You could see the snowball coming at you, but you had no idea how big it was going to be,” says Kari Rihm, president and CEO of Rihm Kenworth and the 2022 Truck Dealer of the Year, presented by the American Truck Dealers association, HDT, and Procede Software.
She was, of course, speaking about the supply chain disruptions and price increases that resulted from the COVID-19 pandemic and continue to ravage the trucking industry.
Since truck manufacturers had dealers on allocations, Rihm says she worked with her sales staff to determine what customers’ needs really were. “They worked hard to deliver bad news to customers that they were not going to get all the trucks they ordered,” she says. She was quick to add that the dealership “has its hand up for any and all slots that open up by cancellation.”
As if the vehicle shortage wasn’t bad enough, the supply chain disruptions spread to parts as well.
“Commodity-type items have been a little bit difficult to get, and we are looking at what alternatives are available,” she says.
“The DEF level sensor issue was a real monster,” she says. As the microchip shortage affected the availability of sensors tracking the amount of diesel exhaust fluid in the tank, truck makers had to get temporary software/calibration fixes approved by the EPA to deal with the problem — and then dealers had to get those fixes to customers.
“The parts shortage is ongoing, and every week it is something new,” says Eric Jorgensen, president and CEO of JX Truck Center and a Truck Dealer of the Year nominee. “You do what you can with safety stock and things like that, but you have to be extremely creative in figuring out ways to get customers back up and on the road.”
Jon Vandehey, president and CEO at Mid-States Truck Service and a Truck Dealer of the Year nominee, says he lost hundreds of new truck production slots due to supply chain constraints, and “many trucks that are being built are often significantly delayed.”
He says the dealership is managing through the crisis “by being in constant communication with customers regarding their orders and the impact the shortages may have on their deliveries.”
Changing Parts Procurement Practices
To combat the parts shortage, Vandehey is sourcing from non-traditional places and even competitors. “It is kind of a ‘get the part where you can’ mentality,” he says.
Rihm also has looked outside her normal procurement channels. “We continually try to develop relationships with new suppliers, and even find new products,” she says.
Rihm’s son, who is the dealership’s parts director, came back from a trade show having found suppliers for products the dealership was not currently selling. Those products are now being test marketed. Rihm Kenworth also has a private label parts brand that she relies on to help meet customers’ parts needs.
She adds that her staff constantly looks at inventories at the branch locations to assess needs. Branch parts managers do not order parts. Rather, branch inventories are based on what parts consumption data shows is being used. “We are using data a lot more efficiently now in order to help us make good business decisions,” Rihm says.
Vandehey says he has a broad base of suppliers and is leveraging technology to increase the speed and effectiveness of procurement efforts.
“We have increased some stocking levels when possible to avoid constraints moving forward,” he says. “But it also is about the importance of communicating with the customers to make them aware of market conditions and provide options to improve the parts acquisition process.”
Vandehey also says his customers are willing to venture outside their normal parts channels. “At the end of the day, they just want to get the truck running and the driver on the road,” he says.
Jorgensen says JX Truck Center still relies on the manufacturer quite a bit. However, the dealership also has its own proprietary line of parts, which has meant building relationships with suppliers outside of his OE channels on which he can rely.
The EV Journey
There have been a great deal of developments surrounding electric vehicles. Dealers are part of the process of getting EVs into fleets for testing and can work with customers on their EV strategies.
“I can tell you when [EVs] were first coming out, I was probably the biggest doubter,” Rihm says. “I thought ‘nobody in Minnesota is ever going to want these. The batteries won’t work in the winter.’ I thought maybe by 2050 we would start seeing them.”
But somewhere along the line, the switch flipped. “Instead of being a naysayer, I started thinking maybe we should be the leader instead of the joiner,” she says.
She found out what she needed to do to get educated and get the dealership started on its EV journey. Customers have indicated that they want to test EVs, and the local power utility also has approached her. “Now we are working on getting a plan in place to get a charging station, and we have some trucks on order for a local customer who wants to do some testing.”
She adds, “I guess what got me excited about learning more and saying ‘let’s be a leader’ is that some applications make sense — local delivery, city buses, and also in applications that traditionally have caused pollution in more densely populated areas. I think it makes sense to eliminate that pollution. But cross country, I don’t know about that.”
Vandehey says that when it comes to EVs, “there are a lot of moving parts right now.” The dealership has designated an EV champion, and “all efforts with EVs go through him,” he says. “All the required tooling and technician training are already on order or scheduled. We also have quoted EV buses and expect an order soon.”
He is seeing interest from other customers, as well. “I think our customers are trying to determine what makes sense from an economic standpoint and from an environmental or social standpoint as well,” he says. “But it has to be an economic decision; the math has to make sense.”
Jorgensen believes it is “clear that the battery technology is not there yet, but it will be, and that will be a great pivot point.” He has seen interest from some customers and even has some spec’s out. At this point, however, he believes that government grants are subsidizing the purchases and that “fleets are looking at [EVs] from a PR standpoint and to see how they work.” Jorgensen says the dealership will be ready when customers want to get into EVs and has appointed his son in law as the person who will be the specialist on the subject.
“I am not going to shy away from it,” he says. “Everything we do is going to be focused on what our customers want and how we can support them.”
While diversity, equity and inclusion are hot topics in the news, Rihm says this is something she has cared about for a long time.
When the dealership was started in 1932, there were Dutch, German, French and Italian technicians in the shop. “They all worked together in the shop and none of them spoke English; they learned it together and learned how to communicate with each other,” she says.
She adds, “I don’t care what people look like. All I care about is if they can do the job. We need employees, we need a workforce, we need technicians, we need parts people, we need salespeople, we need accountants.”
However, Rihm was concerned about whether she was doing enough to attract people from other communities and ethnic groups to work at the dealership. She met the vice president of human resources for a major big box retailer who agreed to help guide her through the process, starting with a committee to look into recruiting and hiring practices.
She believes the dealership has made great strides by focusing on three things: EQ, IQ and BQ. EQ is empathy, while IQ refers to understanding the intelligence that untapped groups have. BQ is business sense and having a good business case for moving toward a more diverse workforce.
“I feel very passionate about this,” she says. “I am really excited about it, and also it is a place where we can really differentiate ourselves. We need a strong workforce, so we need to reach out to every community that buys trucks.”
Jorgensen says when he took over as CEO, he wanted to make sure the dealership was as inclusive as possible, in part because he hoped his three daughters would work in the dealership. “I did not want them to be pigeonholed into traditional roles that existed in our business and at every dealership.”
He adds, “It does not matter what your race, gender or orientation is; we are very inclusive.” Today the dealership has people from 32 countries represented. “We have women, we have different races, we have people speaking different languages. Inclusivity and diversity is not something we talk about; it is just what we do.”
Vandehey says the dealership has increased the number of people from previously underrepresented groups on the dealerships’ board and in its management ranks. In addition, he has created job shadowing and mentoring program at local high schools with minority populations.
“Individual dealership locations have been identified to support local diversity opportunities, and we have modified our corporate value statement regarding the communities we serve, so not only are we valuable and responsible within our community and world, but we also should be a reflection of the communities we serve.”
Facing The Future
Doing the same thing tomorrow that you are doing today is not going to keep a dealership relevant in the future. Rihm says she has talked about what the dealership needs to be doing and what else it needs to be selling.
For instance, when she took over as dealer principal, the dealership did not have a leasing company. “We added one, and that made us a stronger and better dealership. To remain relevant, you have to address your industry’s needs with intelligence. If a customer wants to know about something, I want to dig around and find answers for them. Will I become a trailer dealer? I don’t know. Will I become a boat dealer? I don’t think so. But we need to ask ourselves what else can we do to help our customers.”
Jorgensen says he is constantly looking at relevancy. After he took over the business in 2000, while not reducing its focus on new trucks, the dealership began building up other areas of the business. “We did this so we could weather the cycles differently and better.”
He adds, “We are always going to focus on what we can influence and control the most, and that is how we can create a stable, dynamic future. We can manage the parts business as best we can, but someone else is pulling the strings. With new trucks, we don’t control the pricing, the quality, the availability, or the features and benefits. Someone else does that; we are kind of a delivery agent.
“But on the other hand, used trucks, we completely control. It is about what we buy, how we recondition them, and the warranties we put on them. Our focus always will be finding opportunities within the industry that we can influence and create a difference with and something that we can own.”
In order to stay relevant, Vandehey says the dealership needs to incorporate technology and “embrace the digital transformation that is occurring across all businesses. Those changes are coming, and the way we transform our businesses will dictate whether we are leaders or followers.”
This article first appeared in the April 2022 issue of Heavy Duty Trucking.