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7 Biggest Rental Challenges of Equipment Dealers

By Mikael Forsman
Director, Equipment, Infor


June 23, 2014 – Rent or buy? In today’s industry, it’s not just a decision for a house or car anymore. The same question is increasingly asked in the heavy equipment sector as construction, agricultural and mining companies seek to cut costs and make the best use of their working capital.

Equipment rental is trending upwards in all regions of the world—and it is set for further growth. Rental saves capital, provides flexibility and frees companies from the cost and complexity of maintaining owned equipment. For some, rental is used as a preliminary to purchase, allowing companies to try out different equipment types before settling on the one they want to buy. But for the equipment dealer, rental is a growth market that provides ample opportunities to expand the dealership and grow revenues. However, in order to succeed, one needs to be prepared for rental’s particular challenges.

To keep pace, here are seven of the biggest challenges equipment dealers will need to overcome to be successful in the rental market, as well as some approaches to dealing with these challenges.

1. Taking control of a multifaceted business

Most likely current processes already require the equipment dealer to quote, sell and procure equipment, manage financials, inventory and parts, schedule work orders and maintenance on customer orders, and oversee project management and remanufacture. When rental operations are added to the business, even more tasks are added. The primary challenge is controlling the sheer range of business processes and functional tasks that need to be completed and tracked. One way to improve visibility is to implement a single ERP solution that spans the business processes of dealers, renters and service providers.

2. Accurately balancing portfolio and cash flow

Renting can be a great revenue generator — especially when all of the equipment in the yard is out in the field. But first, one must make the upfront capital investment in the rental assets, which will have an impact on the cash flow of the business. To succeed, a balanced portfolio of rental assets in the yard and in the field is needed. That way the dealer will have control over cash flow, and will know where the assets are and where they need to be.

3. Maximizing the utilization and re-sale of a fleet

Traditionally, dealerships have succeeded at offering equipment, parts, service and maintenance at a volume to meet customer demand. As business evolves increasingly towards rental, one must be able to anticipate the market demand in advance, manage the changes in cash flow profile and maximize the utilization (days on rent) that can be derived from investment in the fleet, while also ensuring that equipment is regularly serviced to maximize the re-sale value at the end of its rental life. To accomplish this, asset management software that offers visibility into all of the rental assets is needed, including their service records, and their parts and accessories. This visibility can help reduce equipment downtime, which can help improve utilization.

4. Balancing rental needs against sales needs

In rental, the goal is to achieve the lowest cost per transaction. One needs to support and manage the processes for rental — quotation, accessories, sales and maintenance — while balancing them against the service, maintenance and repair business of the dealership. With the right planning tools, the lifecycle of parts and equipment can be effectively managed across all business units, as well as the transfer of sales or rental assets between branches and other sites.

5. Offering excellent customer service

To keep customers happy, 99.5% equipment availability and excellent customer service must be provided. However, no matter how skilled the customer service representatives are, if the dealership can’t accommodate a potential renter’s schedule by having what they need when they need it, that customer is going to take their business elsewhere. To improve customer service, consider adding an online customer portal. Online customer portals allow customers to access their own equipment portfolio, spare parts and more, and to view their orders and rental history. In the end, the more the dealer knows about its customers, the better it can help them and the greater the results for the business.

6. Planning for the full equipment lifecycle management

By tracking the costs of the fleet, the equipment dealer can know for certain if a rental asset has taken on too much debt through maintenance, parts and servicing, and whether it is ready to be retired or sold off. Efficient asset tracking tools allows the dealer to make the most out of its investment.

7. Forecasting equipment service and repairs

The last thing anyone needs is for a piece of equipment to fail. Being able to plan ahead when it comes to spare parts requirements and maintenance resource capacity is critical — and it provides a major opportunity to reduce costs and improve customer service. To ensure that equipment is well serviced whether it’s owned or rented, a powerful planning workbench with tools that can forecast and plan for spare parts is needed, along with parts marketing programs and rebates.

(Mikael Forsman is Director, Equipment, at Infor, a provider of enterprise applications and services for 70,000 customers in more than 200 countries and territories. www.infor.com)

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