IF Stuart MacKay were to project himself five years into the future to 2021, here’s what he thinks he’d be saying about what would have happened in that period of time:
• Recession. “We don’t know specifically when. It probably won’t be this year, but we’re going through a pretty lackluster recovery and expansion—just kind of bobbing along. I’m thinking two years.”
• New truck market collapse and rebound.
• New trailer collapse and rebound.
• Increasing vehicle complexity. “New regulations are coming down in the next four to seven years.”
• Continuing new truck price escalation. “Because we’ll be adding technology which is quite expensive to add, and it will be added to the new cost of a truck.”
• New offshore competitors. “I think probably this is a big enough market where people are looking to expand, and it would not surprise me to see a couple of new nameplates in five years.”
• Relatively stable operating universe. “So the growth of the aftermarket will be solid but not spectacular.”
• Continuing distribution consolidation. “Both on the dealer side and the independent aftermarket.”
In “Looking Back From 2021 at the Heavy-Duty Aftermarket,” MacKay turned it around and asked his panel to address some of the same topics from the perspective of their companies and their segments of the industry. The panel: Tom Clevinger, Navistar; Mike Delaney, WheelTime; Lee Long, Southeastern Freight Lines; Kyle Treadway, Kenworth Sales Company; and Don Sturdivant, FleetPride.
Q: It’s now 2021. What does the business look like? What’s going to change from your perspective in terms of equipment, service sourcing, parts purchasing? What changes do you foresee in this five-year window?
Long: I believe we will see a lot more involvement with our vendors to provide real-time invoicing, product availability we are not having right now where we have to wait on parts being delivered. It will be where your infrastructure and parts programs are intermingled with ours. I see the technology continuing to grow on the equipment. We’ll have a lot more of the aftertreatment under our belt. That aftertreatment is going to be replaced with other things that are coming down the pike right now.
Q: Do you see your service practices changing where work done internally might be done by Kyle or Mike or another outside service provider?
Long: I don’t believe we’ll ever get away from our in-house repairs, but I will say that we do look at where our footprint is right now and where we’ve expanded to, but it’d be more beneficial to us to allocate some of those positions elsewhere to maintain our fleet to get more repairs in-house.
Stu MacKay leads a discussion on the future of the aftermarket.
Long: I believe we’ll maintain the same scale of removals from the fleet. However, if the technology does not improve –and I believe it will—it may shorten the life we keep in the fleet, and we’ll remove them from the fleet a little quicker. The total cost of ownership of that equipment—that’s what we will be looking at. We believe that in 2021, we’ll be able to program trucks on the fly, as opposed to bringing them into the shop, putting the calibration on for the fuel and everything else for the engine that we currently have to bring in the shop. It takes time to do, but we believe that over time, that’s going to be an automatic function so we don’t have to touch the truck. It will save us some time and improve fuel economy because it’s been done in a more frequent manner than we’re able to touch the truck.
Q: How about your trailers?
Long: Trailers have not changed a lot in many years, but in terms of fuel efficiencies and wind-resistance reductions, I believe you will see something with the rear and top where you will have more fuel economy from there. Looking at the rounded corners, how we get as close a gap between tractors and trailers and not tear something up—we’re looking at all of that. I believe that by 2021, we will have a 33-foot trailer where that’s going to have 21% more efficiency with one tractor and two trailers. I believe there are going to be technologies coming along that will help us with tractors and trailers.
Q: Kyle, are we going to be down to five or six Kenworth dealers in five years? How do you see this shaking out?
Treadway: Well, it’s a little bit of a grow-or-go world out there. Five is a little bit drastic, but yes, there will continue to be consolidation, and there are various reasons for that. It’s just that the threshold to get into the business is getting higher and higher, and demands customers are placing on us are getting more and more sophisticated. That means it’s either going to be private equity that’s going to come into the dealership world or consolidations of existing dealers. There’s been a little bit of private equity moving in, but they’ve had mixed results.
Q: When you’ve made acquisitions of other dealers and integrated them into Kenworth sales, have there really been some economies of scale?
Treadway: Yes and no. I’ve been thinking about this a lot this last week. When we take over another operation, the culture of that entity survives regardless of any restructuring we try to accomplish. It always reverts back to that. You have to put preference into, what is your culture and how do you translate that to get consistency across all of your locations? Because fleets are demanding consistent pricing and priority and treatment.
Q: You have the global perspective. How do you see what’s going on around the world changing? What might happen in this market?
Clevinger: The simple answer to that is we’re going to have a lot of competition, and it’ll still be coming in from Asia and China specifically. I think we’ll see the business in China evolve as a country of parts manufacturers. You see a lot of that stuff in places like Vietnam, Cambodia, and Laos. They have lower cost bases. So I see that kind of shifting around. Not sourcing perhaps in China in the future. I still see a lot of pressure coming though from that part of the world.
You ask question about technology. Five years is a very short time frame. But if you move further than that, they’re seeing the driverless car in the future and seeing the day when we won’t even own a car. I see the same thing probably happening in the truck business, where it is not a driver—it’s a robot or a truck that moves along slowly. Nobody’s in it and it drives to its destination. In our business, in the parts business, we see these printers. I’ve seen a crescent wrench printed. Those things will have a profound impact on our business long term. I think we’re right at the edge where we think we’ve been through some change, but I think we’re going to go through a lot more change. I think that will happen in the US first.
Long: Our Congress has a terrible time passing a transportation bill. I think it’s a long way off before we see a driverless truck. The infrastructure is not set up to utilize it and maintain it. Until they see the benefit of it, we’re going to have a driver in truck. He may be sitting at a table shuffling bills or whatever, but somebody is going to be in that truck.
Q: Which aftermarket group is best positioned to service your group? FleetPride, TruckPro, VIPAR, HDA, independent dealer service center, OEM dealer?
Long: All the above. What we look for in a partner is someone that fits our footprint. But we’ve used every one of those vendors you mentioned, and we do use the OE dealerships as well.
Q: Don, how do you see the consolidation in your end of the industry? Are you going to be 500 locations?
Sturdivant: My perspective continues to develop. I took over in July and am still in the discovery phase. I’m not all that great at predicting the future. I try to think about things we control as a management team versus things we don’t control. I’ve got a guy who uses the term “bright, shiny ball” and not chasing the “bright, shiny ball.” So we want to pay attention to it. We’re going to focus on basics. For us, it’s about, how do we continue to drive and improve our organization, which is all about meeting customer satisfaction requirements? The footprint is important to us. It’s a big part of our business strategy, but I don’t want to be big just to be big. I want to be big because it gives us some sort of marketplace advantage, whether it’s making sure I have a footprint that works for Lee. But on the other hand, the neat thing about FleetPride is the legacy inherited in the business in the acquisitions—260ish branches. What I love about it is every branch is different, every branch has a local expertise, a local heritage, a local legacy. The beauty is our ability to serve the entire customer spectrum.
Q: Am I correct that most of your locations do not have on-vehicle service?
Sturdivant: We have some that have service shops. As you can imagine, as we acquire a bunch of different businesses over the years, we have all kinds of interesting capabilities.
Q: Mike, you’ve been on the OE side. What do you see as the OE’s role in the aftermarket over the next five years? Do you see it changing a lot, and what might make those changes happen?
Delaney: I think there’s a dream on the part of OEs that they will gain control of their customer bases and that they will be able to create such a compelling product and service story that customers will flock to them and stay with them and not ever want to do anything anywhere else. I think in five years, we will be looking back, knowing that that’s not the way it’s going to unfold. There will be a robust aftermarket industry and there will be better cooperation between the OEs and that industry. Here’s why: Today, you have number of things unfolding. If you listen to the customer, you can’t go far wrong. Lee’s the only one here who actually operates trucks. What he said today was absolutely perfect. He was talking about, “I don’t need another user name and password. I don’t need another separate system for getting my telematics data.” Telematics data is really easy to get. You can transmit it over almost any of the telematics providers today. So getting access to that data onboard and then transmitting it somewhere where it’s going to be used and then sharing it across people is exactly how I think this will unfold. I think the OEs will be able to capture share and customers if they can create some sort of external valuable formula. The challenge here is that the most valuable formula for a fleet is service and parts available every single place they turn. Fast turnaround. Seamless interfaces. So what you’re going to see is a much higher use of technology.
Collaboration is going to be much different than it is today, and things will move faster. Speed will become the absolute byword. The things that the OEs are focused on now are right. But the way that it unfolds will be different than they think because we will have wide availability of all-makes diagnostic tools and we will have access to telematics solutions, and even an independent will be able to tap into it because a fleet will be able to determine where it wants work done and how it wants it done. That will evolve in some interesting ways, and it’s already doing it today.
We have some collaboration software that has quietly become nearly a standard. There are 50,000 individual users, probably 1200 to 1300 fleets and another 3000 to 4000 individual service locations and up to two million repair orders a year right now that are being processed through that system. The minute a call comes into a call center, four or five or six people—whoever needs to be in the loop across multiple vendors and functions—can instantly have the information. Many of these OEs are already getting onboard with that kind of software. If you look five years from now, our ability to collaborate is going to be much greater than it is now and your access to information will be much greater.
We’ve reduced, in some cases, approval time from two days to 10 minutes. Because all decisions are made in advance and all customer parameters are loaded in, so essentially what happens is every time their vehicle shows up, you’re doing it exactly the way they want it done. And if they decide to change an inspection form or do something, they do it at their office and it automatically changes at 200 locations. So the next inspection is done in a way they’ve changed it.
The reality is these technologies are ahead of our understanding of how to use them, but if we know one thing for sure, it’s that the speed and productivity of the truck is everything. Then you have to use these technologies to get there, and you have to collaborate to get there beyond any one limited vertical dealer channel or distribution channel. This is going to be a different world, but everybody is going to have a chance to play in it.