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Putting Ourselves Behind The Curve?

There is an interesting phenomenon that occurs in the material handling industry. Perhaps it’s not entirely unique to our business, since it seems to permeate American thinking in general. It has to do with our belief that when times are good, they will always be good (circa 2005 – 2008), and when times are bad, they will never improve (circa 2008 – 2010). Yet, history inevitably proves both thought processes to be wrong.

From the height of the industrial truck market’s peak in 2006 to the depths of the market trough in 2009, demand shrank by roughly 50%. As dramatic and sudden as this fall seemed, it is not without precedent. A very similar situation occurred back in 1979 – 1982. Over that three-year period, the lift truck market also declined roughly 50%, before starting a seven-year climb to a new high that took the industry size up an astonishing 153% (see the blue shaded areas on the following chart).

At the beginning of 2010, the manufacturers represented in the Industrial Truck Association (ITA) collectively believed the market opportunity would grow only 10% over 2009 levels. However, by the end of the year, our industry had recovered by more than 45%.

As we begin 2011, the ITA is projecting growth to again be in the modest 10% range over 2010 levels. This conservative estimate would appear both realistic and responsible given the shock of our industry collapse during the recent recession. That said, if we dare draw comparisons to the 1979 – 1982 performance period and project out a similar growth trend of 153% over the course of the next seven years, our industry demand will easily achieve a new all-time high at annual levels approaching 250,000 units in classes I – V (see the red shaded areas on the following chart).

During the course of my daily discussions with lift truck dealers, I often ask them what they would have done differently at the beginning of the recession. The answers are almost always the same: “I would have made deeper cuts to my fixed costs, and I would have acted sooner.” The second question I ask is what they are doing to prepare for the recovery. The typical response is several seconds of silence, as if it never occurred to them that business will one day improve.

At this stage of the economic recovery, the slope of the future growth trend is far from clear. But what if a steep and lengthy expansion cycle is, in fact, already underway? Companies that did not cut quickly enough at the beginning of the recession stand to make a similar mistake by not ramping up quickly enough to take advantage of the pending growth opportunities in their markets. This hesitation could cause them to miss out on hiring of well-qualified revenue producers in the service, parts and sales areas. Competition for these individuals will only get more intense as other industries begin to feel the recovery and start responding accordingly.

Hesitation is to mediocrity what boldness is to success! Regardless of how frightening it may currently feel to consider reinvesting in our organizational infrastructure, there may never be a better time than now to capitalize on the growth that lies ahead.

Meet the Author
Kent Eudy is the vice president of dealer sales at Mitsubishi Caterpillar Forklift America Inc., located in Houston, Texas, and on the Web at www.mcfa.com.

Material Handling Equipment Distributors Association

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