Aftermarket providers from across North America appear relatively happy with the business conditions of 2019, according to a panel discussion at Heavy Duty Aftermarket Dialogue, held Jan. 27, the day before Heavy Duty Aftermarket Week kicked off outside Dallas.
Premier Truck Group’s executive vice-president of fixed operations, Ryan Hadley, referred to it as a “good, strong year.” Inland Truck Group saw its oilfield-related business slow, but “everything else was solid,” said President and CEO Greg Klein. Vipar Heavy Duty’s business was up 2.5-3% last year, and it’s planning for a positive 2020.
“We’ve had one down year in 18 years,” added Vipar President and CEO Chris Baer. “We’re always planning for growth.”
Still, during the panel discussion, they recognized that aftermarket businesses must continue to adapt to changing economic conditions and market forces alike.
The Oil Sector
Consider the business of serving the oil sector alone. “Once oil prices drop below $65, $70 [per barrel], the rigs go,” said Klein.
Premier Truck Group’s Hadley expects such business to be relatively flat for the first half of 2020, lifting slightly after that. But there is no denying the fluctuations in the work available around Odessa, Texas.
“Once all those drill rigs come out of the field, all the support businesses are affected. They just park everything,” he said. The underutilized fleets also represent fewer breakdowns for Premier’s 32 service shops and 430 service bays. The Freightliner and Western Star dealer has 27 dealerships in the U.S. and Canada.
Economic conditions can also vary from one country to the next. Baer, for example, admits that the Canadian market was a little bit softer than the U.S. in 2019.
No matter what market conditions exist, other pressures remain. Wages, for example, continue to push higher as shops and parts counters look to recruit and retain their all-important personnel.
Tom Wiers, CEO of Wiers Fleet Partners, noticed particular upward pressure on wages during the first half of 2019. A labor rate survey in seven different Midwest markets saw an average dealer rate of US$136 per hour, compared to independents charging $104 per hour. “I’m seeing more and more independents surpassing that $100 labor rate, primarily because they need to,” he said.
Wages are also just part of the equation, as aftermarket providers look to recruit a new generation of employees. “We’re out there in all the training facilities, all the schools,” Hadley said, referring to his operation’s strategy for finding future workers. “Hopefully we can get them to come to work for us when they graduate.”
Ongoing Training Needs
The training can’t end at graduation, either.
Premier Truck Group relies on vendors to supply all-important training material and taps into electronic information available through Daimler Trucks North America.
But many suppliers pulled back on training-related resources during the Great Recession, said Wiers, whose company began as an International Trucks shop and expanded into the independent repair business. “It’s never recovered to what it has been.” To compound issues, there seems to be a steady turnover of the representatives who support different product lines, he said.
Baer has noticed a general drop in resources available for aftermarket business sales, as well. The challenge is that this has been a common way of conveying important information. “There has been sort of a dilution of some of the senior people we used to see,” Klein agreed. “It comes into play when we decide what lines to carry.”
Building Aftermarket Training Resources
It has led several of the businesses to develop training resources of their own. Vipar HD has assembled a large training library and is now looking to create an online Learning Management System. Inland Truck Parts has gone so far as to create a free-standing training center in Kansas City that’s staffed by five full-time people, with sessions typically lasting three days at a time.
“If you don’t train, you flip the [hour]glass, and the sand is running. Because whatever knowledge your techs have at that point, it’s all you’ll ever have,” Klein said.
He also recognizes one other key advantage: “Techs love training.”
Institutional knowledge needs to be captured, too, especially since many customers approach parts departments, drop something on the counter, and ask for a replacement.
“Our goal ultimately is to try to capture what’s in these guys’ and gals’ heads,” Klein said, referring to the valuable insights of experienced personnel. “It’s very difficult to find training for some of the hard-to-solve stuff.”
A lot of the people managing vocational fleets are not brand experts, Wiers added. That leaves shops to offer the guidance. And while independent shops provide the parts warranty, the shop itself covers the labor. This means they’re particularly sensitive about the parts they’re using.
What They Sell
About 85% of what Vipar distributors are selling continues to be in the form of premium brands. Some of the alternatives are simply here today and gone tomorrow, Baer said, referring to the value of a premium focus. “There’s been many different types of products. We’ve had some successful launches and a few that were not,” Hadley said.
But terms like “counterfeit” or “white box” and “no-name” parts tend to be used interchangeably, Baer stressed – and they shouldn't be. “They’re all different.” Even OEMs will provide private-labeled offerings.
Klein says Inland has created a brand of its own because customers are confident that the organization will stand behind the choices. “We warranty it before we ever contact the manufacturer,” he explained. “It’s not selling on price. It’s selling on value, and what that value is is uptime.”
Customers are looking for new ways of conducting business in the midst of it all – particularly when it comes to a demand for some level of e-commerce support.
Not everyone is ready to provide the same level of access.
Premier Truck Group gives customers access to inventory information, and the business counted $15 million in sales through online sales channels in 2019. The goal is to expand that to $20 million, but Hadley stressed there is still a need to limit pricing information to customers who have established accounts.
Some Vipar distributors have established successful internet stores, but there is a bigger call for more of a business-to-business solution, Baer said. He also encouraged suppliers to “leave some room at the trough” to ensure independent distributors can be profitable. These businesses are ultimately the ambassadors for premium brands, he said.
Then there’s the perpetual “Goldilocks” problem of having a product mix that is just right for local customers.
“Interest rates have made it easier,” Klein observed, referring to the inventories. “But we can only build so big a warehouse.”
John G. Smith is the editor of the award-winning Canadian publication Today's Trucking and editorial director, trucking and supply chain, at Newcom Media. This article was used under a cooperative editorial sharing agreement between HDT and its Canadian counterpart.