THE DEVIL may or may not be in the details, but that's definitely where truck equipment distributors should look to find their profits.
Citing the difference between average and high-profit companies during his Work Truck Show presentation, NTEA's Doyle Sumrall delivered a lengthy list of nuts and bolts suggestions for how distributors can get more money to the bottom line — without increasing sales, trying to haggle a supplier for a lower price, or pushing the shop to work frantically.
Sumrall used pictures and stories he has acquired while visiting NTEA member companies. An average truck equipment shop employs about 12 people, which represents about 25,000 standard hours per year. These hours can be spent making money — or squandered waiting, fixing mistakes, or other unproductive activities.
The typical distributor spends 6.9% of every sales dollar on shop labor, Sumrall said.
“If you can make your organization just 10% more productive, you get $6,900 at the bottom line for every $1 million in sales,” Sumrall said.
Based on research from several sources, along with his own experience, the NTEA director of strategic opportunities is convinced that the difference between average and high-profit companies can be found in the systems the companies have in place for communicating internally and recognizing achievements.
“One of the keys to a successful shop is positive attitude, and it starts with the person who greets visitors and answers the phone,” Sumrall said. He said there is a high correlation between company profitability and the attitude of employees — particularly those who contact customers and other visitors.
“These people seem to set the tone,” Sumrall said. “If they greet outsiders enthusiastically, I usually find that same attitude elsewhere in the company.”
Sumrall focused on several areas where profitability can be improved and offered examples of low- or no-cost ways to do so. They included:
- Communication and recognition
The enthusiasm that tends to permeate successful, profitable companies comes from a management style that keeps employees informed and lets them know that they are appreciated.
“Every person in your organization wants to know what the customer thinks about how the company is doing,” Sumrall said. “As employees are connected to customers, they do a better job. They have ownership. Find ways to gather customer information and share it with your organization.”
NTEA is conducting a series of “Closing the Gap” seminars around the country. The seminars are designed to assist distributors in gathering customer input and establish benchmarks for how the company is performing.
Examples of communication and recognition efforts that Sumrall has seen distributors put in action include company celebrations, a “Wall of Fame” on which employee certifications and awards are displayed, and meetings in which management openly shares facts and measurements.
- A shop order system
Such systems are designed to document very clearly what the customer wants and to translate that into language the organization understands. They should provide a checklist that distributor personnel can use to easily identify the customer requirements that should be on the truck. For complex orders, Sumrall suggested using three-ring binders that accompany trucks through the production process. Including CAD drawings makes it easier to identify the number and location of various components. And if changes need to be made, remove the old page and insert the new.
“Drawings answer a lot of questions,” Sumrall said. “How many of these components am I supposed to install? How far apart are they? Extra time in engineering can save a lot of time in the shop.”
- Clean, well-organized work areas
Manufacturers in the truck body and truck equipment industry have embraced concepts such as lean manufacturing, Sumrall said, and distributors are beginning to implement these concepts in their installation areas.
“Safety tends to improve when shops are organized,” Sumrall said. “People have a sense of order, and things can move more deliberately instead of rushing around.”
Laying out a shop
Sumrall discussed the two basic ways to lay out a shop — producing the entire truck in one bay and an assembly line.
The bay approach is basic. However, an assembly line approach uses at least two stations to complete the truck. Typical stations include processes such as hydraulic, electrical, and mechanical.
One of the more unusual designs Sumrall mentioned is a shop that has four dedicated bays. The first three are purely functional — one each for electrical and air logic, hydraulic assembly, and mechanical and welding. A fourth bay, however, staffed by the shop's technician, is where the most complex functions are completed.
A major advantage of using a flow line, Sumrall said, is to allow shop management to balance the workload. Technicians can be added to reduce bottlenecks.
“These systems, though, require a lot of planning,” he said. “This includes layout as well as staffing. With these systems, it's especially important to have all the tools in the right place and all the supplies that will be needed.
“On the staffing side, the work plan has to be defined, and the time spent in each station has to be balanced. That can be done by moving people around as needed, but bottlenecks must be identified quickly.”
War on waste
Sumrall listed the eight deadly wastes that management consultants have identified in manufacturing operations. These same wastes can be found in distributor shops, too: overproduction, motion, inventory, waiting, transportation, defects, underutilized people, and extra processing.
“This is where to focus,” Sumrall said. “Improving shop productivity isn't about getting guys to work faster.”
Most waste, he said, is the product of these factors:
Lack of or unclear communication
Unnecessary steps in process and motion
Waiting on parts
Lack of organization
Lack of training.
To plug these holes in profitability, Sumrall suggested that distributors work on the following:
Develop clear procedures for common processes.
Maintain a clean, well-organized shop.
Implement a process-oriented approach. Break down general activity into specific operations.
Create a formal system for making changes in work orders
Make training and education an ongoing operation.
Organized shops have these elements:
Sumrall brought to mind conversations husbands and wives sometimes have. “If you don't need it, don't put it here,” he said. “Remove all items from a work area that are not needed for current production or specific operations.”
Set in order
Arrange needed items so they can be quickly found and easily put back in place. Tool boards — pegboards painted with the outlines of the tools they hold — are a good example of a visual way of helping keep tools and supplies in their proper places.
Everything should be kept clean.
People tend to work at their best when they are in familiar surroundings doing their job in a consistent manner.
“Maintain sort, set in order, and shine,” Sumrall said. “Use visual cues throughout the operation. And treat systems and resolve issues by correcting the root cause.”
Keep it up
Improving productivity is a continual process, Sumrall said.
“If you start things, it's important that you don't let them drop,” Sumrall said.
One major way to get things started and keep them progressing is to stress their importance.
“Build in a sense of urgency,” Sumrall said. “We all need that in our businesses. How do we get everyone to feel the need to get the customers' product to them when they need it? When everyone shares that urgency, then you have a team.”
To further the improvement, Sumrall suggested:
Conduct one-on-one mini-appraisals. “These are reality checks,” he said. “Management periodically should meet with employees to evaluate how well they are meeting clearly defined expectations and timelines.”
Expand comfort zones. Focus on what is important and create “breakthrough projects” that the employee or company has not done before.
Create visual cues that quickly allow employees and management to track progress.
These efforts pay off, Sumrall said. They go hand in hand with high productivity. Citing a survey of 161 publicly traded companies, those whose employees believe management respects them, values their input, and communicates well with them had an average 15% higher return on equity.