No Economic Excuses
John Blodgett
As we enter a new year (2018 for those of you keeping track) most firms have or, maybe a little belated, are now determining what their goals are for the year. This is the same for the heavy-duty aftermarket as it is for any industry.
We are currently (as of January) in the 103-consecutive month of economic expansion for the U.S. economy since the end of the recession in June of 2009. Obviously, all those months were not easy going, many portions of the economic recovery and expansion were very weak and for some sectors, such as fracking and oil drilling, there have been some high highs and some low lows.
The economy during this expansion has dealt with exchange rate issues, burdensome government regulations, a slowing economy in China, economic slowdowns in Europe, outright recession in Brazil and other factors. Not that everything is peachy keen (good) across the world, there is still Dennis Rodman’s friend in North Korea, but globally on whole, things are good.
As of December 8, unemployment is at 4.1%, a 17 year low in the U.S. People that had fallen off all records for unemployment are coming back to work and many of those working are seeing their incomes increased, which bodes well for consumer spending. Trucking payrolls grew by 1,800 in November, imports are up – which means good activity at the nation’s ports – and consumer and business confidence are at record high levels.
MacKay & Company tracks fleet utilization and it has been very strong for the first three quarters 2017. Parts sales for aftermarket component manufacturers and their distributors have been consistently up in 2017 over 2016. TEA® (Truckable Economic Activity), a MacKay & Company report on the trucking economy, has not been this positive since before the recession.
Bob Dieli, the MacKay & Company economist, has a short term economic tool called Enhanced Aggregate Spread and it is currently showing a good economy out past mid-year. (See Bob for details.)
So, if you are somebody who is responsible for obtaining sales goals, this would not be a good time to throw in the excuse of the economy for slow sales or anticipated underperforming to target goals. Not being able to meet customer demands, competition, accidently running over a customer’s dog, may all still work, but blaming a bad economy likely won’t work in 2018. If you still think the economy is bad here – contact someone in Brazil for some level setting.
Our current forecast for the aftermarket (soon to be updated in January) is up slightly compared to a strong 2017, but my guess is when we get fourth quarter fleet utilization, our outlook for 2018 will be more robust.
These are the good old times (unless you are certain politicians or newscasters) that we will be referring to during the next recession (not if, but when and hopefully many years from now). So, enjoy and get excited to attack the opportunities. I think most people would agree it is more fun trying to keep up with customer demands vs. trying to keep your doors open, although both can be exhausting.
Mackay&Co TPS, December 2017, Article by John Blodgett
Merry Christmas and Happy New Year
John Blodgett
It is actually the middle of October as I write this column and there hasn't been a whiff of winter weather yet in Chicago, although it does seem like the Cubs have hibernated.
So why bring up the holidays? Because they will soon be upon us and soon after that is the Heavy Duty Aftermarket Week (HDAW) in Las Vegas from Jan. 22-25, 2018. This is the preeminent conference on the heavy duty aftermarket in North America. It is run by a combination of associations whose primary focus is the heavy-duty aftermarket.
If you are a distributor of heavy-duty aftermarket parts and/or service and haven't attended this conference in the past, I highly recommend you consider it this year. It is an excellent way to network with other distributors, get one-on-one time with suppliers and enjoy interesting and educational presentations. If you are a supplier, it is likely the best bang for the buck to get in front of the people who are on the front lines of the independent aftermarket.
The primary reason I am writing this column now is to start you thinking about what you want out of this conference. It seems that everyone is extremely busy these days, mainly because business is good, but if you don't start outlining your goals for HDAW you risk leaving Las Vegas wishing you had spent more time preparing for this conference.
“If you don’t start outlining your goals for HDAW you risk leaving Las Vegas wishing you had spent more time preparing”
Quite often we hear that young people don’t want to work on trucks or off-highway equipment — that they don’t want to get dirty. Theon seems to relish this type of fun (I don’t think he considers it work).
If you are a distributor, start laying out the topics you want to discuss with each individual supplier you want to meet with at the one-on-one meetings. If you start that list now, you are not likely to forget to address the important items. Talk to your employees about their perspective on what needs to be addressed or brought up -they may have a different take.
Also think about what new suppliers it might make sense to meet with this year, if only to better educate yourself on possible new products or suppliers.
Finally, think about who from your organization you want to attend.
There are a lot of heads with gray hair and no hair at this conference (just the men) - not that there is anything wrong with that -but are there younger members on your team that would benefit from this conference? If so, get them signed up
If you are a supplier, you probably have already started thinking about the key messages or themes you want to get across to current and potential distributors. If you haven't started, get started, if you have started, start finalizing.
Determine what and who should be in your booth. Determine how you are going to differentiate your company from your peers and competitors. What are you going to discuss in your one on-one meetings? Will the distributors you meet with be able to remember your message? Will there be anything new from what you told them last year?
Finally, a shameless plug. If you are planning to attend HDAW, get in to town one day earlier and attend HDAD (Heavy Duty Aftermarket Dialogue) on Monday, Jan 22, 2018. It is a one-day conference sponsored by MacKay & Company and the Heavy Duty Manufacturers Association (HDMA) and it includes speakers and panels with distributor, dealer and fleet representatives discussing the pressing issues impacting the heavy-duty aftermarket. You can find more information at either organization's website.
Truck Parts & Service, November 2017, Article by John Blodgett
Cleaning up after the hurricanes
Longest Day: Good time to look at the long and the short of the aftermarket
As I write this column, we just finished the longest day of the year (I mean daylight hours, not a bad day which doesn’t seem to want to end) June 21. Not quite the midpoint of the year, but close, so maybe it is a good time to review what we (MacKay & Company) know so far about the aftermarket for 2017. I do understand that by the time you are reading this it is likely August and Jordan Spieth has already won the British Open.
Let’s start with our Fleet Utilization Index. Each quarter we measure fleet vehicle utilization rates for over 700 fleets of various sizes and vocations. Obviously, fleets’ equipment usage has a direct impact on the aftermarket for parts and service. First quarter utilization came in at a record high and the forecast by the fleets for the second and third quarters was also very strong.
We also have an Aftermarket Index of component suppliers’ sales to OES and independent channels. Preliminary numbers through May have the parts sales for these participants up 3.5% year-to-date compared to last year. Canada is up 7.8%. Sales to Independent channels are outperforming OES in both markets. Both markets (U.S. and Canada) were down last year compared to 2015. Commercial break- If you would like to join Index – let me know. Now back to the column.
Monthly, we also survey several truck dealers and independent parts distributors each month about their aftermarket parts sales. Our survey respondents in May for both channels were up between 4% and 5% year-to-date compared to 2016.
Bob Dieli, our economist and frequent contributor to this column, has a short term economic outlook tool called Enhanced Aggregate Spread (EAS). I won’t enlighten or bore you (depending on interest level for economic forecasting) on the details now, but basically Bob takes four real economic measurement, combines them in an Index and pushes it out nine months — turns out to be a good short term indicator of economic activity. At present, it is showing positive economic activity out into the first quarter of 2018. EAS is also a good leading indicator for our measurement of trucking economy called Truckable Economic Activity (TEA®). Currently all sectors of TEA® are at or above levels measured last year.
“Now is the time to take advantage of a good market and make hay”
Retail sales are forecast to be down this year, but while retail sales can be an indication of economic health, they don’t truly impact the aftermarket of the current year.
Our forecast for 2017 aftermarket in January of this year was for the market to be up 1.5% over 2016. At present, that looks light, but time will tell. We do complete our major update and forecast in July, so stay tuned.
In summary, most indications are positive and the short term outlook is positive, business and consumer confidence is good and forecast capital spending by corporations is expected to be up. Now is the time to take advantage of a good market and make hay (or better yet money). Turn off the radio and TV talking heads (and twitter account if you have one) and focus on what you can control – your business.
Truck Parts & Service July, 2017 Article by John Blodgett
Did the Soft Data turn into Hard Data?
This happens to be one of those situations where the lead time between the writing of a piece and its appearance can actually be helpful to both the person reading the article and the person writing it.
As we put “pen to paper” (actually as we click away on our keyboard) we are looking at an industry environment rife with positive “soft” data. What are “soft” data? The results of surveys about business confidence and spending plans. Since the turn of the year, there has been a surge in business confidence and a rise in spending plans for both people and equipment. What we have not yet seen, for reasons that we shall presently explain, is the associated uptick in the hard data. What are “hard” data? The number of units reported in the last edition of Class 8 truck sales, for one.
And there you have the reason for the question at the top of the piece. Our expectation is that some of the confidence and optimistic plans will translate into more spending and hiring. The problem is the lead time associated with each of the efforts.
One activity where we think results should show fairly quickly is hiring. The decision to increase payrolls is usually made quickly and the hiring process is straightforward. Of equal importance, the reporting interval is short. The Bureau of Labor Statistics updates the truck transportation employment figures every month.
“Since the turn of the year, there has been a surge in business confidence.”
The data relating to other types of spending takes longer to come to light, both because of the process involved in the spending itself and then the reporting of same. In the case of a Class 8 truck, the buyer specs the truck and places an order. Then the OEM has to slot that truck and build it. Then the OEM reports it to Ward’s. Then Ward’s has to compile and publish the numbers. Then the various media outlets have to show you the numbers. All of this can take months. In the case where the spending figures get aggregated into statistics like Gross Domestic Product, or our own metric Truckable Economic Activity (TEA®), the reporting interval can be even longer.
The other area where the transition from soft to hard data is both lengthy and hard to forecast is in the budgeting process at both the Federal and the State levels. All units of government operate on a fiscal year and a legislative calendar. Both of those are widely known and set the parameters for when certain actions should be taken. Where things get complicated is between the start of the process where the president or the governor proposes a spending plan and the subsequent hearings, bill drafting and lobbying that happens before that agenda is settled and put to a vote. And, let us not forget, while the legislatures are debating how much to spend, they will also be debating how much to tax. All of which adds up to another instance of soft data (campaign promises) get converted in hard data (legislation and regulations).
There used to be a commercial that asked the question “is it soup yet?” The employment “soup” should come together quickly. The other “soups”, based on the confidence-driven numbers on spending, will take longer. The political “soup” follows its own rules. Because of that, the folks who don’t understand how hard data come into being and how long they take to come to light will downplay the progress that is being made. Because it could well be this time next year before they can measure how much of the “soft” data turned into “hard” data, we all need to monitor our sources closely for the evidence of that process.
-- Truck Parts & Service June 2017 Article by Dr. Robert F. Dieli, In-House Economist
Never mind the coming data flood, are you using the data you have?
The headlines lately are all about Big Data. However, many organizations don’t execute on small data effectively. It always amazes me when I hear stories of how little value is placed on the mining and exploration of data, no matter the company or the industry. Worse yet, companies think they value it, but aren’t dedicating nearly enough resources to producing truly actionable intelligence from it. This may be because the cost of housing data is really expensive, but shouldn’t you want a return on that investment aside from a data holding tank? It also could be that the wrong people are watching your data.
Undertaking a giant task of looking for stories in data is daunting, so start small. Look for things in the data that match your existing knowledge first. This will give you and those to whom you are providing data some comfort. Data is like a hiking trail, once you go down a path, keep going until the story in the data stops. By then, you should have many other connections to explore. In prior lives, I was always the data guy, no matter my official role. I would explore the data queries (searches) of those that came before me and puzzle together what I was looking for. Once I did that, I was off and running. There wasn’t a stock or purchasing optimization project I didn’t have the ability to gather data for. Mining the data for those projects gives you experience on finding other useful information. Most likely you have someone in your own organization that would like the opportunity to do this for you. Give them a couple hours to see what they can do.
Other considerations:
- Everything is data: purchase orders, sales orders, parts returns, core returns, technician repair data, parts purchases, customer invoices, customer payments, warranty data, employee time off, fleet composition, etc. All of these sources have stories.
- Data quality matters…a lot. If you are reporting on data that is garbage, it can do more harm than good. Audit the data that is input and make sure it is useful by standardizing inputs where possible.
- Utilize subject matter experts for the data mining projects, NOT just database IT personnel unless they are the same people. A technical person without subject matter expertise can lead you in the wrong direction.
- Ensure your reports give you the data you need and are easily accessible by everyone who needs them. If not, why not?
- It is dangerous to have one person control all reporting or data.
- Make time for implementing actionable data projects. Producing reports without a goal is a waste of time.
- Internal staff who know what they are doing are 10 times more valuable than expensive reporting software systems with recognizable names. Listen to your staff.
The bottom line is data can be a nebulous and scary term. It makes people uncomfortable –sometimes because it can produce stories that defy an expected narrative. Don’t be afraid of it, using it effectively can head off problems before they make the light of day, help you stay more competitive, discover a customer’s unmet need and optimize products and processes. If these things aren’t happening at your organization, explore options to make your data usage more effective.
Trucks Parts & Service May 2017 Article by Lynn Buck
Are your automated systems customer friendly?
In the last couple months between work and personal business, I have needed to contact a number of companies for various things. This has meant interfacing with company voicemail and websites, with good and, unfortunately, far too many not so good experiences.
I am all in favor of automated voice systems/websites where you can access information you need as long as two requirements are met: 1) efficient (if you need to go through 10 levels of questions- probably not efficient) and 2) effective (if system cuts you off- probably not effective). When working correctly, it helps speed up results, allows you to access data 24/7 and you don’t have to play phone tag. However, I think you should always have the option of speaking with someone in person.
Most good companies spend lots of time and money to ensure that people who interface with customers in person or over the telephone are trained on proper customer interactions including the most effective way to get the customer the information they need — be it to sell a part, resolve an issue or get them to the correct person to answer a question.
We all rely on some type of automated system to communicate with our customers. But, I am not sure we are spending enough time making sure they are working effectively and more importantly, not making customers upset. In part, I think those who set up these systems are not orientated to thinking about the customer experience.
I have interfaced with companies’ automated telephone systems that indicate they will take verbal or key punched answers to questions, only to find out that they do not take verbal responses and cut you off as you are key punching your responses. I recently called someone back who had left me a message. I got their voicemail, left a message and then the system gave me a message that the person to whom I left a message no longer worked there! Really? – they just called me 20 minutes ago. Turned out the message was for the previous employee associated with that line.
The other day, I was logging into a website and needed to set up a password. I was prompted to have at least 8 characters, a combination of letters, numbers and a symbol in my password. I attempted the password several times and the system repeatedly told me my password did not meet the requirements. I assumed I had misread the instructions or fat fingered my password, but after trying again, it still didn’t work. I called the company (waited 20 minutes), explained the situation, provided my proposed password and was told, “Oh, you can’t have three numbers in a row.” I told him the instructions did not say that – he said, “Yes, we need to change that.” He stayed on the line as I attempted it again; still didn’t work. He then said, “I forgot, you can’t use ‘!’ as a symbol.” I replied, “The instructions did not give me any restrictions.” He said, “Yes we need to change that”. I wonder if they ever changed it.
Since most of us don’t typically ever use our own customer interface automated systems, they tend not to get the review they probably need. Do they operate the way they should? Are they helping or hurting our image with the customer? So, if you have never or not in a while called your company or attempted to use your company’s online systems, I would suggest you see how they work or don’t. Hopefully, you won’t be surprised.
- Truck Parts & Service April, 2017 Article by John Blodgett