Without access, distributors are leaving money on the table.
Historically, material handling distributors have generated much of their revenue from servicing lift trucks, which affords higher profit margins than does the sale of new lift trucks. Within that service portfolio, many distributorships service all brands of lift trucks, not just those that they sell.
Outlining the Issues
Distributors indicate that up to 60 percent of service work may be done on generation-old competitive equipment, so as the new trucks become more common in the market, the distributor will lose that segment of his business. He will be forced to work on only his brand of equipment, because the manufacturer will only provide access codes, software and hookups to their distributors. Not only does this eliminate a major profit center—the ability to work on all brands of equipment—but distributors also are concerned that this will cause a lot of confusion in the marketplace.
Distributors agree that this new software trend provides a more captive market and that the manufacturers are protecting their products well. They’ve also done a good job providing training on the equipment, making sure that only well-trained, certified technicians work on it. On the other hand, the need to achieve the manufacturer’s market share goals, which distributors already take very seriously, is now even more important. To maintain the current level of service opportunities, the universe of available trucks must be larger.
Suppliers say that the loss of service on competitive equipment is not their intent; it’s a byproduct of having software-based diagnostic procedures. Regardless of intent, distributors say they will have to sell more equipment (at low margins) to get enough service work to remain viable businesses.
Distributors also say that the switch to software-based equipment has created a profit center for the manufacturer. When the new trucks first came out, the cabling used to connect the computers to the trucks was expensive and non-standard. Distributors needed to pay for a host of different cables and hookups depending on the type of equipment. In addition, the software is not gen-eric; Machine A’s software cannot be used on Machine B. A separate download from the manufacturer is required to fix each machine, another added cost to the distributor.
For example, say a customer has two identical lift trucks in its fleet, except one has headlights and one does not. For a technician to install a set of headlights on the second machine, he or she needs to call the manufacturer and have a patch sent to make the software read that the truck now has headlights. The distributor must pay for that patch each time, which gets expensive and frustrating as features are added and removed from rental units. Every time those features are changed, the software must be updated. Distributors have been lobbying the manufacturers to offer the software for an annual fee. That way, distributors get all the downloads but only need to pay once.
In addition to the price of the software downloads, distributors also are spending thousands of dollars to train their technicians on all the new equipment. The changeover has added cost to service operations as companies are required to purchase more laptops. It’s also a fine line to walk because many large customers who prefer to do their own service work now may not be able to do so. Training is very expensive and labor-intensive. Will these companies want to make the effort to train all their technicians for lift truck repair?
Nobody yet knows exactly what the long-term ramifications of this trend will be. Standardization will likely occur at some point in time, though it has not yet begun. Summed up by one distributor, “Ultimately, I think the manufacturers will be right about moving to software-based equipment, but we have some pain to go through in the short term. They’re not trying to protect the distributor.”
Paul Laroia, president of Hyster Company, understands distributors’ dilemma. “I can see how this trend is a double-edged sword for distributors. Whichever brand they represent, that business will be more captive to them. However, if they are making their living by servicing other brands, then it could be a negative for them.”
However, Laroia believes that the manufacturers’ intent is the critical issue. “The main driver is to come up with a smart lift truck that enables the necessary flexibility to adjust it to the needs of the application. Often, a user has some internal rules regarding speed or usage that now can be controlled electronically rather than monitored manually. Secondly, building sensors into the various truck components allows for much more expedient fault-finding and troubleshooting. When the operator sees a readout on the dash indicating a problem, he or she can alert the distributor technician as to the exact situation. Improved first-time completion rates eliminate technicians showing up with the wrong tools, which is very frustrating and not cost-effective.”
The issues laid out by the distributors are a byproduct of this trend, Laroia says. “The problem is ensuring that dealers have the necessary connections, software and technological tools on their laptops when they attach them to the equipment. Dealers of other brands may find servicing the truck more difficult, but it’s always possible. We are now also imposing on our dealers an obligation to have certified technicians. So we must also invest in our people to keep up with the technology that we are building into the equipment.”
Toyota Material Handling, U.S.A., Inc. makes its software available to dealers at no cost, according to Cary Howie, technical services manager. “End-user customers who choose to service their own equipment can attend our schools on a space-available basis, so they too would be able to access whatever they need. For a representative of another lift truck brand, it will be difficult for them to get the access codes, but we don’t create the software with the intent of excluding the competition. It comes down to a matter of being trained on a particular model, which is a problem with anyone servicing competitive equipment anyway.”
Howie says the biggest factor when going to Web-based software is getting qualified people to maintain machines. “Any good lift truck manufacturer who thinks it has a valued piece of equipment is more concerned with training people to work on it. Our goal is to have the customer’s truck up and running in the shortest time possible, so we try to eliminate as many hurdles as we can.”
From Toyota’s standpoint, the drive behind this trend is the necessity of diagnosing equipment. “We want to provide a top training program and equip the technicians at our dealerships with knowledge and skills so that they are the natural choices for customers to go to. We’d rather they choose us than be forced to us. It’s always done on how to best diagnose the equipment in the shortest amount of time and keep that equipment in service.” Howie adds, “Of course, the detriment to software-based diagnostics is getting everyone on common ground from the equipment standpoint. The challenge is that we have a dealer body using various makes of laptops with operating systems ranging from Macintosh to Microsoft Windows 98 to the new Windows Vista. That creates a bit of a headache getting everyone compatible.”
Jeff Winner, national service manager at Komatsu Forklift U.S.A., believes this industry trend is the result of EPA regulations and the need to develop on-board diagnostics systems to manage emissions controls. “The short-term impact is in the required level of training,” Winner says. “The range of technology used in each truck, regardless of its manufacturer, makes it difficult for any untrained mechanic to work on the equipment.”
Komatsu Vice President of Product Support Jeff Powell reiterates, “The importance of lift truck technician training is substantially greater with these new EPA-compliant products because the troubleshooting is more comprehensive and the lift truck technician must have more knowledge.” Powell understands the material handling distributors’ position, saying, “General diagnostic equipment can read the EPA codes but won’t give access to any additional manufacturer restrictions, so these new lift trucks do make it more difficult for dealers to work on another brand,” he adds. “But it’s not impossible. As the lift truck industry evolves over time, competitive equipment will become easier to work on,” Powell says.