The lowdown on eight key sessions

Jan. 1, 2005
NO business owner wants to take a step back or even simply maintain the status quo. Everybody wants to move forward with a profitable business that has

NO business owner wants to take a step back — or even simply maintain the status quo. Everybody wants to move forward with a profitable business that has happy customers and productive employees.

How can it be accomplished?

Here is a look at eight key sessions:

Creating Economic Value Through Better Working Relationships

Tuesday, March 1, 1:30-2:45 pm

The fundamental purpose of a business is to create economic value — wealth. Today's environment of excess capacity, fierce competition, and demanding customers has made this goal more difficult than ever before to achieve.

Robert Nadeau, managing principal of The Industrial Performance Group in Northfield, Illinois, will delve into different approaches that manufacturers and distributors have taken to create economic value during the past 30 years, with varying degrees of success, and illustrate how to develop and manage the one factor that has the greatest potential to create economic value for manufacturers and distributors alike — good working relationships.

This session is an outgrowth of the manufacturer-distributor relationship session he conducted last year. Reflecting on that and his work with the pharmaceutical industry, he has concluded that 40% to 60% of the combined ability to create economic wealth in distribution comes from intangible elements such as knowledge, processes, and relationships.

“The nature of the truck equipment industry is that a lot of older owners are still trying to create wealth through the management manipulation of tangible elements such as factories and inventory,” Nadeau says. “So I'm really trying to get these people to realize that the things that got them to where they are today are great, but everybody's at the same spot. So if you're trying to be different and more profitable than your competitors, you have to look at how you're managing the intangibles.

“They're missing the mark in terms of what I think is a tremendous wealth-creation opportunity. There's so much data that shows that the industries that are further along on that continuum are typically industries that felt severe price pressure, so it's mostly on the retail side where every-day low-pricing is not only a mindset — it's probably the kiss of death. Those people came to realize much more quickly that the intangible assets are huge, and we have to start doing a better job of managing them. Because of the nature of the truck equipment industry and the size of the players, they're going to get to that conclusion, but it's taking them awhile.”

Nadeau says excess capacity combined with the every-day low-pricing mindset that exists in most industry sectors has created customers who are more price-sensitive than ever before. In this environment, manufacturers and distributors can no longer get by on the notion that they are value-added suppliers. Unless they can justify — in terms of dollars and cents — the economic value of their offer, they leave the customer no choice but to view their offer as just another commodity.

“The good news for manufacturers and distributors who choose not to compete on price is that almost every product offer has some economic value above and beyond the acquisition price of the core product,” he says. “However, the bad news is that most manufacturers and distributors do not have the type of working relationships that enable them to deal with the customer's number one objection: ‘Why should I pay more?’”

He says economic value is the total monetary worth of a product offer, from the customer's perspective. It stems from the core product in addition to the information, services and, support that are provided to the customer before, during, and after the sale. In other words, economic value stems from the product and everything else involved in taking that product to market. Economic value is created for customers by improving their performance, reducing their overall costs, and/or by reducing their exposure to risk and liability.

“Customers are generally not aware of the economic value the products they purchase create for them,” he says. “This is in large part due to how products have been sold in the past. Features and benefits selling, which has been the standard in most industries for the past 30 years, evolved during a time when the customers' primary source of decision-making and pricing information was their feet-on-the-street salesperson. This sales approach has been an excellent means of communicating how manufacturers' marketing departments perceived customers would benefit from the unique attributes of their products such as, lasts longer, runs faster, easier to use, etc. However, in the current marketplace features and benefits selling does little to counteract the intense downward pressure on price.

“Today, customers have access to an ever-increasing amount of information and numerous sources of supply — primarily via the internet. As a result, they are better informed, more demanding, and in some instances more adversarial than in the past. This new breed of customer is usually aware of the features and benefits of a product as well as its market pricing long before they talk with a salesperson. Armed with information and choices they tend to focus their efforts on reducing acquisition price, unless they are provided with a reason to do otherwise. If manufacturers and distributors do not work together to quantify and communicate the true economic value of their offer, they leave the customer no choice but to perceive their offer as empty marketing promises which do not address their number one objection: ‘Why should I pay more?’”

The Five Pillars of Financial Success

Tuesday, March 1, 1:30-2:45 pm

Albert Bates, chairman and president of Profit Planning Group in Boulder, Colorado, says that businesses rarely have a chance to reflect because they're so immersed in the pressures of day-to-day business.

“There's never any opportunity to ask, ‘Gee, should the business be reconfigured?’” he says. “Or, ‘Are there things we're doing that we probably shouldn't even do? We're trying to do them better. Should we even be doing them at all?’

“The timing of this session is good because profits continue to be disappointing at the present time. I don't want to say the recession is over, but for most people things have picked up. But we still seem to be in the doldrums we regard to profitability. That bothers me. We're doing better than we did last year, but we're still below what I consider the minimum we need to be at in profitability.”

He says financial success can be achieved by mastering five key strategic areas of the operation:

  • Barriers to entry: Realize that competitive battles are not fought on every item on every transaction every single day. Instead, competition is waged between alternative business systems.

  • De-commoditization: The firm's overall product assortment allows for volume sales and reasonable margin opportunities from non-commodities.

  • Employee productivity: New procedures for controlling payroll expense have been implemented.

  • Profit focus: The maximization of dollar profits takes priority over the maximization of sales or the minimization of asset investment.

  • Internal profit understanding: Decision-makers understand how profit is impacted by employee actions.

Immediately after his presentation, Bates will offer another session from 3-4:15 pm in which he expands on employee productivity and ensuring employees understand profit.

“Here's what has happened in distribution over the last four or five years: Employee expenses have got a little bit more out of control every year,” he says. “It's almost reached the point where employee costs are so high that we can't make the business work anymore. The key issue is, how do we step back from this and put together an employee productivity plan to make sure things are going the right way?”

He'll present a hard-hitting educational CD-ROM, “Improving the Bottom Line,” developed by Profit Planning Group. That will be supported by other tools from the NTEA, including the Distributor PROFIT Report.

Truck Equipment Market Outlook & Industry Forecast

Tuesday, March 1, 1:30-2:45 pm

Steve Latin-Kasper, the NTEA's market data and research director, will review current data on truck sales and end-use markets with analyses from the NTEA's staff economist.

He says the industry will show 10% growth in 2005, but given the enormous number of segments, some will be more than that and some less.

“2005 will be a really good year for the heavy-duty side of the industry simply because we're coming up on the deadline for 2007 emission regulations,” he says. “That's going to affect heavy duty more than medium duty. A number of medium-duty trucks are running with regular gas, not diesel. So they don't have to worry about the new regulations regarding the on- and off-highway things for the diesel engine.

“But you can figure that for the heavy-duty side — especially in the second half of 2005, when people are going to really decide what they're going to do about 2007 — the result is going to be a pre-buy that will start in the second half of 2005 and go through June 2006 and maybe extend through the third quarter.

“Given what everybody went through the last time and all of the craziness that was part and parcel, people are going to do a better job of planning this time — especially the engine makers. We aren't going to see a situation where they're all begging the EPA for an extension. Instead, they're going to get engines not only designed and built, but also tested well before the deadline.”

He says two big application market trends will have a strong impact in 2005:

  • “State and local governments are getting back in the black, so they're going to be turning on the spigot again in 2005.”

  • “A lot of people got through the recession — and might not have otherwise — because of the residential construction boom. We're at the end of the low-interest-rate cycle. By mid-2005, most economists expect interest rates to be up to a point where it's going to have a dampening effect on residential construction. In fact, some people say they're seeing it already.”

Introduction and Overview of NTEA's Member SPEQ Plan

Tuesday, March 1, 3-4:15 pm

The Sales/Marketing, Productivity, Earnings and Quality (SPEQ) Plan is a business improvement plan for distributors and manufacturers.

The SPEQ Plan is based, in part, on the NTEA's Quality Assurance Kit and 30 Business Improvement Tips manual. The primary goal of the program is to elevate the effectiveness of members' operations in order to provide them a marketplace advantage. It is intended that distributors and manufacturers will use the processes to improve their businesses, increase their profitability, and position themselves as better channel partners.

This session will be presented by the NTEA's Board of Trustees and staff representatives.

NTEA Initiative for Truck Dealer and Fleet Customer Benchmarking

Wednesday, March 2, 8-9:15 am

Two years ago, the NTEA starts a distributor-manufacturer initiative — a series of programs conducted around the country to build better distributor-manufacturer relationships.

“One of the core tenets is that you have to know what the customer wants in order to build a good distributor-manufacturer relationship,” says Jim Carney, the NTEA's executive director. “That's the first level of information you need. We realized after doing a few of these seminars that there wasn't any good customer benchmarking information out there.”

So the NTEA conducted a survey of over 500 fleets and dealers during November and December, asking them to identify the service issues that lead them to buy from a distributor or manufacturer, and to identify the factors that prompt them to keep going back to the same supplier to do business.

The results of the survey will be presented during this session, along with a benchmarking tool that was developed by independent research firm Markinetics Inc in Marietta, Ohio.

“It's going to be very significant,” Carney says. “We've never had a benchmarking product like this in the industry. I'm sure a lot of our members individually are doing some sort of customer-satisfaction survey. But there has never been a total industry study that goes really in depth in terms of why a fleet buys from a particular entity.

“I think it's going to be pretty eye-opening in terms of how the distributors respond. On the other side, we also want to know why dealers are buying from a distributor manufacturer, why they do business with a particular company. We've always heard that it doesn't matter what kind of product or service you have — a dealer is going to buy on price. You talk to a dealer and he doesn't agree with that. He says, ‘No, that's not the reason we buy. There are other reasons.’ Well, what are they? It's never been defined. That's the intent of this whole study.”

Simple Steps to Maximizing Shop Efficiency

Wednesday, March 2, 8-9:15 am

Doyle Sumrall, the NTEA's business development director, says that as he travels the country and meets with members, almost everybody talks about the need to improve cost control because of diminishing margins and pricing that is fixed by the marketplace.

He says that although 2004 has been good for most in the industry, the preceding three years left an indelible legacy. Companies want to examine how they can do a better job internally and streamline the operation. That's what led to this session.

“I'm going to focus on the challenge we all face in today's world: We're so busy, but we know there are things we'd like to change and improve,” he says. “I'll go over some straightforward planning steps — how you can go out and look at a process and develop a map of how things are flowing in your shop. Whatever that is — whether it's the retrieval of parts to do a job or drilling a frame — we'll look at it in a systematic way and derive a concept of where you want to be in the future. What are the changes you want to achieve? We'll set some realistic goals and discuss how you communicate that within your organization, whether it's a three-man shop or a 30-man shop.

“The need to get everybody involved and set the plan for what you're going to change is an event-driven sequence, as opposed to saying, ‘Well, tomorrow we're going to get this done.’ You've looked at it, decided on the net income, put some measurements in place, and here are the events you need to move yourself there.”

Calculating Accurate Burdened Labor Costs

Wednesday, March 2, 9:30-10:45 am

No matter how thorough, the accuracy of any return on investment analysis depends on how costs for the project are allocated and calculated. Accounting for all of the different types of costs and tabulating overall project or job cost can be an intimidating task.

John K. Puckett Jr, president of Project Solutions LLC in Remlap, Alabama, will discuss costs associated with wages, salaries, benefits, and overhead, along with methods to incorporate them into the true cost of labor for your business. He'll map out a simplified approach to calculating burdened labor cost and how it can help determine where a firm generates profits and assist managers in making decisions regarding shop and business operations.

Simple Tools to Help Make Better Hiring Decisions

Thursday, March 3, 9:30-10:45 am

On average, two of three new hires will disappoint employers in the first year — they would probably rather work somewhere else. Ninety-five of 100 applicants will “exaggerate” to get a job.

How do you avoid making hiring decisions in haste and suffering turnover costs that even in a small business can add up to thousands of dollars each year?

Experts claim 80% of employee turnover is avoidable by using professional assessment tools to gauge the quality of job applicants.

Steven Sill, president of Aspen Equipment Co in Bloomington, Minnesota, says his experience has told him he can't make a hiring decision based solely on interviewing candidates and examining their credentials. For almost 10 years, he has been relying on a personality-profile instrument developed by Caliper, a Princeton, New Jersey-based company that employs a large staff of industrial psychologists.

He said it contains about 150 questions, most of which are multiple-choice, and takes about 90 minutes to complete. The $250 fee, he says, “is nothing compared to the cost of making a hiring mistake.”

“We all put on our best suit and comb our hair nice and pretty for an interview,” he says. “It's kind of like meeting your girlfriend's parents for the first time. You're doing everything you can to do it all right. Well, this Caliper instrument digs underneath that veneer to what you're all about and what the motivating factors are.

“It's an extremely valuable tool. We put more and more weight into it every year. Originally, I put 20% weight on this. But we have found that when we looked at all the things we could assess from the guy sitting across the room against what they told us, they were almost always right. There were times when Caliper didn't recommend someone and we said (to Caliper), ‘Well, thanks. We appreciate your input. Here's $250, but we're hiring him anyway.’ But inevitably, everything they said came true.

“We won't even hire a mechanic without one — and mechanics are tough to find these days. We're a custom house, doing everything from a $300 ladder rack to a $400,000 crane, and everything in between. You might hire someone for a gopher position or one of little value. But short of the guy sweeping the floor, every position is valuable, and everyone can cost you money or make you money.”