Producers, manufacturers and dealers share thoughts on corporate contracts

The following transcripts were edited from two concurrent discussions Jan. 15 at the Pit & Quarry Roundtable & Conference. Both conversations were edited for brevity and clarity.

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P&Q: As the consolidation of the industry continues, the number of sites operating under a corporate structure is on the rise. Equipment suppliers: As these producers expand, what impact has it had on your process of selling equipment, parts and service? How does your number of corporate contracts today compare with five, 10 or 20 years ago? How much more competitive is equipment sales today based on the changing makeup of the industry? Producers: If you buy goods corporately, what advantages do you feel you gain from this approach? And if you aren’t a corporate producer, do you feel you are at a disadvantage when purchasing?

VINNIE ROCCO (AMCAST): I actually think it’s beneficial in a way, but it’s challenging in another when companies get acquired by other companies and kind of follow the corporate structure.

In the sense of a positive, it kind of opens doors into parts of other markets that they are also involved in. So, when you’re dealing with a company in, say, Arizona, you can work through connections in that industry as a manufacturer and open new doors for markets that you might have had a difficult time getting into otherwise. You can network in that respect.

On the side of it becoming more challenging: Sometimes, you hit more roadblocks and the people who want to purchase your equipment have to get approvals. They have capital expenditure budgets that they have to maintain.

One thing that’s come up a couple of times is the rent-to-buy options. Those tools that we offer – or that a lot of the equipment manufacturers are offering – are another way to get your equipment operating for these customers and producers.

EVAN CLARKE (KLEEMANN): In our industry, with Wirtgen Group, we are part of two. We have the mineral section, which is Kleemann, and we have the rural technology section, which is Wirtgen, Vögele and Hamm.

The rural side of the business has had a greater impact on that industry by having corporate accounts. We’ve been leading and pushing from that envelope after many years.
On the mineral side of the business, it’s something we’re starting and we have to get into. We are getting asked that by our larger producers, and trying to come up with a model that we are doing on the rural side of the business to try to get corporate accounts.

We’re starting to see a trend leading toward that. We’ve always tried to avoid it before because it can become complicated, but if there’s a need in the market, we’ll definitely position ourselves better for that for the end user and producer.

RYAN LAYTON (JOHN DEERE): John Deere has a corporate business division that focuses on larger customers and accounts, but even outside of that, we have seen even the small producers become more sophisticated in the procurement process. They want to understand numbers and make sure we’re really presenting value proposition to them. That falls on us to be able to communicate that, but also [on] our dealers [to] be able to communicate that, as well. It’s a challenge and certainly an opportunity to make sure we can articulate what our products bring to customers.

JOHN GARRISON (SUPERIOR INDUSTRIES): There’s definitely a consolidation. Our coast is a good example of that. So we’ve had feedback from our dealers who have said: ‘I’ve been selling to this independent customer now for 20 years, and they were acquired by ‘insert company name’ and now they can’t make any decisions at the local level anymore.’ We’ve actually had dealers coming to us asking us: ‘Could you try to get some sort of agreement set up with this corporate producer or this regional producer?’

I’d say the difference is five years ago, we probably didn’t have any corporate contracts or strategic accounts. We definitely called on them and sold them, [but] nothing formally in place. Today, we have a number of them, and ConExpo-Con/Agg is full of meetings trying to get that set up.

I think even some of the smaller-to-medium producers are more interested in having some sort of a personal agreement, as well. Some are very corporate; they want a written contract, and they want to show that you’re following the contract. Others just want to know that they’re getting a good price, how they’re going to be serviced [and that] parts are going to be available to local dealers.

So, with any of our national accounts, obviously, we have a direct line with the producers, which is important. But we sell and service our dealer networks. There’s definitely more dealers and producers asking for a more structured contract in place.

SCOTT ALEXANDER (ARCOSA): I’ve had the unique experience of having been in a large corporate organization – and [I am] there now – but also for a number of years owning my own mining operations. I was a small producer for a number of years and [have] been a large producer.

So much has to do with your relationship with whoever the provider is. Going through the acquisition process where we acquire smaller companies, we find out sometimes they had better purchasing than we did, and it really has a lot to do with the relationship they have with the company.

You could argue [it’s] an advantage as a large corporation where you’ve got that buying power, but that’s not always necessarily true. I didn’t feel as a small producer I was at any disadvantage, and I’ve worked with a number of companies as both a small producer and a large producer. I feel so much of it, again, deals with the relationships. It’s just who you trust and who you work with.

WILL PIERCE (SCHURCO SLURRY): We’re a smaller manufacturer among multi-billion-dollar, multinational corporations. We’re an American company and we have less than 50 employees. For us in this industry, it’s 100 percent relationships. It’s working through dealers, working and establishing trust at the lowest, smallest level possible – all the way up through the corporate offices.

We see contracts, we see handshakes and we see it all across the board. But for us, it’s totally about the relationship because, by and large, and we can all argue this, but as equipment manufacturers, if there’s one person who made a silver bullet in any particular thing, there’d only be really one company out there. There are many companies out there, and how you service and support your customer or end user is really the differentiator at the end of the day.

TRENT CARNEY (ROGERS GROUP): Probably 15 years ago, we got aggressive with national contracts and national business with our manufacturers. Several got to the point where some of the agreements didn’t necessarily make sense, or make sense to maybe buy from local vendors or manufacturers, as well.

The point is we do like the national contracts, and some of our contracts are kind of high risk, too, but then dealer networks, right? So that you still have that personal [relationship] – the guy down the road, your representative [who] still lives in your town; that sort of thing. That’s probably the best of both worlds.

But national contracts are probably seeing much better pricing [with] standardization of your cost, as well as across multiple areas. We’ve incorporated a lot of service discounts into those, as well. It’s not just parts. It can be service. So when you find that match where you get great pricing but still get local representation because you’re using those people, that really does help a lot.

CLARKE: The biggest challenge we’re seeing in the contracts: In North America, [it’s] much easier and can be accommodated, but the biggest challenge is the global contracts. This market is shrinking worldwide.

You can buy everything you want on the Internet, or you can research pricing – what they’re paying for machines in England, France or Germany. We are starting to see those as something very difficult to manage with larger companies – global companies that have acquisition costs, prices and they see in North America [what] we’re paying for it in France, China or wherever that equipment is going.

I understand the manufacturing costs, transport costs and just the companies themselves, and as everything else, that becomes very challenging to manufacturers. But it’s starting to happen, and we are getting requests for that.

TOMASO VENEROSO (AMCAST): We work with all different kinds of customers. With mining and big quarries, there’s a bit of disconnect between the corporate procurement and operations. That’s something that is very challenging, especially when you try to push the policy to create a bridge between the administration and the operations.

In terms of timing, that requires a lot of organization because you’ve got to visit the site, spend time there and then go to headquarters to try to convey some concept to people who, sometimes, have never seen the mine in their life.

Then, of course, there are smaller operations where administration and operations are pretty accessible. That’s the best-case scenario.

Overall, in terms of corporate contracts and procurement processes, the biggest part of it is trying to clear the bridge and gain something logistically between operations and administration.

E.J. BURKE (DYNO NOBEL): That is a true challenge because that is where the difference is. There’s a difference between price and cost, and most procurement folks will have their goals and incentives centered around price. The operation people will have it all center around cost. So you really have a fundamental issue to deal with straight away.

We are trying to partner more with our customers in terms of our segmentation, looking at trying to find a value of all of those people who really want to take a look at the long haul [and] develop technology together.

RICK MADARA (MCLANAHAN CORP.): We had two large producers [whom] we had corporate contracts with years ago. The struggle we ran into – and the reason it didn’t work – is it’s hard for somebody out of Birmingham, (Alabama), to tell somebody in Southern California who to buy from. All of these areas have their local dealers, and we have our own dealers. [Producers] have a good relationship with them. They get service from them. So for them to be dictated to who they’re buying from was a struggle.

It really never took off for us, and I think the biggest reason was because of the local support. Geographically, they have different people they’re comfortable with. It might be us and it could be our competition, but they don’t want to be told out of Raleigh, North Carolina, who to buy from.

I think even the producers have recognized that. I don’t know that we get many requests for it. I am seeing some bigger RFQs (requests for quotation), where they’re sending out everybody to fill out equipment lists in January and saying ‘we need this much equipment for next year [and] these are the locations.’ You bid that way.

As far as the buying power that a big corporate producer has: I don’t see that. They’re not coming to us for that anymore.

TYLER TROWBRIDGE (BELT TECH): From a dealer perspective, you spend a lot of time investing in local relationships. You nurse that relationship for years, and you need that local support and consult.

From our perspective, I need to spend time with the guys on the corporate side to make sure we’re on those lists [and] we qualify. We’re a full-sized, full-line Superior dealer. So it’s important for Superior and I to partner together – or consult with him to be on the list and to qualify.

You also can’t ignore or forget about that relationship locally, because you still need to be there.

So it’s complicated. You’re seeing more and more of it as consolidations happen in our industry, but it’s a challenge. I think it’s a multilevel challenge that you need to attack to be successful.

STEWART PETROVITS (ROUTE 82 SAND & GRAVEL): As a noncorporate, small producer, you’re definitely at a disadvantage if you don’t know that corporate contracts exist and if you’re not actively fighting back against them. If you can sell a (Cat) 980 (loader) to Oldcastle for [X price], you can sell it to me for [X price]. And you need to demand that, whether it’s Bridgestone tires or cellphone service.

Our company has been around since 1966. We’re loyal to Caterpillar and Ford. We built loyalties, versus a corporate account that’s going to have their best practices meeting and say: ‘Guess what? Everybody’s buying John Deere this year.’ It doesn’t matter that there’s no dealership near you, and that next year the practice is going to say ‘Komatsu.’

I don’t really know what you’re gaining by selling a cheap machine to somebody who, a year from now, is going to buy the competitor’s cheaper machine – versus catering to guys like us whom you can build some brand loyalty with.

If you don’t demand it, you’re definitely not going to get it. You’re going to be at a disadvantage.

TONY GIANNI (TRIMBLE): I agree with everybody’s comments, especially on the price versus cost. To Rick’s comment [about] the regional player saying, ‘You know, the people in Raleigh or Chicago are not going to tell me what I’m going to purchase’: There definitely are those struggles.

I work specifically with these [kinds] of accounts. It’s not necessarily these big aggregate producers, but those who are very technology focused, as well, and want to adopt it into their business.

I think the flip side – and one of the things we have seen at Trimble in having these bigger contracts – is that we get your input to design these products. We have some very good, very intelligent, visionary people at Trimble. But at the end of the day, [procurement] might not even know what a mine is. They don’t spend every single day of their life working there. We can have our ideas and vision that we want to go with, but at the end of day it’s only as good as how it’s going to improve those businesses.

For us, we have seen these bigger contracts and [worked] side-by-side in partnering and trying to subsidize some of the gaps that they don’t have. We have seen that as a tremendous benefit, for sure.

BRAD NICHOLS (SYNTRON MATERIAL HANDLING): From our perspective, it’s not just the manufacturer or a particular manufacturing group doing a corporate contract with a producer’s group. What we’ve been seeing and having is these various, larger big box distribution companies coming to us trying to make some type of trilateral or partnership-type agreements.

There’s a different phase that’s happening out there. You’ve got this big, huge bid that you have with me – this big push that way. Both Martin Marietta and Vulcan (Materials) have come to our facilities and spoken with us. But the biggest issue they have is the lack of knowledge at the various plant sites.

They’re young. A lot of it is that they have a huge, aged workforce that’s no longer there. Younger kids have come up and don’t know a whole lot. So they’re wanting to make sure there’s support, and they’re wanting to make some of these corporate agreements [about] service and support for the people on our sites. That’s really a new area of conversation.

COLIN OERTON (STONEPOINT MATERIALS): I think we’re kind of in this category. We’ve grown probably about 50 percent over the past 12 months, just in terms of our size and employees. In the past, we’ve always let each one of our groups get out there and kind of source the contracts themselves. We’re right at this inflection point where we’re looking at helping from a procurement perspective, trying to do something at the corporate level.

I’m not going to mention any company names, but we went out and bought a large piece of mobile equipment last year. We got quotes from two of our different regions for the exact same piece of equipment. The difference in cost was material, which was really surprising. That’s going to drive us to do a lot more of this.

It would be interesting to see how [corporately] whether we can actually get those sorts of cost savings. I think, to a certain extent, it’s good to let each of our groups continue to try to find the best price for the client. It’s something we’re really focused on. It’s another way to try to improve and reduce our operating costs.