Collins Explains Growth and Consolidation of Industry

The truck equipment industry is evolving.

Growth and change in the industry have made the past 35 years worth remembering so those in the industry can see what the future holds. Ron Collins, president, Collins Associates, spoke at the January 8 National Truck Equipment Association training workshop in Los Angeles about those changes, what they mean, and what may lie ahead.

"If you can get a handle on where you have been, you can figure out where you are going," Collins said.

Collins shared his perspective on why the industry has matured from the days of one-line manufacturers selling their own products to the hundreds of manufacturers and complex distribution networks of today.

"Understanding this evolution is critical to understanding the growth and direction of the industry," Collins said.

Collins used a 1962 edition of the Trailer/Body Builders Buyer's Guide to illustrate that distributors also were manufacturers in the early days of the industry. In 1962 the Buyer's Guide was a list of what Collins refers to as mega manufacturers.

"The lines between manufacturer and distributor have always been blurred, they are blurred today, and will continue to be blurred," Collins said. "The listings in 1962 were primarily dump body and hoist manufacturers that supplied everything to distributors with the exception of accessories. This trend started as early as the 1930s or 1940s, but continued in 1962."

Using Trailer/Body Builders as a history book of the industry, Collins showed that the magazine served a slightly different readership in 1962 than it does today. The magazine listed more companies manufacturing components and fabrication materials. At that time, manufacturing distributors were under pressure from competing new manufacturers.

"By 1962, distributors were beginning to buy more and manufacture less because their costs were rising," Collins said.

Expensive freight and distribution costs in this country forced early manufacturers to locate their plants close to distributors. Collins used a map of the country showing the locations of current distributor members of the NTEA and compared it to a map showing the locations of manufacturers. Not coincidentally, most manufacturers and distributors are grouped close to each other.

The 1972 edition of the Trailer/Body Builders Buyer's Guide indicated a major change, Collins said. "The business of the major manufacturers was being stripped away by other companies offering more specific products. Distributors were buying more and manufacturing less. The peaking of manufacturers in 1985 created a bad scenario for everybody in the industry. This was the first time that there were more manufacturers than distributors could buy from."

These circumstances forced manufacturers to seek increased sales and forced larger distributors to seek growth at the expense of smaller companies. Today's consolidation is a result of excess numbers of manufacturers and distributors in the 1980s, he said. Consolidation was just starting to take effect in 1995. This meant that fewer manufacturers were serving fewer distributors."

By 1995, manufacturers had grown their businesses to require a certain volume of sales and took the necessary steps to achieve that volume, he said. Manufacturers began to use catalogue outlets, direct selling, or regional business to keep sales up. Just as in the early days of the industry when manufacturers evolved into distributors, the manufacturers of today will do what they need to to continue their growth.

"The trick is that they must give customers added value. If they do that then they can't be replaced," Collins said.

Collins presented a comparison of products listed in the 1962 and 1997 Trailer/Body Builders Buyer's Guides. He pointed out that product listings increased and decreased. When taken as a whole, however, changes in the listings indicate that manufacturers and distributors have grown into separate entities. Product listings are as follows:

Collins concluded by discussing the differences between the East and West Coast truck equipment markets. Traditionally, East Coast manufacturers could not justify the high cost of freight and travel to compete on the West Coast. Technology is making the West Coast market easier for East Coast companies to serve in the 1990s. Air travel and freight costs are becoming more reasonable, according to Collins. He also notes that fewer personal calls are required because there aren't as many sales people as in years past.

To survive on the West Coast, distributors incorporated flexibility in the way they ran their businesses. West Coast companies did what was necessary to earn end-user satisfaction, he said.

"In the 1960s there were exclusive territories, and most distributors sold one product line," Collins said. The elimination of the one-line distributor is what caused change. He added that West Coast companies should take action to protect their market.

Collins noted that the West Coast market-driven mentality is slowly taking effect in the East.

"There is almost nothing that East Coast manufacturers won't do now to take care of a customer," Collins said. "This is something that West Coast companies have been doing for a long time. We are forced to turn out better products and treat our customers better."

"All these changes have taken place during my business life which isn't over yet," said Collins. "Outstanding opportunities still exist in this industry. We just need to find out where they are."

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