Companies Reap Benefits with Three-Way Alliance

Two years into a three-way strategic alliance, executives from GPU Energy, Reading Body Works Inc, and Crest Truck Equipment Company Inc have just one question: Why didn't we start it sooner?

"We haven't once looked back and wished we had chosen a different partner," said Ray Kohler, project coordinator for GPU Energy.

The alliance is a five-year agreement in which Crest provides GPU with all of its nonaerial, truck-mounted equipment, and Reading Body provides the truck bodies.

The companies have a formal contract that outlines the fundamentals of specifications and delivery, but Kohler described it as a "living document" that can be changed as they find better ways of operating.

Strategic alliances are gaining in popularity, particularly in the electric utility arena. The prevalence of downsizing, spurred by deregulation, has led companies like GPU to rely on vendors like Reading Body to do some of the engineering work that used to be done by GPU's staff . The most obvious benefit has been financial. Kohler said GPU's initial savings estimate of $35 million over 10 years was "conservative," given that the company expects to soon double its original fleet of 3,000 vehicles. Reading Body is more efficient because it can build a large group of bodies at one time. Crest, knowing that it is completing 10 trucks a month for GPU, can adjust its production schedule to accommodate needs in other areas. They have reduced the peaks and valleys in production schedules, providing a steady stream of orders.

Crest president Norm Ziegler said his company's traditional sales approach - one bid equals one order equals one delivery - changed in the alliance to: one bid equals multiple orders equals multiple deliveries. He said this is a significant economic advantage to a truck equipment distributor.

"You're able to amortize your costs over a much wider base - your sales expense and general administrative costs," he said. "It's the old saying: 'It takes as much horsepower to build one body as to build 100.' It's very helpful from the production loading standpoint and much easier from the control standpoint."

But it goes far beyond that. Kohler said the spirit of the alliance between the southeastern Pennsylvania companies has been characterized by "cooperation and collaboration --- to achieve mutual win-win, long-term competitive benefits."

The foundation of the alliance comes through shared values and collective knowledge that have allowed the companies to be innovative in communications, planning, design, pricing, delivery, service, warranty, and technical support.

Kohler said GPU realized its traditional procurement process was not efficient or "friendly." Specifications and technical evaluations would navigate a maze through the procurement department, and then GPU's officials would finally sit down with the vendor to finalize production specifications and drawings.

Jack O'Donnell, executive vice-president of sales for Reading Body, described the improvement in the quotation process: "What used to take three to four months and a mountain of paperwork now takes a phone call."

Altering the Traditional Approach GPU challenged Reading Body to be creative, posing a number of questions: How could the process work better through warranty and body specification improvements and reduced costs? Would replacement parts be available in emergencies? How could the process be improved for Crest, the distributor, when the bodies were installed? What could be done to standardize components? What was Reading's approach and philosophy in becoming a partner?

Ziegler said he realized that his company's traditional approach to selling would have to be altered. Two of his father's favorite sayings kept bouncing around in his head: "Never take a boat with a small motor onto a big lake," and "If you can't run with the big dogs, you'd better stay on the porch."

"If you leave the porch to run with the pack toward an alliance, to be successful you and your staff have to think outside your traditional sales paradigms," he said.

Ziegler said some people in his company questioned the proposed alliance, saying it would require a lot of hard work and the company already had all the business it could handle. For him, the work would be worth it. And after enduring some down times in the 1970s and 1980s, he wasn't likely to say, "The shop is full."

He said the one-bid/multiple-order/multiple-delivery aspect leads to improved communication with the customer by "redefining adversarial relationships that are very common in the traditional selling arena. For example, 'That's not in the specs, we're not going to give it to them.' Those thoughts were being replaced by, 'This change would really make a better truck. Let's see if they want us to add it.' It really opens up the lines of communication. If we come up with a better way of doing things that is cost effective, we can pick up the phone without going through an act of Congress."

Working Together He figured the alliance would lead to standardization, which would lead to administrative simplification and production efficiency.

And that's exactly what has happened. He said Crest has been able to more accurately project monthly performance, has worked with GPU to identify component suppliers, developed a pricing strategy that produced a profit margin for the companies, and initiated social events to bring them closer together.

"It's more than a business," he said. "It's really pretty cool. You've got to understand that the alliance is a continually changing process. Am I glad I got off the porch? You bet I am."

Kohler said GPU used to make process changes that would disrupt Reading Body's production schedule. Now, they've agreed that those changes happen only once a year.

O'Donnell said that through the alliance, Reading Body has found ways to streamline GPU's trucks. He said GPU was putting unnecessary rain shields on the door s. Reading Body also devised a better way for GPU to stow the chock-block holders and designed a body that was more installer-friendly for Crest. Parts are now all standard and readily available, which dramatically alters the replacement process in manufacturing and shipping.

"By eliminating these things, we were saving money," he said. "As we saved money, we passed that on as far as improving the price of the product. We're still making our margin of profit, but at the same time, we're bringing something to the table that meant a reduction in cost.

"These are things that you continually have to work on. We're making our margin, we're getting the business, and we're saving the money. It's an ongoing thing."

Five More Years Expected The mutual mission of the alliance partners is to investigate ways to add product and service value for their customers, improve market share and inspire growth, strengthen operations, add technological strength, and enhance strategic growth.

Kohler said GPU's key objectives are to reduce overall life-cycle costs and unit downtime, improve customer service levels, design a customer-friendly warranty program, reduce manufacturing lead time, eliminate bells and whistles, and develop a team approach to forecasting planning, manufacturing, expediting, delivery, and operational concerns.

Kohler said the alliance isn't simply working with Reading Body and Crest - it's also working with GPU's other alliance partners: Sauber Manufacturing, MGS Trailers, Altec Aerial Devices, and International Trucks.

"I guess in theory, we could have said after a year, 'You're not competitive, goodbye,' " Kohler said. "Out of our six alliance partners, that's not even close to happening. Some of the people that weren't successful in bidding keep coming back to me and saying, 'We know it's a five-year agreement. Can we get a chance to bid it after five years?' My answer is, 'If after five years it's not working, then maybe we might talk about it.' "

Ziegler said he expects that when this agreement is finished, the companies will sign a five-year extension.

"It really comes down to, 'Say what you do and do what you say,' " he said. "If you do that, you've lived up to your end of it. There'd be no real reason for GPU to make a change."

In the end, Kohler said it comes down to a quote from John F Kennedy: "Lofty words cannot construct an alliance or maintain it; only concrete deeds can do that."

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