A distributor explains the case for consolidating the rental and freight departments.
As a multi-branch company, Liftech Equipment Companies (East Syracuse, NY) is always looking for ways to maximize efficiencies and streamline operations at its seven branches—located in East Syracuse, Schenectady, Rochester, Buffalo and Vestal, New York; South Burlington, Vermont; and Bloomfield, Connecticut.
It’s nearly a 500-mile drive from Buffalo to Bloomfield. Until recently, being so spread out was causing us to lose customer focus at the branches due to miscommunications and people getting spread too thin. In particular, the short-term rentals and trucking were the most problematic.
In January 2009, we decided to move our rental departments to one centralized location. We believed it would help us better control our costs and manage our asset movement a lot more easily. Our East Syracuse headquarters location became the clearinghouse for all rental activities. Rather than having each branch try to coordinate a third-party trucker to haul rental equipment between branches and each branch’s customer, we created a central place to unify that process.
For instance, the service manager in Buffalo receives a service call from a customer who needs us to pick up the out-of-service unit and bring it into the local shop for a repair. A rental unit will be needed to temporarily replace that unit, so that particular request gets communicated to the centralized rental department, who will work with the external customer.
The whole idea of rental centralization was not to eliminate our outside haulers—it was to coordinate the best way to utilize them. We do all of our new equipment and most of our used equipment prep work in East Syracuse, so we have to send out rental units from the headquarters in East Syracuse to the branches. Even though East Syracuse is the hub, 75 percent of our business occurs in the branches. We own three trucks housed in East Syracuse. We also have backup third-party carriers based in each of our branch cities. Each of them has a specialty that we call on them for—one doesn’t do large loads, another doesn’t do small loads.
Having one centralized location has enabled us to negotiate a consistent price for all our rental-associated freight. We’ve been able to move the fleet more efficiently on scheduled moves. The number of moves per week increased from 68 in 2008 to 77 in 2009, and moving the fleet on a planned basis lowered the cost of doing business and allowed our utilization to have a more controlled focus.
The change to Rental Central allowed us to keep the required assets in each territory without moving them around too much. Prior to 2009, we would make a trip for a one- or two-day rental without having any rate of recovery associated with it. Now we know if it makes financial sense to move a unit for two days. Before, for example, we didn’t know about a pick-up of a demo unit in Schenectady. Now we have requests for a rental, demo and a shop job that all come in to one centralized location. We can make the move easier and more profitable. As a result, our recovery of rental freight percentage increased from 52.9 to 56.8 percent. External billing for freight other than rentals decreased from 85 percent to 69 percent being handled by outside vendors.
To handle these requests, our in-house IT specialist, Denny Maderi, created specialized software that we call the Help Desk. The branch service manager sends an e-mail to rentals, and Help Desk automatically creates a work ticket. Then we can easily track the status of that work order.
In addition to providing a new level of accountability, the Help Desk system makes it easier to prioritize rental jobs in terms of importance. Prior to this system, each employee made his or her own decisions about what was a high priority; out of ten requests, maybe two actually were. This system allows us to tell them where they are on the priority list and create a record of where we are in the process.
If you’re considering centralizing your rental department, here are a few suggestions. First, the branch location must remove itself from the equation. It can’t be calling truckers itself because this interferes with the idea of getting a special negotiated rate.
Second, be sure to keep salespeople out of the mix. They, rightfully, always want to make their own calls, but the fewer people involved, the less opportunity for error.
Third, and perhaps most important, is to have patience with the implementation. We pushed the issue pretty hard once we made a decision and didn’t allow ourselves a lot of time to get used to the new way of doing things. It was good in some respects, not so good in others. For example, the people at the branches felt like they were losing their identity, some of their control. But, it was done to create efficiencies, and it has done that. Now the person talking to the customer on the phone about a service breakdown doesn’t have to worry about handling the rental customer. That call is automatically going to Rental Central. When the phone calls come in at the branch for the rental department, they get transferred to East Syracuse via the phone without the customer knowing the difference.
Having all the phone calls come into one place allows better continuity of rates. It’s much easier for us to tell the customer what we can deliver and when we can deliver it. Let’s face it, if you’re working at a branch and get a phone call about rentals that you’re not used to dealing with, it’s not a priority for you. That’s why, at Rental Central, we make rentals our priority. It allows branch employee to focus on the service and the parts side and the branch issues while we handle the rentals.
Right now, rental is the only department we’ve centralized, but the company will evaluate other aspects of our business—like parts and service—because of our positive results with Rental Central. Overtime for truck drivers decreased from $31,000 to $8,000 year over year, and the trucking department had a positive bottom line of $33,000 after originally planning to break even at best.
|Meet the Author
Dave Aylward is general rental manager at Liftech Equipment Companies, located in East Syracuse, New York, and on the Web at www.liftech.com.