As various field service industries move forward with digital service transformations, heavy equipment manufacturers and dealerships face unique challenges when overhauling paper-processes. In this two-part series, learn how the relationship between manufacturers and the dealers that sell, service, and support their equipment in the field has developed and how leading companies are moving toward a common service language to solve long-standing challenges.
The Rise of the Heavy Equipment Dealer
Over 100 years ago, backyard mechanics, inventors, and dreamers created some of the most iconic companies in the world today. The Hyster-Yale Group grew out of an innovative solution for hoisting, or “hysting” logs in the Pacific Northwest. In their words, “One customer, one truck, one solution at a time, (our) company grew.” The Holt family in California experimented with steam engines and different drive types, eventually inventing a “track-type” tractor, the “Caterpillar.” Its commercial success was assured once Holt found a way to power it with a gasoline engine in 1908.
Similar origin stories abound for brands like Toyoda, Shimadzu, and John Deere. These early inventors quickly found that the path to market was too expensive, complicated, and distracting to pursue on their own. In order to focus on the improvement and perfection of their products, they needed to develop and grow a network of equipment dealers to resell and service their products. In the US, these dealer networks initially blossomed in the West, Midwest, and Southern agricultural heartlands. After World War II, they exploded across the globe, bringing previously unimaginable productivity to an international client base.
In many cases, the dealer purchased product, sold it to customers, and provided parts, maintenance, support, and service to those assets. In some niche solutions, the manufacturer maintained that main customer relationship, particularly for exceptionally large customers and those customers requiring a large, multi-region rental fleet. This variety of “go to market” formats added further complexity to the overall management of the installed base.
Dealerships Grow Exponentially
The opportunities for dealers to provide some go to market capabilities for manufacturers grew exponentially, not only through the means of geographic expansion, but also through the addition of more product types, product specialization, and financial purchasing/rental/lease options. More customers, in more parts of the world, could make use of these products, demand new and more specific product types and solutions, and take advantage of the rapid growth of international financing options and models to acquire the use of these expensive assets.
With every product addition and innovation, every market that opened, and every innovation in financing strategies, more customers had access to these products, and there was a corresponding need for a local dealer to provide sales, support, and service. It is important to point out that these dealerships, in almost all cases, are independent companies. They, except in rare cases, are not owned by the manufacturer and sell many different and often competitive brands of equipment. They provide customers, within a geographic area, with sales, service, and support for equipment that they in turn buy from the manufacturers.
These dealerships evolved out of agricultural supply businesses, mechanics’ garages, feed and grain suppliers, and the like. One unintended consequence of this evolution may be that the manufacturer owns the product brand, but the dealer owns the majority of the customer relationships and has a material impact on the perception of the brand within their customer base/geography.
Piecemeal Point Solutions Suffice for the First Few Decades
Organically, and opportunistically, manufacturers developed business models, product portfolios, and expansion plans while dealerships looked at additional equipment portfolios, complementary product lines, and similar products for trained technicians to provide services to. As the dealerships developed alongside, but independent of, the manufacturers, they developed their own internal processes and procedures. They created their own invoicing and administrative functions to support their business. This was generally not an issue, as for decades these processes and procedures were paper-based, and a paper invoice or parts order—even in widely varying formats—was simple to process for the manufacturer.
Over the course of the last 30 years, the rise of network communications and the internet has provided an amazing opportunity to streamline, automate, and digitize the flow of information and asset performance data between manufacturers and dealers. Equipment manufacturers have aggressively adopted leading-edge technologies like remote sensors, the Internet of things, predictive analytics, and condition monitoring, but they are not the party responsible for the maintenance and service on the majority of their install base.
While manufacturers have forged ahead with these technologies, many dealers today are still operating with processes and procedures that are the result of 30 years of technical constraints. Many dealers have only a few, if any, IT resources and have cobbled together multiple point solutions to meet the service challenges of today. They have evolved, in a very real sense of the word, a system that works for them. They can create work orders, select technicians, assign work, order and consume parts, submit invoices for payment, and get paid. It may not be elegant, efficient, or pretty, but it works, and it relies on systems that they already own and swivel chair data reentry. In other words, what they have works for them today and they have already paid for all of the supporting systems. But now that new technology has created much more complex equipment, these legacy paper-based management systems can’t keep up.
In the next article, I’ll look at the technological advancements that are forcing equipment dealers to modernize and digitize their service offerings and operations.