/sports celebrity golf outing at the nationally renowned Cog Hill Golf Club in Lemont, Ill. Along with many of Illini’s valued customers, dozens of nationally known sports celebrities were along to enjoy the day’s festivities, including: Chicago Bears greats Dan Hampton, Steve “Mongo”McMichael, Otis Wilson, Kevin Butler, Jim Thornton,and Glen Kozlowski; Murray Bannerman, Chicago Blackhawks; Randy Hundley, Chicago Cubs; Carlos May, Chicago White Sox; Mike Torrez, New York Yankees; Sean “The Beast” Fister, 3-time ‘LDA’ long drive champ; and Chicago sports media icon, Hub Arkush, as master of ceremonies. Illini Hi-Reach is a long-time AED member and has served the greater Chicagoland and Northwest Indiana marketplace with JLG aerial work platforms and telehandlers since 1993.
Pictured: Chicago Bears great, Jim Morrissey, on his way to the tee box at the Illini 20-Year Invitational 2013.
Edward Ehrbar Inc. has been appointed by JCB to represent the manufacturer’s compact and mid-range construction equipment, including new, pre-owned and rental models, and provide JCB parts and service from locations in Yonkers and Holbrook, N.Y., and Danbury, Conn.
Effective Oct. 1, H&E Equipment Services, Inc. (H&E) announced the opening of its new store in Pasadena, Texas. The dealer now has three stores in the Houston area: two full-service construction and industrial equipment facilities and a third that is a fullservice crane operation. H&E has been in Texas for more than 50 years, and now has 11 locations throughout the state, with 68 locations nationwide. Terex Construction, a business segment of Terex Corporation, entered into a private label agreement with Vermeer Corporation. Terex will provide Vermeer with a forestry compact track loader specifically designed to work in Vermeer’s applications. Volvo Construction Equipment has sold its dealership interests in central Europe to its long-term distribution partner, Ascendum Group (ASC). The deal became effective Sept. 30 and includes the transfer of all assets, employees and sales territories. Volvo CE and K-Tec Earthmovers Inc. have engaged in a strategic alliance to promote efficient methods of earthmoving worldwide. This relationship will also allow the Volvo CE dealership the opportunity to represent the K-Tec product offering on a worldwide basis. Bobcat Company has pledged its continued support of research and development activities conducted in tandem with nearby North Dakota State University Fargo (NDSU) at the university’s Technology Incubator, where Bobcat is an anchor tenant. Bobcat will match $2 for every $1 provided by a grant through North Dakota’s Centers of Excellence program. The company is contributing more than $400,000 toward the program, which will result in more than $200,000 in additional grants for NDSU.
New BOMAG Dealers Announced
Miller-Bradford & Risberg, Inc. now offers BOMAG asphalt pavers and the RS Series of reclaimers and stabilizers at all of their locations in Wisconsin and Michigan. With these additions, the company represents the complete line of BOMAG road building products. Stephenson Equipment, Inc. has been named as the authorized BOMAG road building equipment distributor in portions of Pennsylvania and New York. The territory stretches from central and northeastern Pennsylvania through Philadelphia and westward to Harrisburg. In New York, Stephenson Equipment’s territory covers Syracuse to Buffalo and southward to Binghamton. Finkbiner Equipment Company has been appointed the authorized BOMAG asphalt paving and rehabilitation distributor in portions of Illinois. In a territory stretching from central and northern Illinois into the Chicago market area, including Lake and Porter counties in Indiana, Finkbiner Equipment now offers asphalt contractors BOMAG’s line of Cedarapids paving and material transfer equipment and the MPH and CMI RS series of reclaimer/stabilizers. Throughout central Illinois, reaching from Springfield to the Quad Cities, Finkbiner Equipment also offers BOMAG’s milling equipment line.
November 2013 | Construction Equipment Distribution | www.cedmag.com | 17
Protect Your Business and the Environment – Don’t Be A Polluter
Recycling as much as possible is a good beginning to EPA compliance.
BY ERIC STILES
A well-known equipment dealership – which had operated on the same property since the 1950s – received a surprise visit by the local authorities after a waterway located adjacent to the property appeared to have been recently contaminated with an unknown substance. A detailed facility inspection revealed that an uncontrolled storage area located out in the open at the back of the property was the source of pollution. Numerous steel drums and plastic totes of waste oil, gas, and other chemicals had been left unattended and unmarked, and had been leaking contents into the ground for years. A federal agency was called in to begin a site assessment and cleanup. The dealer had little documentation of any waste disposal procedures or training and was left to pay more than $400,000 in cleanup costs and fines. Equipment dealerships have a variety of processes that can generate waste products, including oil and brake service, parts degreasing, battery service, painting and vehicle fueling. Many of these byproducts can be classified as hazardous and are regulated by federal and state agencies, which means your dealership has an obligation to collect, recycle, or dispose of the waste by using a licensed hauler with expertise in local, state, and federal regulations. A lack of pollution-prevention measures can lead to environmental damage, cleanup costs, fines and unwanted media attention. Let’s take a look at ways your dealership can help control pollution exposures and maintain compliance with regulatory laws. Does My Dealership Generate Hazardous Waste? Most equipment dealers will generate some level of
18 | www.cedmag.com | Construction Equipment Distribution | November 2013
regulated wastes, even if it’s in small quantities. There are two reasons for a waste to be considered hazardous. First, it can be specifically listed as hazardous by the EPA. There are more than 400 wastes listed by their chemical names in Part 261 of the EPA regulations. Second, if the waste does not appear on the list but it has the following characteristics, it can be considered hazardous: Flammables or combustibles, including solvents, degreasers, and paint waste such as thinner or sludge Corrosive products like battery acid, paint stripper, and other cleaving agents Unstable or reactive chemicals including bleaches or other oxidizers Toxic substances with high concentrations of heavy metals including lead, chromium, or mercury Some examples of substances used by dealerships that could lead to the generation of hazardous wastes include lube oil, grease, transmission and brake fluid, antifreeze, Freon, parts cleaner, paint-related materials, and fuels such as gasoline and diesel. Bottom line – it’s the dealer’s responsibility to identify the hazardous wastes in their operations. And if you are unsure about what to do with it, call a professional disposal service for assistance. We Have Hazardous Waste – Now What? After you have identified your hazardous wastes, the next step is to determine if you’re meeting EPA or state recordkeeping requirements. Regulations require all hazardous waste generators to obtain an EPA identification number, regardless of how much waste is generated.
Play It Safe
To learn more about obtaining an identification number, go online to epa.gov and look for a copy of EPA form 8700-12, Notification of Regulated Waste Activity Instructions and Forms booklet. The amount of waste you are allowed to store on your site depends on the amount of waste your dealership generates. Generally, the less waste you generate, the fewer problems you’ll have with maintaining your handling and disposal compliance. To keep your dealership ahead of any potential problems, consider incorporating these practices: Recycle anything you can. Waste oil, antifreeze, parts-washing solvent, and other wastes can be recycled by your company or professional services. This is very important because anything recycled is no longer considered a hazardous waste and therefore is no longer a liability to the waste generator. Waste oil is currently not considered hazardous waste by the EPA, but some states disagree. There has been heavy lobbying in Washington to keep it off the list of regulated materials. However, it’s best to handle waste oil as hazardous to avoid inadvertent contamination. It can be legal to burn waste oil as fuel for heat as long as it has not been mixed with other materials. Some states may require testing to determine if the oil is suitable as fuel. If wastes are not recycled, they should be hauled to an EPA certified disposal site by a certified hauler. The hauler should provide you with a manifest showing the materials were received by the disposal site. They should also be able to provide a certificate of liability insurance proving they are covered. It important to remember that unless it’s only water, never flush anything down the drain. Hazardous materials, even though diluted, may cause damage to sewer systems, treatment plants, and worst of all, the environment. Train your employees to properly handle, store, label and
dispose of regulated wastes so you can avoid becoming a polluter. This document is made available by Sentry Insurance a Mutual Company and its subsidiaries and affiliates (collectively “SIAMCO”) with the understanding that SIAMCO is not engaged in the practice of law, nor is it rendering legal advice. The information contained in this document is of a general nature and is not intended to address the circumstances of any particular individual or entity, nor the best practices applicable to any particular individual or entity. Legal obligations may vary by state and locality, and best practices are unique to specific items and situations. No one should act on the information contained in this document without advice from a local professional with relevant expertise.
ERIC STILES is Sentry’s lead Account Executive responsible for maintaining the AED/Sentry relationship. He can be reached at eric.stiles@ sentry.com. As the endorsed P&C carrier for AED, Sentry Insurance offers superior coverage options and services to meet your dealership needs.
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Window to Condex
Opportunity Galore –CONDEX Brings New Products and Services to You
Plan to make the CONDEX trade show a big part of your schedule while you’re in Houston, Jan. 15-17. Here’s a preview of just some of the exhibitors’ products you’ll see for two consecutive days on the show floor during the 2014 AED Summit.
BLS Poly Bolt-On TUFPADS Track Pads HIGHTOP BLUES %227+ Lasts up to 88% longer than standard black polyurethane Designed specifically for asphalt milling machines Available for a variety of machines, including Wirtgen, Roadtec and Caterpillar
Replace your worn track pads with BLS Poly Bolt-On TUFPADS HIGHTOP BLUES – No. 1 Polyurethane Track Pad in the World – to save on replacement parts, labor and shipping costs.
HKX, Inc. Load Hold Valve Kits %227+ HKX field-installed Load Hold Valve (LHV) kits improve excavator performance in lift applications where the load needs to be held for extended periods of time and where extra precision (no load movement) is needed. Unlike standard hose burst and anti-drift valves, the valves in the HKX LHV kits are designed to give superior load holding capability while providing overload relief and hose failure protection for the boom and arm cylinders. Each valve holds the actuator (cylinder) in its position without leakage when the main valve is centered. Therefore, the hydraulic oil cannot be forced out of the cylinder by the cylinder load, preventing cylinder drift. The result is precise control while holding or placing heavy loads. In addition, the valve prevents uncontrolled lowering of the load in the event of a hose failure, ensuring compliance with hose burst requirements of DIN 24093, ISO 8643 and EN 474. HKX LHV kits, complete with comprehensive illustrated installation instructions, include load holding valves on the two boom cylinders and arm cylinder, and all connecting tubes, hoses, proportional pilot control lines and hardware. (continued on page 22) 20 0 | www.cedmag.com | Construction Co Equipment D Distribution istribution | November 2013 is 2 3 201 20
2.0
F N R
Window to Condex (“Window to Condex” continued from page 20)
HCT Excavator and Backhoe Hydraulic Kits %227+ Excavator and backhoe hydraulic kits from HydrauliCircuit Technology are custombuilt for your application. Our state-of-the-art, 35,000-sqare-foot installation, production and research facility is designed to enhance our product and capabilities. Manufacturing of tube assemblies, hose assemblies and brackets are all done in house, allowing us the flexibility to adapt to your needs. For more than 12 years, HCT has offered “turn-key” kits, with installations being performed at our facility in McDonough, Ga., which has four bays dedicated for kit installation. Most kit designs are based on actual in-house installations. The kit installations are complete with flow/pressure tests to ensure best performance. Our in-house powder coating facility allows us to control the quality and offer quick turnaround. Powder coating provides a protective coating that is UV resistant and enhances the life of the components. There is no need to paint any of these components, saving time and labor.
+\GUHPD KP )ODWEHG 'XPS 7UXFN %227+ Based off the popular 912HM articulated dump truck model, the 912HM flatbed features a 1.6 foot extended rear half with a built-in tipping frame ideal for the construction, utility and oil and gas industries. Like all of Hydrema’s products, the 912HM flatbed is built with high quality materials including a heavy-duty, robot-welded, articulated chassis as well as Hydrema’s patent-pending front axle suspension. The newly developed suspension features a center pivot with pendulum bar and double hydraulic stabilizers allowing operators the option of locking the oscillation movement at up to 22 degrees. Along with the durable design, Hydrema’s 912HM offers exceptionally low ground pressure, which makes working on even the softest ground conditions possible. The machine utilizes its 2.6-foot-wide, 30-inch wheels, high ground clearance, articulated pivot steering system and automatic weight transfer to successfully and efficiently traverse delicate terrain.
Lowe Manufacturing Co.’s Augers, Auger Bits, Trenching, and *UDSSOH $WWDFKPHQWV IRU &RPSDFW (TXLSPHQW %227+ At Lowe, attachments are not just add-on items to our product line – they are our entire focus. Since our first hydraulic auger attachment was sold in 1971, Lowe Manufacturing Company, Inc. has followed a simple philosophy: “Design and build specific products that offer the best performance, durability, and overall value in the attachment industry.” We know we have to be better than the big name competition or we would not survive. But the success of our approach is quite clear; today Lowe is a highly regarded producer of auger, auger bits, trenching, grapple attachments for compact equipment with a worldwide reputation for excellent performance and value. There is an element of personal family pride that goes into each product we build. Family ownership means we have only the customer to answer to. There are no extra layers of management, no public stockholders clamoring for a dividend, and no parent corporations that would interfere with this relationship. When you call our office, you will be greeted by a human voice that will quickly get you the information that you desire.
Midland SPD-8 Road Widener %227+ The Midland Model SPD-8 Road Widener is designed to place shoulder materials out 8 feet wide next to main line pavements. This machine has proven its ease of use and high productivity to deliver base and hot mix materials to the proper grade and slope both below and above grade. The SPD-8 has been upgraded to accept the John Deere Tier-4 version of the 4.5-liter engine, and controls allow conveyor belt speed and on/off and spreader blade functions from the operator’s control panel. The hopper and spreader blade are in full view in front of the operator, with no fatiguing “over-the-shoulder” watching the spreading operations. The SPD-8 easily changes over from right hand spreading to left hand spreading. Merely move the operator’s controls from right to left, move right hand tools to transport position and open the left side blade to the desired spread width. 22 | www. www.cedmag.com w.c w. cedmag.com | Construction Equipment Distr Distribution trribution ib | November 2013
Window Wind Wi nd dow to Condex C nd Co n ex
Moley Magnetics Inc.’s Hydraulic Magnets %227+ ESA Hydraulic magnets are designed for demolition and scrap industry or anywhere where flexibility of attachments is beneficial. Ease of Installation: complete enclosed system – pump, generator and control box are mounted on top of the magnet Hook up hydraulic cables and go Available from 32 to 60 inches Lifting capability from 1,500 plus pounds
3DODGLQ·V -5% 3RZHU/DWFK 0XOWL 3LQ *UDEEHU &RXSOHU %227+ The JRB PowerLatch multi-pin-grabber coupler by Paladin Attachments, designed by Miller UK Limited, is one of the safest, most advanced multi-pin-grabber couplers available for excavators and loader backhoes. It employs several advanced safety features, including a patented Automatic Blocking System (ABS) that ensures coupler engagement is maintained during hydraulic failure. Designed to work with a wide range of buckets and attachments, the JRB PowerLatch has the most features, reduced offset and is one of the lightest, yet strongest excavator and loader backhoe multi-pin-grabber couplers available today. The JRB PowerLatch features backup mechanical locks on both the front and rear attachment pins that are independent of the machine’s hydraulic locking and operating system. The ABS mechanical backup safety system automatically locks both pins so coupler engagement is maintained even if hydraulic failure occurs. If the rear bucket pin is not correctly engaged, or missed during the attachment process, the ABS automatically secures the front attachment pin. Attachments can only be removed under operator control when they are in a safe, curled position, preventing accidental release of the attachment.
November 2013 | Constructio Construction tion Equipment Distribution | www.cedmag.com om | 23
Strategy
In the Physics of Business ™ Don’t Succumb to Biznertia Whether your equipment business is at rest or in motion, it’s your intelligent action that matters most. Take our Assessment Test. BY JEFF LEFEBVRE
If you keep doing the same thing over and over for too long, you’re likely to become irrelevant (And in some cases it’s a sign of insanity – or so said Einstein). Think of Kodak, Nokia, Circuit City, Blockbuster, marquee brands once dominating their markets, now gone, irrelevant, or in significant trouble. Newton’s First Law of Motion (inertia) states, “An object at rest will stay at rest, and an object in motion will stay in motion at constant velocity, unless acted upon by an unbalanced force.” A cup of coffee at rest in front of you will remain at rest until a force is applied. The liquid coffee in a cup in your hand as you walk down a hallway will move with you. Rest stays at rest, motion stays in motion, until a force is applied. Well, the same is true in business and hence Lefebvre’s First Law of Business (Biznertia™) – “A business at rest will stay at rest, and a business in motion will stay in motion at constant performance, unless acted upon by an unbalanced force.” Kodak, Nokia, et al are examples of companies that had good motion, for a time. And then something happened. Either they rested – and the world changed around
them, or they stayed in motion – but the motion was in the wrong direction. As forces are applied to any business, that business must adjust and adapt. For Kodak, the force was digital imaging. For Nokia, the forces were Apple/ Android/Samsung. Companies that ignore changes in their market (aka: stay are rest), or those that continue with old strategies (aka: stay in constant motion), put their futures at stake and risk becoming irrelevant. The key to long-term success in any business is to constantly balance or overcome market changes/forces with strategies of your own: innovation, changes in product lines and services, adoption of new technologies, new skills. Is your organization falling victim to Biznertia? Are you doing the same thing over and over with little adjustment for how the world is changing around you? A leader’s job is to drive the right change at the right time. In Kouzes and Posner’s study of leadership they found that one of the five “practices” exhibited by “exemplary” leaders was that they frequently “challenged the process”.* They searched for
opportunities, questioned the status quo, and were willing to experiment and take risks in order to improve their business performance. This is how great leaders avoid Biznertia. This doesn’t mean that “change is always good” or that you should “change for change’s sake” or aim for “constant change.” Sometimes it’s good to be the coffee in the cup going down the hall. If you’re in a good hallway and you’re making progress, there is no sense in changing course. But every now and then adjustments do need to be made and change (however slight) is required. Are You at Risk? How susceptible is your company to Biznertia? Answer the questions in the Biznertia Assessment Test. What forces are acting upon you and how are you adjusting for continued success? The Biznertia Assessment Test* on page 54 is broken into three broad categories: Monitoring/Assessment, Planning/Culture, and Action/Measurements. If you have trouble answering some of these questions, perhaps you’re suffering from Biznertia. (continued on page 54)
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Margins
True Grit:
Behaviors of the +LJKO\ 3URÀWDEOH Dealer Admit it or deny it, but CE dealers operate in a profitability plight compared to other parallel distribution industries – experts offer tips to break away from ‘average.’ BY JOANNE COSTIN
The numbers tell a story that AED dealers may not want to hear. A comparison of AED Cost of Doing Business reports with similar reports compiled by other wholesale distribution associations,* reveals AED dealers are consistently, over the economic cycle, in the bottom quartile of financial performance. “Over time we have become an industry of low expectations with respect to financial returns,” said Mike Marks, managing partner for Indian River Consulting Group, speaking to dealers attending AED’s Executive Forum held in September. To shed light on the profit plight, Marks delved into association
financial research, interviewed six extremely profitable construction equipment dealers and two investors, and moderated a panel of industry experts at AED’s Executive Forum, held in September. Recognized for his expertise in distribution channel strategies and supply chain management, Marks offers considerable insight on a topic that many dealers are reluctant to discuss. Based on a poll of dealers conducted at the Forum, there doesn’t seem to be a consensus on the reasons why AED dealers rank so low on profit. Nearly half said they didn’t think there was only one reason. Another 27.4 percent felt
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the reason is that most dealerships were comfortable with running a lifestyle business. The Facts A direct comparison of AED and MHEDA dealer financials provides a starting point for analysis. There is nearly a 21-point spread between the absorption rate of MHEDA median performers and AED median performers, and a 20-point spread between high-profit performers. The median MHEDA dealer’s profit from parts, service and rental paid for 91.5 percent of expenses, while the AED median dealer covered just 70.7 percent. Additionally, high-profit
Margins
MHEDA dealers had a surplus profit from parts, service and rental, covering 103.4 percent of expenses, while AED high-profit dealers had an absorption rate of 83.6 percent. The AED dealer’s heavy reliance on new equipment sales also stands out. While the median MHEDA dealer relies on new sales to deliver 41.7 percent of revenue, both the highprofit and median AED dealer rely on new equipment sales for nearly 70 percent of revenue. Marks contends that a “myopic focus on market share” by the industry suppliers places significant roadblocks in the path of dealer profitability. In his presentation, he also identified and discussed four behaviors of high-performance dealers that are different from accepted industry practice. Marks cautions that best practices gleaned from interviews should not be intended to be definitive sets of action to follow, but simply observations based on his conversations with high-profit dealers and industry investors. Four Behaviors of Highly 3URÀWDEOH 'HDOHUV (1.) Professional Management versus Lifestyle or Entrepreneurially Led. Many industries are dominated by lifestyle businesses and entrepreneurs. “Owners are not particularly concerned with underperformance, as long as suppliers are not particularly unhappy,” explained Marks. Contrast this with a professionally managed organization where growth needs to exceed GDP with a 20 percent return on invested capital. The professionally managed dealership differs in its disciplined approach to risk. According to Marks, professionally managed companies typically have a formal annual planning cycle and use 12-month trailing data sets to understand trends. They believe in ongoing training and participate in Dealer 20 groups. In addition, they routinely receive performance feedback that
allows them to take corrective action. “They pay attention to the detail,” said Marks. “Doing 138 things right every day.” (2.) Full Participation in All Available Revenue Streams. According to Marks, highly profitable dealers don’t have the same dependence on new equipment sales as dealers suffering from profitability plight. Rental, used equipment and service are sovereign departments and are not subordinate to sales. Rental fleets are managed by metrics such as age, utilization and average rental rates, with each piece of equipment operating as its own profit center. In high-profit dealerships rental fleets are managed by fleet managers, not sales people. “Rental is not an optional business for an AED dealer if their customers rent equipment from others,” advised Marks. Marks reports that in high-profit dealerships product support sales reps often produce more profit than new machine sales reps. He encourages dealers to be “equipment solutions guys” rather than a salesperson walking in with products and
services. “Recognize that customers sometimes may want to rent or buy used,” added Marks. Panelists Duane Wilder, former president of Liebherr Construction, and Chris Wilmot, chairman, Groff Tractor, concurred that a full, multipronged approach to revenue generation is essential to drive profitability. “The good dealers find a way to participate in all the revenue streams,” said Wilder. “You can’t do it just on new machine margin. You can’t do it by being out of the used equipment business. You have to be in the parts and service business. If you get a good piece of all of that, then it’s a pretty decent value proposition. If you are not participating in all of them, it’s a challenge.” “One of the inherent problems in looking at the distribution side, is we have a low consolidated margin rate of 18-23 percent in this business,” added Wilmot. “Generally for a business, that’s a low margin. There are some higher margin segments – service, parts – [but] they are generally smaller portions of our business. New equipment is an 8- to 10-percent business. Used equipment
MHEDA was chosen due to its asset similarity to AED
MHEDA versus AED – 2012 Results Factor
Median Performers MHEDA
AED
5
High Profit Performers MHEDA
AED
Report Formats Are Very Different Reflecting Strong Industry Biases Firm Revenue ($millions)
$28.6M
Return On Assets
7.9%
Return On Sales
3.6%
$47.5M
$28.6M**
$47.1M
4.9%
16.9
12.2%
3.5%
6.2%
7.6%
Absorption Rate*
91.5%
70.7%
103.4%
83.6%
Revenue Share – New
41.7%
68.1%
41.7%**
67.4%
Revenue Share - Parts
20.6%
22.3%
20.6%**
20.2%
Revenue Share - Service
19.2%
8.6%
19.2%**
8.5%
Revenue Share - Rental
11.3%
1.0%
11.3%**
3.9%
*Total Aftermarket Gross Profit $ (Parts, Service and Rental) / Total Dealership Expenses $ = Absorption rate ** Not broken out – but similar WWW.IRCG.COM
INDIAN RIVER CONSULTING GROUP
(continued on page 30)
November 2013 | Construction Equipment Distribution | www.cedmag.com | 27
Margins
(“True Grit: Behaviors of the Highly Profitable Dealer” continued from page 27)
offers a greater opportunity. Rental offers greater opportunity. You can drive up that consolidated margin rate with the mix. That’s going to determine how much money you make in this business.” (3.) Offering Designed to Capture the Full Share of Spend. According to Marks, high-profit dealers know their customers well and are focused on solutions. “Find out what customers want. Is it uptime, operator training, or parts?” asked Marks. One strategy used by highprofit dealers is mass customization – a technique that combines the flexibility and personalization of “custom” services with low prices. For dealers, this can mean service options that keep customers from ever going anywhere else for their needs. Marks found that most of the highly profitable dealers he spoke with managed their net promoter score to measure customer satisfaction. Others made good use of customer advisory boards to identify customer needs. Luke A. Phenicie, partner at Hammond, Kennedy, Whitney & Company, offered the perspective of an
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30 | www.cedmag.com | Construction Equipment Distribution | November 2013
investment firm. “Most of the businesses we invest in, the bulk of their revenues come from rental,” said Phenicie. “Having flexibility in their business model to be able to work through the business cycle becomes more valuable because it’s a diversified source of revenue.” (4.) A Sweet Spot of Specialized Expertise. Marks also cited a dealership’s ability to find a unique niche as the last of the four behaviors of high-profit dealers. He defines a “sweet spot” in the market as one that costs little to grow yet has high growth potential. It’s an area where a dealership can gain market share that is 1.4 times greater than the nearest competitor. “Your niche expertise should bring you to the forefront,” said Marks. The expertise does not have to be a product, but can be a service to a group of customers. Wilmot expanded on how to cope with the reality of being in a seasonal business. “You have to look for the segments in the market that are your sweet spot that drive high-profit revenue during the off season.” These could include services such as rebuilding pavers and cranes, or addressing markets such as aggregates and fixed plant sites. +RZ :RXOG <RX )L[ D /RZ 3URÀW 'HDOHU" Marks asked the Forum panelists what actions they would take to fix a low-profit dealership. Their responses are based on decades of experience in the industry and what they have seen work in the past. “I would take my middle management and senior management and put together a zero-based budget,” said Wilmot. “You do a deep dive into your general ledger and you find out where you are spending money. Start with the revenue and if the team can’t produce the revenue, then I can’t produce the spending. “You have to get revenues up but you have to manage what dollars you have.” Wilmot stressed the importance of a good dealer management system. “Do you have a dealer management system with business intelligence that gets you information quickly instead of someone preparing a spreadsheet?” he asked. “That is an important part of driving profitability.” Phenicie also stressed the importance of timely financials.“We really encourage closing your books within five days,” he said. “If you don’t have accurate information to redirect your resources, then you are not responding to your customer or looking after your business.” “You have to start with the financials,” advised Wilder. “You have to have good data. Usually you can identify a few things early on where you can have some success, which gives the team a chance to feel like they are making progress.” Low internal labor rates were seen as a common problem among low-performing dealers. “I am a firm believer that you should treat your internal sales the same way you treat your customer sales,” explained Wilder. “Dealers that
Margins
have lower internal labor rates are subsidizing the margin on new equipment.” The panelists agreed that if you are losing money or not making much, the focus should be internal, but the longterm goals would be to make the organization become more customer focused. “In the last three or four years, we [as an industry] have spent so much time internally; now is the time to be focused on the customer,” advised Wilmot. “If your salesmen aren’t adding value you need to re-train them.” The importance of getting employee involvement was seen as a key part of the turnaround process. “You have to focus on your employees and engage them and get them excited about the opportunity, because they are the ones that face your customer,” said Phenicie. “Once you get the right people in the right places you can focus on what your customers want.” Sharing financials with employees was a common practice among the high-profit dealers, yet this is not a common practice in an industry where the majority of businesses are family owned and privately held. “It’s incredible when you turn an employee into an owner,” said Phenicie. “Transparency builds trust,” said Wilmot. “If you are trying to take a low-performing group and make them a high-performing team, you have to be willing to open yourself up to get results.” Final Take-Aways from the Panelists Wilmot: “The profit we make in the transaction is the value the customer puts on our relationship. Now, more than any other time, there is a need for professional problem-solving, value-creating salesmen.” Phenicie: “Focus on employee engagement. Get good information. Get it right before you expand and go everywhere else.” Wilder: “Make sure you are participating in all the profit streams available to you and make sure you have good communication both internally and with the manufacturer.” *Material Handling Equipment Distributors Association (MHEDA), Heating, Air Conditioning, Refrigeration Distributors International, the National Association of Electrical Distributors, Fluid Power Distributors Association and the National Association of Wholesaler-Distributors. JOANNE COSTIN is a freelance writer and marketing consultant focusing on the construction industry. She can be reached at (847) 358-1413 or jcostin@costincustom.com.
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Margins
The charitable foundation of Vermeer Equipment Company sent volunteers and mini-loaders to help with tree-planting. Allied with Kubota Tractor Company, the Iowa foundation also supplied a track loader for tree hole-digging.
Through a Grinder and Back Again – Joplin, Mo., Two Years Later Equipment companies, city officials talk about the tornado that ravaged their town – and their refusal to stay down. BY GILES LAMBERTSON
An EF5 tornado shredded the heart of Joplin, Mo., in May 2011, and two years later the pieces are being stitched together again. Notwithstanding the loss of 161 lives, thousands of homes, and millions of irreplaceable articles of memorabilia, the community seems stronger for the experience. “You kind of hate to say it, but the tornado was
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a blessing in some ways,” says Mike Quick, regional service manager for power systems at Fabick Caterpillar in Joplin. For Quick to acknowledge the ultimately positive economic impact of the tornado is significant: He and his wife barely survived the storm in their home. (See sidebar on page 35.) The mile-and-a-half-wide tornado was not unique; at
Reconstruction
least five other storms of equal intensity struck the South and Midwest that year. However, the Joplin tornado touched down on the west edge of a city of 50,000 people and moved slowly through it, completely dismantling businesses, ripping apart poorer and more affluent residential neighborhoods alike, and littering about 100 miles of streets. “You look at the six square miles of devastation and 161 fatalities and you feel there should have been 2,000 fatalities,” said David Hertzberg. He was director of Public Works when the storm hit but now directs recovery as community development project manager. “We lost our Wal-Mart, our Home Depot, a Lowe’s, a sports store, our high school, our hospital, two fire stations, and several thousand homes.” Not in his litany of losses is the Fabick Caterpillar dealership. Cleaning Up Doug Fabick lives in St. Louis and flew in to view the storm damage the day after it hit – then raced home to pull his travel-trailer to Joplin. He set it up on the south edge of town and lived in it for three weeks as he and his employees scrambled to re-establish the stricken business. “Some people asked what we were going to do. I said, ‘We’re going to clean this up and help our customers recover and get to work.’” The Cat dealership’s inventory on that fateful Sunday included D6 dozers and 16G motor graders, model 246 skid steers and a line of 336 excavators. All the machines were damaged by the 200-mph winds that bumped them around, shattered glass, and left most of them inoperable. A bus was wrapped around a roller. Some $1.1 million in parts were damaged and had to be tossed into the dumpster. The dealership’s parts shuttle truck was found a half mile away in a front yard, and was carried back to the property
Auger near playground: Thousands of trees still are being planted in right-of-ways and parks in Joplin, some using this cityowned Case skid steer-auger.
Violent winds virtually destroyed entire apartment complexes, including this one (top and bottom photos).
Instead of a total of 161 fatalities, “you feel there should have been 2,000,” says Joplin city official David Hertzberg.
on a forklift. Eight Fabick service vehicles and pickups were destroyed – a small part of the 9,000 vehicles claimed by the storm. Also pummeled by the wind was a Cat 330 excavator belonging to Columbus, Kan., contractor Crossland Construction. The machine was being serviced at Fabick’s. The day after the tornado, it was retrieved by the contractor, fired up and driven clanking away – without any glass in its windows – to help with emergency work nearby at the collapsed Wal-Mart store. Within two days, Fabick had parts arriving from the company branch in nearby Springfield. About 100 pieces of heavy equipment ultimately were trucked to Joplin from other Cat dealers for renting out during the clean-up. In addition, Caterpillar executives in Peoria, Ill., short-shipped other dealers so they could focus on resupplying Fabick. “It was amazing how the Cat world pulled together to support the local dealer,” Fabick said. After Fabick cleared its site, a temporary metal-framed, vinyl-walled structure was erected as a parts and service (continued on next page)
November 2013 | Construction Equipment Distribution | www.cedmag.com | 33
Reconstruction
(“Through a Grinder and Back Again – Joplin, Mo., Two Years Later” continued from page 33)
center. The 130-feet-by-60-feet facility was fronted by a double-wide unit for customer service. Over the next year and a half, the dealership worked its way out of those facilities and relocated to a new 50,000-square-foot facility on 20 acres along the city’s eastern edge. Loaning Out Machines The storm cut through Joplin safely north of another equipment dealership, the 100-year-old Victor L. Phillips Co. (VLP) The day after the tornado, clogged streets made it tough for VLP employees to reach the dealership. But the company’s crew quickly recovered from the shock of what they were seeing and immediately loaned out Case and Hyundai excavators and skid steers to the city to help clear primary streets. Then contractors began to appear. “The biggest demand was excavators with grapples on them and skid steers and wheel loaders with grapple buckets – anything that would move material,” recalled Bill Ewan, a long-time sales person at Victor L. Phillips. The storm area was littered with debris not only because
Fabick Cat was crumpled and trashed, but the dealership swiftly restored customer service and eventually built a new facility.
of the storm’s strength, but also because of its creeping pace. “When you think of a tornado going through, you think of it blowing everything away,” Ewan said. “That wasn’t the case here. A lot of the houses that were destroyed were like they were run through a grinder and disposed of right back on the foundation.” In response to such devastation, contractors and volunteers arrived from across the state and country. While having so many helpers show up was marvelous, renting equipment to some of them was something else. Ewan says Victor L. Phillips rental personnel exercised caution in signing over equipment. “Some people came from as far away as California, Texas, and Louisiana and some of these people we elected not to deal with,” Ewan matter-of-factly recalls. “You rent a piece of equipment to a customer from, I don’t know, pick a state, and you set up an account and there is no guarantee that you are going to get your money or that they are WITH OUR TEAM SELLING APPROACH, YOU SELL going to bring back a machine in THE EQUIPMENT AND WE STRUCTURE THE DEAL. useable condition.” Despite its cautionary policy, the dealership brought in equipment from five other locations and Programs for new & used heavy moved all of it from their yard and construction equipment onto jobsites. Some contractors who became customers in the weeks after the storm still are working in Joplin t $Pmpetitive rates two years later. Their arrival and continued presence in the southwest t 8JEF $SFEJU 8JOEPX Missouri town partly reflects the t 'MFYJCMF 5FSNT state of the construction economy t 'BTU 3FTQPOTF across the country.
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34 | www.cedmag.com | Construction Equipment Distribution | November 2013
By the Numbers David Hertzberg can tell much of the Joplin story in numbers. Big numbers. 7,500 homes and 500 businesses
Reconstruction
destroyed or damaged 95 percent of streets in the storm’s path left impassable 3 million cubic yards of residential debris 110 public works departments responding (opening up most of those streets in 36 hours) and 150 volunteer organizations from as far away as Canada “FEMA was very impressed when they arrived that we were already doing some stuff. We didn’t wait on them. We had already rolled up our sleeves. They were very impressed with that,” Hertzberg recalled. Another number to throw in the mix: 20,000 trees destroyed. “At a glance, it looked like celery sticks where trees were stripped of limbs and leaves. People hoped that they would survive, but that was hope, not science,” says Ric Mayer, a Missouri Department of Conservation arborist with an office now in Joplin’s Parks and Recreation Department. Mayer came out of retirement to oversee the restoration of Joplin’s tree population. Some 11,500 donated trees have been planted, including oaks, pines, poplar, riverbirch and cyprus. Mayer and his crew – using an auger on a city-owned Case skid steer – are currently busy planting several thousand more trees during fall planting season. And another 4,000 right-of-way trees are on schedule to go in the ground between now and the end of 2017. It has been an up-and-down effort. Of 2,000 dogwood trees planted early on, perhaps 90 percent died. Wrong tree, Mayer says; wrong time. On the other hand, only 14 of 600 shade trees planted in parks during the 2012 drought succumbed to the heat. “That’s good in any year.” Vermeer Equipment Company contributed to the tree-planting effort. The Pella, Iowa, manufacturer of agricultural, utility, pipeline, mining and tree equipment became heavily involved in Joplin’s tree repopulation efforts through its Vermeer Charitable
Surviving the Tornado: One Man’s Harrowing Story “I saw it coming from the west and thought it was a bad storm,” recalled Mike Quick, Fabick Cat employee. “I grabbed a pillow and told my wife, Mary Jo, that we needed to get in the bathtub.” From that vantage point, Quick and his wife experienced 20 minutes of the Joplin EF5 tornado. It was a harrowing experience. “The house just blew up,” Quick said, remembering how he lay in the bathtub, his arms wrapped around his wife. “It just exploded. It was the most violent thing I ever experienced. The ceiling collapsed in on us and the breath was sucked right out of us, literally. It was like the breath was knocked out of you.” Then the sky darkened – Quick could see the sky because the roof had blown off – and hail and rain pelted them around pieces of sheetrock that had fallen across the tub. The drenching rainfall in the eye of the storm filled the tub to overflowing. “Then I could hear the back end of the storm coming and I knew we were in trouble. When the back end hit, it started to pick up my wife out of the tub. She was screaming and we were both praying and I was yelling to her, ‘I’m not going to let you go!’” And he didn’t. When the brunt of the storm had passed, he finally eased up from the tub to look around and was astonished by the devastation. He exclaimed, “The neighborhood is gone!” His wife asked what he meant. “I told her, the neighborhood is gone.” Four neighbors living within three doors of the Quick home were killed in those few minutes of terror; nine neighbors were killed within three blocks. Three quarters of the Quick house was demolished. “I still had a little bit of roof on the laundry room.” The couple rebuilt their home on the property. Sadly, after surviving the violent storm, Mary Jo Quick suffered a recurrence of cancer and died one year later. Looking back on the loss of his home and subsequent death of his wife, Quick readily expresses gratitude for, among other blessings, his employer. “I can’t say enough for the Fabick family. They gave me an opportunity to take care of my wife for the last three months of her life and supported my family any way they could,” he said. “It is amazing to be part of a company that values employees like that.”
Mike Quick, (far right), celebrated Fabick’s grand opening this summer with Caterpillar executive Adam Zimmerman (center) and customers Kenny (left) and Michael Singer. Photo courtesy of Construction Equipment Guide.
(continued on next page)
November 2013 | Construction Equipment Distribution | www.cedmag.com | 35
Reconstruction
(“Through a Grinder and Back Again – Joplin, Mo., Two Years Later” continued from page 35)
Foundation, which, among other things, responds to disasters. “Lots of people in our organization felt very strongly about going to Joplin,” said Fred Earley, Vermeer’s environmental engineering manager
and coordinator of such responses. So within days, a Vermeer crew drove south with trucks and trailers and two mini skid-steer loaders. Vermeer workers later returned to help rid the city of tree stumps. Earley worked out a deal with Vermeer’s Great Plains dealership, which has locations in Oklahoma, Kansas and Missouri: The dealer leased a SC252
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stump grinder to the foundation, which, in turn, turned it over to members of Joplin’s Immanuel Lutheran Church. Trained church members operated the grinder the rest of the year. Then Vermeer returned a third time with S600 and S800TX mini-loaders to help move balled trees. Plus, the foundation triggered its alliance with Kubota Tractor Corp. and delivered a Kubota SVL75 compact track loader. The machine was equipped with an auger specially designed for digging tree-planting holes in rocky soils. Vermeer personnel trained the Lutheran volunteers to operate the auger – and then stayed around long enough to plant 150 trees themselves. Progress and Projections Hertzberg looks at the whole redevelopment picture and concludes the city is further along in its recovery than he had expected it to be at this point. Some 85 percent of needed building permits have been issued for home construction and 90 percent of businesses are back in operation. Yet he foresees four intense years of project management as the community establishes new medical, retail, cultural, and convention center facilities. In 2012, Joplin recorded $554 million in building construction, a four-fold increase over the previous year. This year, construction has halved, but that is still a two-fold increase of pre-tornado activity in the city. Hertzberg anticipates one more year of relatively heavy construction activity as Joplin continues to develop itself into a place unimagined before the fateful Sunday in 2011. GILES LAMBERTSON is a retired journalist and freelance writer whose interest in the construction industry goes back to his carpentry days. He can be reached at geepeela@yahoo.com.
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36 | www.cedmag.com | Construction Equipment Distribution | November 2013
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Could You Be Sued Over a Tier-4 Problem?
Litigation
When new technology, customer confusion, plus new pricing and fines all converge beginning this January, a cloud of litigation may fall upon the industry – don’t get caught in the storm. BY JAMES R. WAITE, ESQ.
Engine emissions regulations have permanently altered the equipment industry, and we’re not finished yet. January 2014 marks the onset of required Tier-4 Final implementation in the heavy, off-road construction equipment industry. While manufacturers have poured millions of dollars into R&D to meet the deadlines and dealers are readying their technicians and sales forces to support their customers through the transition, the subject of legal scenarios and considerations should not be underestimated. Legal Issues and How to Deal With Them Knowledge is Key. A lack of customer knowledge can spell disaster, particularly with respect to expensive new and unfamiliar equipment and technologies. After the damage has been done is not the time to try to determine who is responsible. It is, therefore, imperative that the customer acknowledge in writing all Tier-4/Stage IV monitoring and maintenance protocols, especially with respect to rentals. Also in the case of rentals, include in writing that the owner or distributor is entitled to inspect and maintain the equipment and, when necessary, recover damages for customers’ noncompliance.
Legal Liabilities. A great deal of Tier-4/Stage IV technology is new and/ or still being developed. Consequently, you can expect a number of legal issues (and lawsuits) to arise over the next several years dealing with, for example, damage resulting from maintenance failures, warranty claims, fines and penalties, updated guidelines, worksite restrictions, and other issues. Who will be responsible (and pay) for them? Fines. Important: The EPA can assess fines of up to $37,500 per violation against OEMs and dealers, and up to $3,750 per violation against individuals for tampering with or altering Tier-4 emissions devices. Never attempt to disconnect or circumvent Tier-4/Stage IV equipment, and if you rent equipment, be sure to advise your customers to refrain from doing so. Contracts. Few sale or rental contracts in use today adequately deal with these issues – the technology is simply too new, meaning the potential cost/liability issues have yet to be fully assessed. If you think you don’t have the time to revise your current contracts, I would encourage you to do that before the inevitable lawsuits arise. When you do, among other things, you will want to make certain your sales
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and rental contracts accomplish at least the following: (A) Advise your customers of applicable Tier-4/Stage IV requirements (B) Obtain written confirmations from customers that you have provided, and they have received, read and understood, the necessary instructions and warnings (C) Obtain their agreements to comply with the new regulations and appropriate care for machines. (D) Obtain indemnities – agreements to reimburse you for your expenses if you are sued or fined for compliance failures by customers and third parties Doing so may be the difference between recovering a large emission controls-related loss, and suffering a hefty and nonreimbursible expense. Competitive Issues EPA Tier-4 regulations (40 C.F.R., Part 1039, et seq.) and EU Stage IV regulations (Directive 2004/26/EC of the European Parliament) apply to four major types of pollutant emissions: hydrocarbons (“HC”), carbon monoxide (“CO”), particulate matter (“PM”) and oxides of nitrogen (“NOx”), and require that manufacturers substantially reduce pollution emissions. After Jan. 1, 2015, these requirements will apply
Litigation
to virtually every type of diesel engine typically found in the equipment fleets of distributors, rental operators, contractors and other owners throughout the U.S. and Europe. European and American standards have largely been conformed, but the rest of the world remains well behind in terms of pollution regulations and the technologies necessary to achieve compliance with mandated thresholds. However, China, India, Japan and South Korea, have adopted similar standards in some (more limited) cases. Obviously, this creates some competitive issues for owners and operators in developed countries. Market participants in the more heavily regulated U.S. and EU continue to argue (with considerable merit) that, among other things, the increased cost of the newer, cleaner machines places them at a disadvantage when competing with businesses in lightly regulated or unregulated countries. Clean diesel technologies are, however, improving quickly, and some of the benefits have reportedly begun to manifest themselves (e.g., increased productivity, decreased fuel consumption, reduced employee health issues and reduced absenteeism; though the evidence is thus far mostly anecdotal, and remains the subject of considerable debate). In addition, some of the heaviest polluters, including China (which has now surpassed the U.S. in total CO2 emissions and emits almost 30 percent of the worldâ&#x20AC;&#x2122;s greenhouse gases) are starting to catch up. According to The Economist (Aug. 10, 2013), China has issued 20 significant antipollution laws in the past several years, has created a Ministry for Environmental Protection, and is moving toward broader adoption of Tier-4/Stage IV-type emission standards. But progress is still slow, and enforcement remains spotty, meaning OEMs and their customers in developed countries will continue to suffer at least some degree of competitive disadvantage in the near term. (continued on page 55)
Help Your Customers Understand Tier 4/Stage IV technologies fall into two broad categories: (1.) advanced engine design (using new combustion technologies, intake filtration systems, variable geometry turbochargers, crankcase filters, and exhaust gas recirculation systems, for example), and (2.) exhaust gas after-treatment systems (for example, particulate
matter filters and selective catalytic reduction systems). OEMs are generally free to use any combination of technologies they deem appropriate, as long as they meet the applicable emissions standards. Among the chief concerns for most distributors and their customers is, of course, the cost of these new technologies. Manufacturers are
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November 2013 | Construction Equipment Distribution | www.cedmag.com | 39
Management
In The Shrinking Talent Pool Find and Grow Your Leaders Within Employee assessments and proactive development won’t be options in the future – reach the young, match talent to tasks, and nurture the naturals under your own roof. BY RON SLEE
Over the previous two months we have talked about technicians and office personnel including the sales functions; now we come to the leadership group. Let me say this right up front: Management is about leading people not managing people. This is a critical job function and one that many misunderstand. Historically, we have taken the individual with the seniority in the department, and we have made them the supervisors or the managers. As with most of the other job functions, management and supervision need to be developed in-house. This might have been a suitable solution during the middle of the 20th century, but it clearly is no longer the right answer. It is very clear that we must identify and then develop the right individuals to lead the operating and selling departments in an equipment dealership. Identification of good candidates is not an easy task. Let me define leadership for the purposes of this discussion. Leadership
is a process whereby an individual influences a group of people to achieve a common goal. This influence is achieved through respect and trust, which are gained by achievements that are viewed as important by the followers. You do this through shared experiences on the job, working together on a day-to-day basis or on projects. Leadership is not a trait that is limited to a few people. It is a process that rests in the interactions between people. It can show itself and is very natural. It can be learned and it is not some genetic benefit limited to a few. There are many companies in the market that specialize in personality profiling and “personalysis;” there are businesses that develop specific profiles for all job functions. What this is all leading to is managing the individual job functions and the personnel best suited to those functions. This requires what I call a “skill set inventory” for each employee in the company.
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What is the educational background and job history, including the performance at each stage in the history, and the specific level of skills of each individual in the business within each department? With this information available for each individual, the company can much more realistically determine the individuals who have the potential to be high performers. For those of you who are interested in pursuing this further, several books come to mind: “What Makes a Leader?” by Daniel Goleman; “What Makes an Effective Executive?” by Peter Drucker; “What Leaders Really Do,” by John P. Kotter. Then, of course, the company needs to be able to define the specific skill requirements for each of their job functions. This is typically an area in which many dealerships are lacking. Maybe you are thinking, “I am too small for that,” or “I know what they are supposed to do.” I couldn’t disagree more. It doesn’t matter how large or small or how well we think we know
Management
what needs to be done – we must get very specific about what the job functions are and what the expectations are for each job within the job function. We need to define and describe every task that has to be performed and what the standard levels of performance are for those tasks. Employee Development and Your Customers So with defined tasks, job functions and a skill set inventory we now can move to employee development programs. In the book “Employee Development: Big Business Results on a Small Business Budget,” the nine contributing authors affirm that, “an investment in the professional development of employees increases employee satisfaction and retention. As organizations grow increasingly more complex, it has become even more important that they retain the knowledge and experience that the best employees have spent years acquiring. It has also been demonstrated that professional development enhances employee satisfaction.” If you read my columns you have seen “The Service Profit Chain,” which shows a direct correlation between employee satisfaction/retention and customer satisfaction/retention. Employee development comes in many shapes and sizes: mentoring, cross training, self-study, local schools and tuition reimbursement, industry-specific classroom learning, webinars, and Internet-based learning systems, to mention a few. In other words, there is a wide variety of options for everyone to choose from for their business. But dealers must choose to invest in the development of their employees. In the excellent book, “Future Jobs – Solving the Employment and Skills Crisis” Edward E. Gordon lists the hardest jobs to fill in the United States. They are as follows: 1. Skilled Trades 2. Engineers 3. IT Staff 4. Sales Representatives
5. Accounting * Finance Staff 6. Drivers 7. Mechanics 8. Nurses 9. Machinists/Machine Operators 10. Teachers We need employees in eight out of the 10 hardest jobs to fill, not just mechanics. We simply cannot continue to approach the business and employee development as we always have. Employee Development is not an expense that gives the employee assets that they can take elsewhere. It is a necessity for your business to be able to succeed. I believe that the evidence is very clear. Not having the correct number of employees with the right skills is currently inhibiting each and every dealership in their growth right now – today. So, the conclusion that I have come to, and many others have as well, is that you must develop your own employees. You can no longer rely on your ability to hire someone with the skills you need when you need them. Finding Your Leaders For management and supervision this becomes even more on point. Your leaders will all be subject matter experts. They will have related experience in specific job functions relating to their field of expertise. They will have earned the respect and trust of their followers through their actions in previous work. Today, however, you must start the search for employees who are a “good fit” for your company much earlier in the lives of the potential employee. In some cases this is as early as middle school, if not the end of elementary school. To work with high school guidance counselors, while important, is now almost too late. This means building relationships with your local schools. It also means that you must start to work with and understand the value of “career assessment.” Career assessments will help you identify personal strengths and preferences and match
them to potential career and job opportunities. By now it should be clear why we need to have job function definitions and descriptions down to the level of personal attributes of successful candidates. Harvard University psychologist Howard Gartner stated ‘The single most important contribution education can make to a child’s development is to help him toward a field where his talents best suit him, where he will be satisfied and competent.” This is very significant and quite different than the goals that the education system operates within today. To assist the potential employee, employer and student there is a job tool available at Career Outlook (http://www.careeroutlook.us) called the “Interest Profiler,” which will help you understand this process and the ultimate solutions for each student and potential employee. This tool helps individuals find out what their interests are and how they relate to specific occupations. I hope I am leading you to the conclusion that the selection of a supervisor or manager is not a hit or miss proposition but is a well calibrated process that matches the employees’ interests and competencies with the needs of the job. When I was working at Hewitt Equipment and also Finning Tractor & Equipment, the companies had a program where they hired what I will call interns. These young men and women were between their last two years in college studying engineering, science or business. The dealership would employ these people and use the summer period as a time to screen them for their interests and personal attributes. In those days, the scientific evaluation tools were not available. These potential employees would start in the warehouse picking and receiving parts, and this job function would screen out nearly half of the candidates. It was a job function much below their self-image and interest. One of the most important attributes that we need in our leaders (continued on next page)
November 2013 | Construction Equipment Distribution | www.cedmag.com | 41
Management
(“In The Shrinking Talent Pool Find and Grow Your Leaders Within” continued from page 41)
is what has been called “a servant’s heart;” we want individuals who are not above doing any task that helps others. Customer service, after all, is our primary objective, isn’t it? Demographics One more thing to consider is the changing demographics of the workplace. Between the years 2010 and 2030, 79 million people in the U.S. will be retiring and leaving the workforce. Where will all the employees come from to replace the skills and experiences of these people? Is our current education system providing these talents and skills? Unfortunately, we all know the answer to that question. So what is it we have to do? We have to work with the educators and the students, determine which
students have the aptitudes and attitudes that we require, and start these individuals working with you earlier than has previously been the case. Have them work after school, on school holidays, during the summers. Match each of them up with mentors. Then create a specific plan for each individual employee that matches their interests and competencies. Yes, this is a much more difficult task and much more diligence will be required to operate it. But it is necessary. Consider the fact that the retiring workers are much more educated than past retirees; as a result we are very likely to be adding many more less-educated workers than we lost to retirement unless we act and prepare ourselves. Additionally, as you review the current labor market you will find that despite the high level of unemployment it is more and more difficult to find the right candidates for a range of skilled positions.
42 | www.cedmag.com | Construction Equipment Distribution | November 2013
In 2011, Manpower, one of the largest staffing firms in the world stated, “the world stands on the brink of a global employability crisis.” Then in 2012, they warned for the seventh year in a row the world faced an acute talent mismatch. Yet only 25 percent of the employers were addressing skill shortages through employee training and education. (“Future Jobs” page 32) We are now critically short of what Peter Drucker called “knowledge technologists.” I call them managers and supervisors. Competing For a Smaller Pool For a considerable period of time the business competition for scarce talent will be unprecedented. Companies large and small will be hard-pressed to find good employees and retain them. Salaries and wages, which have so far in this recovery been kept in line with the past, are about to explode
Management
in the competition to obtain the right people with the right skills. This will be a fools’ errand. At some point, businesses will come to realize that employee development and training is the proper and correct answer to the skills shortage dilemma. This employee development will rely on the definitions of the requirements of each job function. It will require a skills inventory of the current employees. A specific development plan for each employee will be created and followed. The plan will be adjusted frequently as the employee grows in his or her skills. Employee training and education will in all likelihood become a depreciable asset like any other tool that is purchased for the company. This will allow businesses to think more about the investment in people and less in the short-term profit that is our current obsession. But these changes will be difficult to make.
Save Yourself The quick, the cheap, and the easy drive most business talent development strategies. The weakest link in this business culture fantasy is the continuing focus on outside hiring to get the skills the business needs. I contend that we must develop the personnel that the business needs internally. It is work, but it should be done now. Create a profile for each job function and task that you have in your company. Find a reputable source to use for career profiling and personnel evaluation. Develop an ability to annually obtain the skill sets of each employee in your company. Develop a career development plan for each employee. From this it will become clearer which ones have the aptitude and competencies for promotion to management and supervisory positions. Get involved with the local
educators at the middle school and high school levels, not just technical schools and universities. What I am describing here are the tools that you will need to succeed in the coming decades. If you decide to change your approach to personnel development, thus adapting to the new reality, you will succeed in an increasingly complex and demanding business climate. If you don’t change, you will face increasing risk to your business. The choice is yours. The time is now. RON SLEE (ron@rjslee. com) operates a consulting firm that specializes in dealership operations (R.J. Slee & Associates, est. 1983) and a management and operational training business (Quest, Learning Centers, est. 1994). You can find more specifics at www.rjslee.com, or follow him on Twitter: @RonSlee or his Blog: learningwithoutscars.com.
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November 2013 | Construction Equipment Distribution | www.cedmag.com | 43
A Closer Look
Real-Time Information Equals Real Value EquipSoft offers dealers a low-risk, high value ERP solution to meet their needs. BY JOANNE COSTIN
In today’s business environment, no one likes to wait for the information they need. Not customers. Not employees. Not suppliers. As a result, real-time visibility into a dealership’s operations has dealers excited about ERP (Enterprise Resource Planning) solutions. EquipSoft’s ERP software for the equipment distribution industry is focused on improving efficiencies in rentals, service, sales, parts, and equipment management. Managers get real-time access to business metrics, which ultimately improves relationships with both customers and vendors. Prior to using EquipSoft, Yale/Chase Equipment and Services, Inc., a construction and material handling equipment dealership headquartered in City of Industry, Calif., was on an antiquated batch operating system. According to the dealership’s owner, Roger Ketelsleger, once invoices were run for the day, you could not get an invoice out. You would have to wait until the next day when the next batch of invoices would be run. Reporting was also an issue because the system couldn’t isolate the performance of different segments of the business. Top left clockwise: (1.) Construction worker pulls up equipment history “We just didn’t have easy access to the from the EquipSoft system on his tablet onsite. (2.) Graphic visualizametrics we needed to run a business,” said tion of data in the role center of Service Dispatcher within EquipSoft. Ketelsleger. Today, results are broken out for (3.) Forklift operator and manager review real-time inventory in the each of their eight business units, so Yale/ ERP system on a tablet within the warehouse. (4.) Bing mapping Chase managers are able to better identify functionality of customer locations integrated within EquipSoft for problem areas and correct them. “We know if quick, easy contact management. that business unit is profitable or hitting the numbers it should be hitting,” he said. “Before what I wanted,” he said. A key consideration for Yale/ we had EquipSoft it was impossible to see where the Chase was the system’s ability to be changed or added problem areas were.” onto. According to Ketelsleger, most of what the firm According to David Pilz, CEO of IndustryBuilt, the needed was available “out of the box” from EquipSoft. makers of EquipSoft, what sets EquipSoft apart is its The balance was customized. deep functionality, combined with lower risk – all at a EquipSoft strives to provide a 90-95 percent out-oflower cost to the dealer. the-box fit for equipment distributor customers. This is To decide on an ERP system Ketelsleger asked 12 accomplished with tailored, configurable ERP software vendors to respond to 250 questions based on the needs that meets industry-specific needs. of his managers. Only two vendors could provide most EquipSoft operates on the Microsoft platform, which of what he needed. “With EquipSoft, I got 95 percent of Pilz says provides a great advantage to dealers. “We
44 | www.cedmag.com | Construction Equipment Distribution | November 2013
A Closer Look
rely on Microsoft to do the heavy “Dealers have been offering more technology lifting. Microsoft invests products and value-added services, around $10 billion into its products’ and operationally they need to be research and development each extra diligent around their resource year,” said Pilz. “Our customers get scheduling,” he said. “Acquisitions the benefit of all that new product also often prompt a review of busidevelopment, and EquipSoft is 100 ness systems.” percent focused toward applications Pilz reports that some dealers try for their industry. It’s very much the to shore up their existing systems to same relationship that dealers have get the reporting they are looking with the manufacturers; dealers for, but that requires a lot of the provide tremendous value-add for work to be completed offline. “They their customers based on the prodare not getting the information as ucts provided to them.” timely as they want,” said Pilz. The According to Pilz, Microsoft EquipSoft solution automates the CRM and Microsoft Dynamics NAV reporting process. (Microsoft’s accounting and inventory management application) are two Get Your Head in the Cloud of the most widely used business It has been well documented that applications in the world. Pilz believes many businesses are thinking about it is not a good use of a company’s changing the way they manage inforresources to build their own applicamation technology. Cloud computtions. Instead, EquipSoft extends what ing is a newer concept that offers Microsoft has already created. companies the ability to retrieve “There is little risk because all of the resources via the Internet through tools are built on a single Microsoft Web-based tools and applications, platform,” said Pilz. “The innovation rather than having a server at the and industry standards that are in play business location. Cloud computing take the risk out of the equation for has financial appeal because it allows organizations to shed at least some the customer. Then it is just a matter of their expensive IT infrastructure of cost. The platform drives more and shift computing costs to more cost-effective integration.” manageable operational expenses. In business since 2001, EquipSoft The EquipSoft solution is available has been focused exclusively on in a cloud-based format through dealers since 2005. EquipSoft staff Microsoft’s Azure delivery platform. people who have worked in the Dealers can pay a monthly or annual equipment distribution industry fee versus paying on a per-user basis ensure a good understanding of for an on-premise solution and having dealer needs. “The deeper you get within the equipment niche the more to invest in hardware additionally. Because some companies still view the you are able to build repeatable cloud as a data risk, EquipSoft also functionality that can be used across offers a private cloud solution. a variety of companies,” said Pilz. “The customer can eliminate their From their initial core systems for IT costs and outsource to us. It’s managing sales, rental, used equipa predictable cost,” Pilz explained. ment parts and service, EquipSoft has added mobility functionality and CRM. “The IT infrastructure and delivery system we use is world-class quality, Pilz believes that in an increasingly more than a typical dealership could competitive market dealers need to be more responsive to their customers, ever afford on its own.” Implementation costs are similar and they are looking to their busifor either model. Costs for impleness systems to help them meet mentation vary based on how many this challenge.
locations and how many users need to be trained. According to Pilz, the timeframe needed varies from four months for a dealer with one to three locations David Pilz to 10 months for a larger regional dealership. The EquipSoft solution targets any type of equipment dealer (construction, agricultural, material handling, etc.) with one to 30 locations. EquipSoft already has built-in solutions for many types of dealers. “A single location dealer can afford this,” said Pilz. “We are a perfect solution for any dealership that doesn’t have a system or has outgrown their homegrown system.” Ketelsleger speaks highly of EquipSoft’s handling of their data conversion. “They have a very good process, well documented, and they told us what we needed to do.” In his experience, the hardest part is trying to run the business while training, cleaning up systems and documenting the entire process. Newer offerings for mobile and cloud-based technology offer dealers significant advantages. For example, a service technician with access to telematic data can diagnose machine problems before ever leaving the dealership, bring the part with him, initiate the order and billing right on the jobsite, improving both cash flow and customer service. Before deciding on a solution, Pilz believes dealers should look beyond the software demonstration to think about how the system will be integrated, and consider both the cloud and mobile. “It’s about getting dealers information that is meaningful, to help them drive and grow their business.”
November 2013 | Construction Equipment Distribution | www.cedmag.com | 45
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On the Numbers
A Double-Whammy Tax Bite Just Around the Corner A big tax bill in April ’14 could be followed by an equally painful estimated tax payment in ’15. BY GARRY BARTECKI
Here we are again, another year-end facing us. Time flies when you’re having fun – and we are having fun aren’t we? Let’s see, what can I say about 2013? How about: It was a very “confusing” year, and consequently I never got comfortable about the future – not for a year, quarter, month, or even a day. It really is tough to plan when you don’t have a handle on inflation/ deflation, interest rates both short and long term, construction work in your area, your tax position both federal and local, the demand for rental, caution about hiring, health care costs, and Tier-4 costs. These are the major areas one has to be concerned about as we finish up 2013 and head into 2014. There is still time to take action in 2013 to avoid headaches in 2014 by notifying your customers that 50 percent Bonus and a $500,000 Sec. 179 are still available for equipment purchased and delivered by the end of the year. This may be a way to move some of those units still on the lot that you would like to turn. Make them a deal they can’t refuse, add an extended warranty package on it, and it may turn out to be a win-win for both of you. The other major area you need to understand in 2013 is your tax position, because things are about to change in 2014. In 2013, you still have some great tax benefits (as described above) to use on the dealership return for 2013. In 2014, it will be another story. Most likely
Bonus will disappear with 179 dropping down to $25,000. In short, your 2014 tax exposure is going way up, not just because of changes to Bonus and 179 but because your rental and other business assets have a low tax basis – if sold after 2013 they will generate significant taxable income without new tax benefits to offset the taxable gains. There is also a tax trap related to 179: If you are in a 179 carryover position, you can only deduct what is available for 179 in the year the carryover is being applied to. For example, if you took advantage of the $500,000 179 in 2013 and could not use it, you only get to use $25,000 of your carryover position a year going forward. Better make sure you use any 179 balance in 2013, even if that means you bypass other types of deductions in the process. Those low tax basis assets along with rental department taxable income are both subject to the new Obamacare 3.8 percent tax on investment income if you use a flow-through tax entity (Sub-S or LLC). Example: If you sell $1 million of rental assets and wind up with $1 million in taxable gain (because you used Bonus on those assets previously or just had them in the fleet long enough to depreciate and you meet the gross income test), you will pay an additional $40,000 on the sale of those assets. The same goes for rental department taxable equipment gains. The scary part of all this is the potential overall tax bite you could
incur over the next 18 months. First, you pay taxes for the first time in a long time, or you pay a lot more than you normally do – possibly with no estimated tax in reserve to cover the liability, so you have to write a check in April to pay the tax. Then, having paid this extensive tax bill, you have to have this same amount paid in for 2014 based on an estimated tax schedule. So beware of this not-so-hypothetic scenario: You owe $200,000 in April of 2014, and you also have to pay in another $200,000 by January of 2015. Ooops – big hit to the checkbook. To avoid this bad April Fools’ surprise, you must have a very good estimate of where you stand with the tax basis of your business assets, the taxable profits from the rental operation, your carryover positions for NOLs and Section 179 balances, as well as your taxable income situation personally – for estimating 2013 tax bill. While you are at it, do the same for 2014, assuming that Bonus and Section 179 are going to have a much smaller tax impact starting in 2014. If your tax person tells you these issues don’t apply to you, get a second opinion. What you don’t want is to have the IRS figure it out for you. Call me at AED if you need guidance: 630-468-5121. GARRY BARTECKI (gbartecki@ aednet.org) is AED’s vice president of Finance.
November 2013 | Construction Equipment Distribution | www.cedmag.com | 47
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The Group
Recruitment & Retention
Top 3 Things You Must Be Clear About The more detail you provide now about your company, the job, and the location, the fewer problems you’ll have later.
BY JERRY RANDECKER & CHRIS SITTER
Every dealership wants to attract the best management personnel, so let’s take a moment and examine why a highly qualified candidate would decide to pursue your opportunity. The answer is threefold: (1.) Because your company sounds like a place where they would fit in and enjoy working (2.) Because your position sounds like a fit with their skills, experience and interests, and because this career move presents a meaningful challenge they would enjoy tackling (3.) Because your location is a place that fits the needs and desires of the candidate and his or her family To help a potential candidate accurately determine whether or not (s) he’s a match for your opportunity (early in the hiring process), your position description should clearly communicate all three of these critical pieces of information. Providing candidates with an honest, attractive presentation of your company, your job, and the area where your position is based will also eliminate a great number of hours your HR team or search firm will spend evaluating candidates who could have determined – on their own – that they are not the man or woman for this job. It takes more time on the front end to develop such a document, but be assured this will be time well spent. We didn’t place any special priority in the order of these three points, and neither should you. The fact is, they are all equally important, and you need to treat them all with bright green lights or you can confidently expect trouble in the months
and years ahead with that hire. Point 1: Applicants need to have a type of personality, work habits, and attitude that will work – for the long haul – in your company culture. So, try to provide not only a brief history of your company and an overview of the products and services you provide, but also a fairly clear picture of what it’s like to work at your dealership. This could include: hours of operation, overtime expectations, attire, periodic teambuilding activities, etc. Point 2: Determine what’s attractive about your particular opportunity. Is there a specific challenge connected to this role that will raise the adrenaline levels of highly qualified candidates when they learn of it? If so, briefly tell that story in a manner that causes them to stay up till midnight brushing up their resume and writing you a polished cover note! With regards to the qualifications, list the certifications, the specific skills, the years of relevant experience, the travel requirements (if any) and the educational credentials expected for that particular role. If you spell out the challenge and the desired qualifications, then you have successfully communicated “the job.” Point 3: Too often, location is not seriously evaluated until late in the hiring process. Can Mr. or Ms. Candidate and his/her family enjoy living (for the long term) in the area where this position is based? If a vice president or director level candidate from three states away reads one of your position descriptions, will they have a pretty good idea of what it’s like to live in your town? Every place
has its pluses (and minuses), and while one candidate may consider a remote location a fantastic opportunity to commune with nature and to hunt, fish and camp with their families on the weekends – another might see it as being stuck three hours from the nearest sports stadium and favorite restaurants. Make a list of the top reasons why your longtime employees at that location stick around, and brag on each of those reasons for at least a sentence or two! If this branch location is within close proximity of some good shopping malls, an area symphony or a nice entertainment park, mention it. Candidates will also want to know the approximate cost of living in the area (see www.coli.org), and whether the office/branch location is close to a nice lake or a major state park. The really bright side of this threepoint HR writing assignment is that once your team completes their first position description in this format, you will have a great template for every other role based at the same location. Just change out the desired qualifications, update any company information that has changed, and Presto – you’ve got an accurate and attractive position description ready to capture the attention of some strong performers when you’re ready to fill your next management role. Happy Hiring! JORDAN-SITTER ASSOCIATES is an executive search firm focused primarily on the heavy equipment industry. Jerry Randecker and Chris Sitter can be reached at jerry@jordansitter.com, chris@jordansitter.com, or 210-651-5561.
November 2013 | Construction Equipment Distribution | www.cedmag.com | 49
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Aftermarket
The Market is Changing – Are You Adapting? The third edition of the Product Support Opportunities Handbook (PSOH) is coming this month. BY RON SLEE
Every five years, AED conducts a survey among contractors and fleet managers – the survey data is now in, and the 2013 edition of the Product Support Opportunities Handbook (PSOH) report is ready to be released. The first of these reports was launched in 2002 and the second at the end of 2007. This is the first look we have had at the market since the financial disruption starting with the fall of Lehman Brothers in 2008. We have some very telling information about our customers, their needs and wants from a product support perspective. It deals with the changing demographics of the customer base. What do the customers look like today? Are they larger or smaller? Do they own more or fewer machines per customer? Do they carry more parts inventory or less? Do they have more technicians on their payroll or fewer? These are all very significant points that we must take into consideration when we provide our products and service to them. You might remember The Balanced Scorecard – the business tool developed by Harvard Business School in the 1990s. The starting point on this scorecard, used in our Quest training programs, is to know and understand the needs and wants of our customers. Once we have these needs and wants, we know what we need to excel at to satisfy them. Satisfying these needs and wants is something that energizes our employees. They want to do a good job and they will work much harder to satisfy the customer than they will to satisfy management. The PSOH also deals with buying decisions that the customers make for labor and parts – who they buy from and why they decide to purchase from those
sources. This also is a critical tool for AED members. Knowing where the customer chooses to purchase their maintenance or their cutting edges and why should help each and every one of you to consider changes in your “customer service delivery systems” when the customer gives you evidence that should precipitate action on your part. The PSOH is a wonderful business tool. It helps you understand where you need additional training or better processes and systems. It might provide some insight on your price points. It really is telling you what the customer wants in order for you to get more of their business. The PSOH also deals with market coverage. Many of you understand that you touch less than 50 percent of the machine owners in your territories. By “touch” I am referring to having a personal visit or a telephone call from an employee of your business to discuss products or services your dealership provides to the market, which a particular customer does not currently purchase from you. You touch the customer on a deliberate and planned basis, and the individual who communicates with the customer is skilled in what they do: the selling process, the features and benefits of the products or services you offer, the competitors in the trade area, how to overcome objections and much more. Once again in the PSOH, we discuss the market potential calculator. This allows you to determine what the market opportunity is for each customer and how successfully you have been able to capture that market from each customer. This allows you to determine where you need to pay more attention in the market. The
PSOH helps you identify where you are losing and how to determine the underlying causes of these weaknesses. This also enables you to determine your “market capture rates” for the service programs you offer and the parts families available from your dealership. It is a powerful tool. We all know Albert Einstein’s definition of insanity: Doing the same thing over and over again and expecting different results. In the world of education, I ask each class for some definitions. Insanity is one of them. But two others have revealed the enlightening distinction between ignorance and stupidity. The definition of ignorance: Not knowing what to do. The definition of stupidity: Knowing what to do but not doing it. The PSOH tells you in detail what the customer wants. It also tells you where they buy the goods. It looks like there are no good excuses left and no better way to begin improving except to study this report and act upon it. AED releases the PSOH in PDF format only at the end of this month, which means you can have it on your desktop within minutes by visiting aednet.org/products. The choice is yours. The time is now. RON SLEE (ron@rjslee.com) is the founder of R.J. Slee & Associates, Rancho Mirage, Calif., celebrating more than 30 years in business in the United States, a consulting firm that specializes in dealership operations. Ron also operates Quest Learning Centers, a company that provides training services specializing in product support, and Insight (M&R) Institute, a company that operates and facilitates “Dealer Twenty” Groups. Follow Ron on Twitter: @RonSlee; and read his blog at learningwithoutscars.com.
November 2013 | Construction Equipment Distribution | www.cedmag.com | 51
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Washington Insider
Time to ‘PAC’ Up for Election 2014 AED is putting resources toward the campaigns of pragmatic, ‘reasonable’ candidates in hopes of restoring some semblance of normalcy. BY CHRISTIAN KLEIN
The 2014 midterm congressional elections are less than a year away. With control of the Senate (and possibly the House) at stake, next year’s contests are shaping up to be as contentious as any in recent memory. At the time of this writing, D.C. is just emerging from the government shutdown and debt ceiling fight. How Congress and the president resolve the conflict will likely be a big factor in 2014. The initial handicapping says that Republicans are the losers in the recent political battle. Obamacare is far from popular, but most Americans seem to disagree with the strategy of shutting down the government in an effort to defund it. There’s also consensus about the need to reign in government spending, but not at the expense of America’s triple-A credit rating. As of mid-October, the GOP was getting hammered in public opinion polls, while approval ratings for President Obama and Democrats were holding steady. Beyond hurting the party’s national brand, the shutdown has caused rifts between Republicans and the business community. My expectation is those factors will combine to cost the GOP Virginia’s gubernatorial race this November and make it much more difficult for them to win control of the Senate in 2014. Punditry aside, it’s tempting to look at what’s happening (or not happening) in Washington, throw up your hands in frustration, and turn your back on the whole thing. That’s the wrong response. The problem isn’t who is involved in politics; it’s who isn’t. If business leaders like you don’t step up, get more actively involved in recruiting, supporting, electing, and defending good, pragmatic candidates,
things are only going to get worse. With that in mind, AED’s government affairs team has been hard at work for months designing and executing our 2014 election strategy, which includes: Supporting the election and re-election of pragmatic House and Senate candidates with a demonstrated track record on AED priorities, especially Republicans with strong infrastructure credentials and Democrats committed to tax reform and progrowth regulatory policy Maximizing the impact of our contributions by engaging in competitive Senate races in states with active AED members, smaller populations, and cheaper media markets where our limited resources will do the most good Working with allies inside the Beltway to host “construction industry only” fundraisers for candidates to emphasize national and local impact of federal infrastructure programs Encouraging active equipment industry engagement in the process by having AED members hand-deliver AED PAC checks to candidates “back home” through our ImPACt program, thereby strengthening relationships between dealers and their elected representatives Building on the record participation by distributors in AED PAC during the 2011-2012 election cycle through creative new fundraising strategies and identifying new PAC supporters to provide more political resources, elevate equipment distributors’ visibility, and enhance AED’s effectiveness. Recognizing the overwhelming majority of congressional districts are “safe” (drawn to give one of the two major parties a strong majority), AED is focusing unusual attention on the
primaries. We’re getting early money to allies so they can defend themselves against primary challenges from extremists at both ends of the spectrum. In a few cases, we’re also taking a look at pragmatic primary challengers who seem to be more in sync with AED’s policy objectives than the incumbent. To date, AED PAC has already made more than $37,000 in strategic contributions to 25 campaigns. But remember, our PAC strategy isn’t about us; it’s about your company and the issues that affect your markets and costs of doing business: infrastructure, taxes, energy, and regulatory policy. If you want to help us move the ball forward and help elect good candidates, go to http://aedaction.org/ aed-pac and give us “prior approval” in accordance with federal election laws so we can communicate with you openly about our political program. If you want to have an even more direct impact on the political process, consider getting involved locally. Open your wallet and volunteer your time to support candidates who share your priorities. Put them in touch with us so we can consider them for PAC support. What’s happening in D.C. is frustrating, but when you wake up tomorrow, the federal government will still be around and still impacting your company. By supporting the campaigns of pragmatic, reasonable candidates we can restore some semblance of normalcy and certainty to the political process. Thanks for your continued partnership in that effort. CHRISTIAN KLEIN (caklein@aednet.org) AED’s vice president of Government Affairs and Washington counsel. He can be reached at 703-739-9513.
November 2013 | Construction Equipment Distribution | www.cedmag.com | 53
Strategy
(“In the Physics of Business Don’t Succumb to Biznertia™” continued from page 35)
Biznertia Assessment Test Monitoring/Assessment What are the major trends/changes happening in your marketplace and how well are you positioned for them? How often and aggressively do you monitor and debate what’s happening around you? Did you attend the AED Executive Forum? Did you hear Eli Lustgarten, Jim Huntzinger and others discussing trends? Are you a member of a 20 Group? Do you have an outside Board of Directors? Do you regularly engage in benchmarking? How truly engaged are you with your customers. Do you have conversations regarding what’s happening in their world, what needs are not being met, what you can do to help them improve their performance? How often do you survey customers? (Not about a just-completed repair order or delivery, but about their total experience with your organization.) Do you know how you can add more value to your customers? List the Top 3 technology/regulatory/ marketplace trends and their likely impact on your business. List your Top 3 competitors, and how well you stack up against them. What are your competitive advantages? Who are the new entrants you need to keep an eye on? List your Top 3 organizational strengths, weaknesses, opportunities and threats. Planning/Culture What do you do with your monitoring/assessment observations from above? Is your annual strategic
planning process really just a budgeting exercise for the next year, or do you have detailed conversations about objectives, goals, and specific strategies that are going to be pursued. How has your business strategy changed in the past 18-24 months? How open is your culture to challenging one another? Does everyone agree with the boss? How often do you hear “that is how we’ve always done it” or something similar when trying to implement a change. How many new “things”/projects have you experimented with in the last 12 months? (adjustments to service process, new lead sources, changed sales pitch). What is the reaction to failure on an experiment? Is it tolerated? Are pay increases based upon performance or tenure? And speaking of performance, what does your dealership do with underperforming staff? Do you ignore the situation and bury the person in a position where they will do little damage, or do you address the situation with coaching/mentoring/training? And if that doesn’t work – termination? Action (Speed & Agility)/ Measurements What percentage of your revenue in the last 24 months is coming from new customers/products/services? What are some of your new skills and competencies that were not present in your business three years ago? When the Great Recession hit, how long did it take you to respond?
54 | www.cedmag.com | Construction Equipment Distribution | November 2013
Have you begun to outsource noncritical business processes (HR, IT, marketing)? What tools/training are you providing your employees to stay ahead of changes in technology, products, and processes? How quickly do you respond to new opportunities (rent-to-rent versus clinging to rent-to-sell; customer relationship management (CRM); search engine optimization; social media). *Kouzes and Posner, The Leadership Challenge: How to Make Extraordinary Things Happen in Organizations, July 2012 **This assessment test was Cloudsourced with Northwestern University’s Master of Engineering Management LinkedIn Group and contributed to by Garry Bartecki, AED staff vice president of Finance.
JEFF LEFEBVRE, PH.D. ithe founder and president of PriSim Business War Games, which created AED’s “Test Drive” dealer simulation business course. He is also a faculty member at Northwestern University, Harley-Davidson University and a member of the master faculty at the Mortgage Bankers Association’s School of Mortgage Banking. Jeff will speak at the AED Leadership Academy later this month in Orlando on the lifetime value of customers – visit aed-leadership. com for details. Jeff can be reached at jlefebvre@prisim.com, 847-548-7888.
Litigation
(“Could You Be Sued Over a Tier-4 Problem?” continued from page 38)
currently estimating the cost increase at between 2 and 7 percent of the total purchase price of a given machine (though many claim these estimates are optimistic). According to most manufacturers, however, fuel consumption should decrease by as much as 5 percent, and maintenance costs should decline by roughly 1 percent (though only limited data on either metric has been available thus far). Anticipated longer-term benefits, such as increased employee productivity, enhanced engine reliability and reductions in absenteeism and employee health costs will be more difficult to assess. The reductions in maintenance, repair and replacement costs should, however, help mitigate a portion of the purchase price increase over time. Implementation of the regulations has been ongoing. New diesel engines
the equipment used on jobsites. That in the U.S. and EU are, with some means operators will likely have little exceptions, subject to at least Tier-4 choice but to move quickly toward Interim/Stage IIIA requirements. In the replacement (or retrofitting, where U.S., Tier-4 Final regulations become possible) fleets in those areas. applicable to the 174-751 hp nonroad diesel engine market on Jan. 1, 2014, and to the last segment (75-173 hp) JAMES R. WAITE, ESQ., former General on Jan. 1, 2015, when similar Stage IV Counsel at RentX regulations also become effective in Industries, Inc., has the EU for engines over 56 kW (75 hp). written equipment sales Can your customers continue to use contracts and leases their older, non-Tier-4/Stage IV equipment? The regulations generally do not around the world over the past 20 years. He wrote the book published by the American require equipment owners and operaRental Association on equipment rental and tors to dispose of their current fleets sale contracts, and has authored numerous of older-technology diesel engines articles on the equipment industry and the (Note: California has adopted its own laws affecting it. He can be reached at (866) standards). However, local worksites in a growing number of areas have begun 582-2586 or j.waite@wwlegal.net. to require Tier-4/Stage ADVERTISERS’ INDEX IV technology B4 Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 with respect Bell Trucks of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 to at least a Charter Software Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 portion of
STATEMENT OF OWNERSHIP MANAGEMENT AND CIRCULATION (Required by 39 U.S.C. 3685) 1. 2. 3. 4. 5. 6. 7&8.
Title of publication: Construction Equipment Distribution Publication Number: 0130-160 Date of filing: September 30, 2013 Frequency of issue: Monthly Number of issues published annually: 12 Annual subscription price: $79.00 Location of known office of publication and headquarters: 600 22nd Street, Ste 220, Oak Brook, Illinois 60523. 9. Publisher: David Gordon, Associated Equipment Distributors, 600 22nd Street, Ste 220, Oak Brook, Illinois, 60523. Editorial Director: Kim Phelan, Associated Equipment Distributors 600 22nd Street, Ste 220, Oak Brook, Illinois, 60523. 10. Owner: Associated Equipment Distributors, 600 22nd Street, Ste 220, Oak Brook, Illinois, 60523. 11. There are no known bondholders, mortgagees and other security holders. 12. The tax status has not changed in the past 12 months. 13. Title of publication: Construction Equipment Distribution 14. Issue date for circulation data below: September 2013 15. Extent and nature of circulation: Average No. copies Single issue each issue during nearest to preceding 12 months filing date A. Total number of copies printed 3,067 3,400 B. Paid and/or requested (outside county) circulation (Form 3541) 2,425 2,500 Other classes mailed through the USPS 19 17 C. Total paid and/or requested circulation 2,444 2,517 D. Free distribution by mail E. Free distribution outside the mail 0 0 F. Total free distribution G. Total distribution 2,444 2,517 H. Copies not distributed 623 883 I. Total 3,067 3,400 Percent paid and/or requested circulation 100% 100% 16. This statement of ownership will be printed in the November issue of this publication. 17. I certify that the statements made by me above are correct and complete: (Signed) Martin Cabral, Production Manager, 09/30/13.
Direct Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 34 Dispatching Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 42 e-Emphasys Technologies, Inc. . . . . . . . . . . . . . . . . . . . .28-29 EPG Insurance, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 HKX, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Hydrema Exports A/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Infor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 LayMor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Leading Edge Attachments . . . . . . . . . . . . . . . . . . . . . . . . . 19 Liebherr Construction Equipment Co. . . . . . . . . . . . . . . . . . 48 Manitou North America . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC Okada America, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 PFW Systems Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Pierce-Pacific Manufacturing Co. Inc. . . . . . . . . . . . . . . . . . 36 PriSim Business War Games, Inc. . . . . . . . . . . . . . . . . . . . . . 13 Ritchie Bros. Auctioneers . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SANY Heavy Industry Co., LTD . . . . . . . . . . . . . . . . . . . . . . . 9 Sentry Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Terramac. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Vacuworx Global, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Veritas Risk Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Wacker Neuson Corporation . . . . . . . . . . . . . . . . . . . . . . . . 15 Werk-Brau Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .IBC WTP Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 XAPT Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OBC
As the official magazine of Associated Equipment Distributors, this publication carries authoritative notices and articles in regard to the activities of the association. In all other respects, the association cannot be responsible for the contents thereof or the opinions of contributors. Copyright © 2013 by Associated Equipment Distributors. Construction Equipment Distribution (ISSN0010-6755) is published monthly as the official journal of Associated Equipment Distributors. Subscription rate — $39 per year for members; $79 per year for nonmembers. Office of publication: 600 W. 22nd St., Suite 220, Oak Brook, Ill. Phone: 630-574-0650. Periodicals postage at Hinsdale, Ill. 60521 and other post offices. Additional entry, Pontiac, Ill. POSTMASTER: Send address changes to Construction Equipment Distribution, 600 W. 22nd St., Suite 220, Oak Brook, Ill. 60523 November 2013 | Construction Equipment Distribution | www.cedmag.com | 55
Dealer Data
August Construction Rises 2 Percent Residential building remained on an upward track, nonbuilding construction rebounded. Year-To-Date Construction Starts Unadjusted Totals, In Millions $
Monthly Construction Starts Seasonally Adjusted Annual Rates, In Millions $ Nonresidential Building Residential Building Nonbuilding Construction TOTAL Construction
August 2013
July 2013
% Change
$490,241
$480,966
+2
Source: McGraw-Hill Construction, www.construction.com
Nonresidential Building Residential Building Nonbuilding Construction TOTAL Construction
8 Mo. 2013
8 Mo. 2012
% Change
$329,432
$327,072
+1
Source: McGraw-Hill Construction, www.construction.com
Monthly Sales Volume by Original Equipment Cost with Recovery %
This graph illustrates sales of used rental fleet by the major North American rental equipment companies for the last 24 months. Each monthâ&#x20AC;&#x2122;s equipment sale volumes are expressed as a percentage of the total original equipment cost (â&#x20AC;&#x153;OECâ&#x20AC;?) sold in the highest volume month, with December â&#x20AC;&#x2122;12 representing 100%, (e.g. total OEC sold in January â&#x20AC;&#x2122;13 was approximately 60% of total OEC sold in December â&#x20AC;&#x2122;12). Actual sale $ volume is illustrated as the blue component of each bar in the graph. The recovery (i.e. sales $ as a percentage of OEC sold) is indicated within the bar for each month (e.g. February â&#x20AC;&#x2122;13 sales $ recovery was 47.8% of total OEC sold).
Source: Rouse Asset Services. Contact Gary McArdle at gmcardle@rouseservices.com, (310) 363-7520
The Dirty Dozen - 8&& Ă&#x20AC;OLQJV RQ HDUWKPRYLQJ XQLWV Equipment Description
AUG 12
SEP 12
OCT 12
NOV 12
DEC 12
JAN 13
FEB 13
MAR 13
APR 13
MAY 13
JUN 13
JUL 13
Grand Total
Articulated Dump Trucks
108
50
57
69
86
32
24
40
57
86
72
89
770
Crawler Dozers
256
246
368
306
375
340
184
291
269
307
267
351
3,560
3
2
1
6
10
7
9
3
6
11
4
9
71
555
476
691
550
741
624
408
529
662
719
732
678
7,365
36
23
22
31
47
31
10
22
20
20
27
14
303
621
555
681
615
717
824
435
615
749
925
775
878
8,390
78
59
99
115
133
89
44
54
96
104
112
110
1,093
8
3
7
4
7
5
6
2
2
13
15
6
78
Skid-Steer Loaders
811
835
1,122
1,479
1,677
1,393
752
994
960
1,074
897
903 12,897
Tractor Loader Backhoes
351
352
423
366
384
335
246
231
361
356
294
396
Wheel Loaders < 80 HP
38
48
69
72
96
78
50
61
44
66
64
57
743
Wheel Loaders > 80 HP
435
366
539
625
625
608
330
335
489
484
439
504
5,779
3,015 4,079 4,238 4,898 4,366
2,498
3,177
3,715
4,165
Crawler Loaders Excavators - Crawler, Hydraulic Excavators - Wheeled, Hydraulic Mini Excavators Motor Graders Scrapers - Conventional
Grand Total
3,300
Supplied by Equipment Data Associates, Charlotte, N.C.
56 | www.cedmag.com | Construction Equipment Distribution | November 2013
4,095
3,698 3,995 45,144
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