The evolving dealer-producer universe

Deliver parts. Provide service. Ensure uptime.

These areas remain fundamental to an equipment dealer’s responsibilities. Still, how dealers carry these fundamental tasks out is rapidly changing.

To discuss the changing dealer universe, P&Q assembled a panel comprised of representatives from each link (manufacturer, dealer, producer) of the supply chain. Rick Madara, director of sales for North America at McLanahan Corp., brought perspective to our panel as a manufacturer. Lee Heffley, vice president and regional sales manager at Brandeis Machinery & Supply Co., served as our dealer representative. And Alan Maio, vice president and general manager of northern California and Nevada at Cemex, brought perspective as a longtime aggregate producer.

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P&Q: Rick, can you offer some historical perspective and your own personal experience on how dealers have changed over the course of your 20-plus years serving the industry?

Madara: One of the things we talked about a lot the last few years was embracing the dealers. Twenty-one years ago when I started in the industry, we had one stocking dealer. We had many representatives and we worked with them accordingly, but back then it wasn’t the same as it is now.

I think producers rely on dealers a lot more than they used to. We have to understand the value dealers bring a manufacturer, because we rely on them to bridge the gap to help producers. We can’t be everywhere.

We look at dealers as a partner and an extension of what we do every day. They have other lines that they’re working on, too, but we try to get them to work with us as much as possible. Because they’re calling on the customers and producers every single day, they can come to us when they need expert help.

P&Q: Lee, you’ve been on the dealer side for many years. The manufacturer-dealer dynamic has been described by some, at one time, as authoritative, with manufacturers expecting things and, in some cases, ‘dictating’ to the dealer. Perhaps the typical relationship was not as cooperative then as it is today. From your standpoint, how has the manufacturer-dealer dynamic changed?

Heffley: Our company has been in distribution for 110 years now, so we’ve seen a lot of changes over those years. I’m sure with some manufacturers over the course of history that there have been some tougher relationships. But by and large it’s been a cooperation between distribution and the manufacturers.

Somebody told me one time about marriage: it’s not 50-50, it’s 100-100. There are times when you have to make that extra effort to help the manufacturer out, and likewise for the distributor.

P&Q: Alan, can you offer some historical perspective, too, looking back to when you joined the industry, how you worked with dealers and what your expectations were to start versus what they are today?

Maio: Going back to my days with Rinker (Materials), we were much more self-reliant. We had mobile mechanics and full electrical crews. That has changed.

With how hard it is to find labor and trying to beat down the cost inflation we’ve seen, one of the ways a lot of producers are combating that is to de-risk that and sublet that out.

In my experience, this is the most contracting of work I’ve seen at the sites. Twenty or 30 years ago, other than stripping jobs or something like that, you never saw production outsourced like you do now. I outsource almost all my production.

It’s getting the dollars to put the capital in to get auxiliary equipment. A crane doesn’t really pay itself back on paper; it’s seen as just a cost item. It’s very hard to get all of the equipment you need and to get the capital to buy it. So it’s easier to outsource it.

The problem is suppliers, vendors and contractors face the same things we do, which is labor shortages. We accept rates that are a little higher than what we can do internally, but overall it makes more sense for us because we’re de-risking ourselves.

P&Q: The contractor seems to have more visibility these days. At the same time, we hear reports of the big producers leaning on dealers as contractors. Are you seeing that? Are you asking dealers to serve in a role that a contractor might traditionally have done?

Maio: We’re asking dealers to help us broker some of that. ‘Hey, here’s what we need, we know it’s not really what you do, but how can you help us bridge that gap and play matchmaker a little bit.’

Dealers are trying to find a way to leverage that and take a piece of it but also help the customers out. I think it’s a little desperation, just trying to figure out how do we decrease costs and leverage all of our vendors.

P&Q: Lee, any experience with that, and when you pick up that contract, is that an opportunity or more of a challenge that a dealer doesn’t want to take on because there are so many responsibilities you guys already have?

Heffley: It’s just like management. The best thing you can do is delegate responsibility and streamline your own efforts. I don’t see distributors from our standpoint getting into Turner Mining (Group) – or something like that – and actually doing the contract work from that standpoint.

But with the responsibility of technical labor, we take that very seriously and apply a great deal of resources toward our apprenticeship program. That gets coupled with resources toward rental equipment. Downtime just isn’t acceptable. So whether it’s backup machines or being able to mobilize quickly, it all kind of fits together as far as how the dealer can add value.

Madara: This past year, there were two projects we worked on where the customer actually made us put in the contract that we’d have somebody run the plant for them for the first eight months because they could not find labor to run their plant. That’s the first time in the history of our company, which has been around a long time, that that’s happened.

[Labor] is a real problem. Hopefully that gets better over time, but right now it’s a real issue.

P&Q: What qualities are manufacturers looking for in dealers?

Madara: There are a lot of things we look at. We serve a lot of different industries and territories. A dealer that’s handling crushing equipment in Texas might be different than a dealer handling washing equipment in Pennsylvania. We definitely look at the area they’re going to be operating in.

We look to see if they have service trucks, if they have enough people for boots on the ground, their history and how long they’ve been with the company. The biggest thing we look at – and this is for any industry, any area, any product line – is trust. You have to have trust both ways between a potential dealer and a potential manufacturer.

The potential dealer has to believe in the product you’re producing, and you have to have trust in the dealer that they’re going to market your brand the way you want them to. If you don’t have trust, that relationship is not going to work. If you can trust each other, you can make everything else work. There’s enough training and enough experience out there that you’ll be successful. But if you don’t have trust, I don’t think it will work.

Heffley: When we’re evaluating whether to take on a new manufacturer, we have a checklist we go through – the financial, risk/reward analysis. But far and away the number one thing is ethics and values of that organization – and what we know them to be is in line with Brandeis. We think that’s served us well. It’s a decision we don’t make lightly.

P&Q: Alan, from the perspective of a producer, what are you looking for in a dealer?

Maio: Earlier in my career, it seemed like everything was an emergency. You’d call with a Defcon 1 all the time for everything, no matter what, because you just wanted it now.

Now, we are much more reasonable because we understand people can’t react like we expected them to react in the past. We have to be more communicative and own that a little more.

One of the things we try to do is sit down on a quarterly basis with all our partners, which is what we call them, to make sure we have that open communication and we are clearly defining what is code red and what is not code red. In the past, we would steal a supervisor from a dealer. Very recently, I had that opportunity, and we tread more lightly in that because you understand everybody is facing the same challenges you are.

P&Q: Lee, you wrote in Pit & Quarry recently about the changing dynamics of the dealer and the role of stocking parts and keeping an inventory of key parts, arguing that the Great Recession changed this handling. Producers just aren’t stocking parts like they once did, so that’s more pressure up the supply chain for the dealer and manufacturer. Is this the new normal?

Heffley: Whether it’s parts inventory or personnel, there’s certainly a shedding that took place. But it’s coming back.

A lot of the responsibility has shifted to us and then upline to the manufacturers. One of the difficulties with the recession is that with it came a lot of component manufacturers – the people who make the small parts that comprise the big machine – completely went out of business. As it’s come back, finding those companies really falls more on the lap of manufacturers to be able to replace that manufacturing.

We’ve tried different things – nightly truck service to all of our manufacturers that covers 14 of our dealerships, and component forecasting is a big thing that our manufacturers support. That’s a combination of telematics and 110 years of history to know in advance when Alan’s machine is likely to lose a transmission or an engine and be able to plan ahead so he doesn’t have to pull that fire alarm.

P&Q: Alan, as a producer, who should take the responsibility of parts management?

Maio: Everybody has to take a little piece of that. It’s more of a global supply situation now with a lot of mobile equipment and a lot of larger equipment. With fleets of equipment 20 years ago, a site might have had all Cat trucks and all McLanahan equipment. [Now], especially on the mobile side, you’ve got two pieces of this and three pieces of that, and it makes it that much harder and costly for the producer to stock all those individual parts.

We have what we call a United Nations of equipment at a lot of our sites because you see brands from all over the world – one of these and one of those – so it makes it difficult to keep that cost of ownership down. You really need to have partnership.

P&Q: Rick, do you have any thoughts on where parts responsibility falls?

Madara: It definitely has shifted. At the end of the day, the responsibility is on the manufacturer. It’s a collaborative effort between the manufacturer, the producer and the dealer – who stocks what.

As long as you have an open line of communication and the producer understands that ‘look, this particular piece isn’t in stock because it doesn’t wear out for six years, but if it goes down, it takes eight weeks to get it in,’ we can work that out.

At the end of the day, the manufacturer has to at least acknowledge what parts are available and which ones aren’t readily available and how long it takes to get them in because they can’t afford to be down for weeks waiting for a part to come in. It’s critical that parts are available.

In the past, it was OK for it to take two or three days for a part to get there from the factory. Now, we live in an Amazon world, and they want it that afternoon if something is going to make them down for a couple of days. For wear parts, the dealer will typically stock. They want them as quickly as possible so they can get back up and running, because one piece of equipment can go down and it can take down the entire plant. So it’s critical we have those things in stock.

P&Q: We’re probably going to see more technology offer predictive services in the future. Maybe equipment will order its own parts not before too long. But tell us a little bit, from each of your standpoints, how technology is changing the way you operate and avoid downtime.

Madara: We still rely heavily on our dealers to understand and predict when parts need to be replaced. A repair might happen in a year on something in Pennsylvania, where out in a sand and gravel operation in California it might take six months.

You can put sensors on equipment and calculate how many times something rotates and when you think it’s going to fail, but that’s only going to be as good as what the producer can help out with that. So we rely on a lot of on-site type of stuff.

As far as technology, we’re looking to do dealer apps and things like that where the dealer can actually see what we have in inventory, what they have in inventory, and then our inventories talk to each other. So if they’re putting a bearing on a piece of equipment, we’ll know that and we’ll know to replace their inventory automatically so they don’t have to worry. Those sorts of things are happening.

As long as we give our dealers enough tools and information, a lot can happen seamlessly.

Maio: We have iPads for plant managers so they can be monitoring a plant if they have to go to their kid’s soccer game. When I started, you were there at 6 a.m. when the plant started, and you were there until whenever it was finished. That’s just not the age we live in anymore if we want to attract anybody to the industry. So we have to find ways to not decrease accountability or responsibility, but allow technology to be their friend, be able to stay on top of things and know their KPIs a little bit more than they have in the past.

Heffley: It’s still [about] people. We can have the telematics, component forecasting and things like that, but we still rely heavily on people and their assessment of that information. What does it mean? You guys operate equipment every day. Oil analysis – that’s nothing new – but it’s probably one of the most valuable indicators that you have for the condition of your machines.

You can have all kinds of data on parts inventory, but if you don’t really have the knowledge to translate that data, know what that means and how we can best prepare, it’s just a bunch of numbers.

P&Q: Is there anything else in the whole dealer dynamic that we haven’t touched on that is kind of changing how you guys do your jobs?

Madara: Our biggest challenge as a manufacturer is we continue to get bigger. We continue to acquire other companies that have lines. We started out as one size company 20 years ago and now we have this much product, so trying to find a dealer that doesn’t have a competing line is difficult. Chances are they’ve had a line for the last 10 years, and now all of a sudden we’ve added [something] to our inventory and expect them to promote both lines. It’s a challenge.

Good dealers are few and far between – they really are – and we have to embrace the good ones and the ones that we work with because it’s like losing an employee. It’s very expensive to lose a good dealer. We have to do everything we can to hold on to them. We work with them as much as possible. We evaluate each other, just like we do our own employees.

Maio: We recognize the changing times, and all of us see part of our job, especially those in leadership roles, as being brand ambassadors for the company and for the industry. It’s a lot less adversarial – or a one-way sort of communication with your contractors, vendors, suppliers – than it used to be. It’s more of a partnership, and fostering that open communication is important to us. We recognize that we have to do that and we have to be flexible.

We just don’t inventory parts – period. I buy everything I need at the time I need it. We just don’t have the funds and capital to be putting in inventories right now. So, again, de-risking the business, sharing the responsibility and being collaborative is really important as we move forward.

Heffley: Being the distributor, it’s easy to feel like you’re always the one in the middle. The truth is, it’s an equation and there are three components to it – and every one of them is important. We need feedback from guys like Alan to know what their needs are and continue to fine-tune what that is.