As the average age of Class 8 tractors reached a record high of 9.5 years in late 2011, a corresponding spike developed for parts and repair services needed to keep such old equipment up and running. As a result, OEMs, dealers and independents alike began, and continue, to deploy a variety of different methods to try and meet as much of this expanding aftermarket demand as possible while streamlining and simplifying the process for themselves and their customers.
For example, Bryan Martin, owner of 4 State Trucks and head of the Chrome Shop Mafia made famous on the Country Music Television show Trick My Truck, expanded the new, used, and salvage parts mix at his 40,000-sq.-ft. retail location located off I-44 just outside Joplin, MO, to create a one-stop shop environment designed to meet almost any parts need for a wider range of customers.
“The key for us is parts diversity,” he explains. “We don’t want all of our eggs in one basket. That’s why we offer new parts, used parts, and a ‘yard sale’ style setup for salvage parts so we can appeal to all levels of parts needs within the trucking business.”
Martin’s philosophy is to offer a Wal-Mart style retail environment for parts, yet couple it with a mom-and-pop approach to service.
“We figure if we get someone in here once looking for a particular component, and we have it in stock and win them over with our service, they will always come back,” he says. Martin credits that approach to helping 4 State Trucks weather the Great Recession and sluggish economic recovery of the past few years.
“When times get tough, there’s a lot more demand for used and salvage parts,” he adds. “And when times get better, sales of new parts, chrome accessories, etc., begin to rise. We want to be in a position to serve both ends of the parts market so we keep business coming in during the rough patches.”
Big dealership chains are following a similar philosophy as well. Rush Enterprises Inc., which operates one of the largest commercial vehicle dealership chains in North America, notes that aftermarket services, including parts sales, accounted for about 63% of the company’s total gross profits in 2011.
Indeed, W. M. “Rusty” Rush, the company’s president & CEO, stressed in the firm’s annual report that expanding aftermarket capabilities is one of three critical strategic focus points for his family’s business going forward. (The company booked $2.5 billion in revenue last year.)
“Parts, service and body shop revenues reached record highs in March [2011] and continued to climb throughout the second and third quarter of 2011, remaining strong through the year’s end,” Rush says. “The resulting record absorption rate of 117% for the fourth quarter of 2011 and an annual absorption rate of 114%— our highest ever—[is due to] increased service needs of aging vehicles as well as incremental business generated by service solutions we are providing to our customers.”
EXPANDING OPPORTUNITIES
Rush adds that the company plans to continue seeking opportunities to expand aftermarket services it provides customers, and he expects parts, service and body shop revenues to remain strong throughout 2012.
Such expansion is also occurring as managing parts inventory is becoming a bigger and more expensive chore for fleet parts and service managers, notes Paul Tuomi, director of parts sales for Daimler Trucks North America (DTNA). “As truck engines become more complex with ever more sophisticated emissions controls, there are literally more parts per truck to keep track of and stock,” he explains. “For this reason, many fleets look at outsourcing much of their parts needs to dealers and distributors, moving that responsibility, cost and risk away from their operations. Together with OEM truck leasing and contract maintenance programs, this appears to be a growing trend.”
“A lot of fleets are outsourcing parts inventory and management to dealerships to maintain better control of their inventory, reduce obsolescence, increase inventory turns, and reduce downtime,” adds Chris Harrison, general manager of CIT Group Inc., a Kenworth dealership chain headquartered in Morton, IL.
“Advancements in electronics and emissions systems also require a lot more parts on a truck, [which] require more parts to be placed in inventory,” he says. “Because many of these parts are fairly expensive, it’s more critical to have stricter parts inventory control so you have the right part at the right time to avoid downtime.”
Dale Brubaker, director of parts operations for Navistar Parts, a division of truck maker Navistar Inc., says that the parts population is only going to keep growing, but that isn’t necessarily a bad thing for fleets. “For example, aerodynamic improvements that improve fuel economy might require more parts,” he says. “But that also means fleets are demanding that their OEMs be more flexible in how they support their needs.”
Navistar is using a proprietary Dealer Inventory Alliance, or DIA, system to help its dealers strike the right balance of parts availability and inventory cost by identifying what parts dealers absolutely need and what parts they don’t need.
“There’s a certain population of parts that every dealer needs to stock based on the products currently on the road that may require service, but the system also helps develop customized inventory plans for dealers based on their sales history,” Brubaker explains. “Our goal is to have the right part at the dealership when a truck comes in to be fixed.”
CIT’s Harrison uses similar technology as well, called Kenworth PremierCare Connect, to help improve parts as well as maintenance support for customers. He says this system, also used by Peterbilt Truck under the name TruckCare Connect, allows fleets to maintain much better inventory control because it offers more robust parts control reports such as usage reports, reorder reports and obsolescence reports.
“The system also ties in-house repairs to a work order,” Harrison explains. “That functionality allows fleets to track warranties and produce cost-per-mile reports for each vehicle. These reports allow the fleet to see which parts are high usage, and the system can be set to automatically reorder those parts on a daily basis, making sure the part is always available.”
He also points out that a lot of fleets are outsourcing parts inventory/management to dealerships to maintain better control of their inventory and reduce obsolescence, increase inventory turns and reduce downtime. “Outsourcing allows them to have the right parts on hand at the time they’re needed,” Harrison stresses.
Brett Fincham, DTNA’s manager of fleet sales, notes that while inventory turn or sell-through isn’t the same as reduction, it offers many similar benefits for customers. And like other OEMs, DTNA has also crafted a wider and deeper parts offering connected with technology to make the entire parts process simpler for fleets to manage.
“Our OEConnection system, for example, enables our distribution centers, dealers and distributors to quickly locate parts stocked anywhere in the system. That can mean the difference between hours and days in the shop depending on how close the needed part is,” he says.
“With a mix of proprietary genuine OEM parts and parts from key industry vendors, we offer complete parts inventories for any service need,” Fincham adds. “And when it doesn’t have to be new, we offer Detroit Reman parts from our own domestic remanufacturing operations, helping our fleet and other customers achieve the lowest total cost of ownership for the truck assets they own.”
PARTS POSITIONING
There’s also DTNA’s Alliance Truck Parts allmakes replacement line for when genuine OEM parts aren’t the customers’ first choice, for whatever the reason.
“The Alliance Truck Parts brand is itself a tool for many fleets—and at the other end, parts retailers—to manage costs,” Fincham says. “The lines carried by Alliance are positioned very intentionally to fall into the lower-priced value category while offering better quality on the good-better-best continuum. That positioning offers fleets a real choice when looking at replacement parts for their trucks.” He says that this means customers don’t have to go for the “generic white-box” replacement part, accepting a high level of uncertainty in quality just to get a good price.
That’s also what’s driving OEMs to try and bundle more aftermarket services. Volvo Trucks recently created a division called Volvo Trucks Support Services to help provide fleets in the U.S. and Canada with more customized support solutions, relates David Pardue, Volvo’s vp-aftermarket solutions.
“Bundling truck support services can help protect assets, improve operational efficiency, offer a one-stop shop for service and parts information, and provide the fleet options to manage costs,” he explains. “That helps simplify truck operation and maintenance for our customers.”
