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Delving into the uptime opportunities for truck makers

Nov. 8, 2017
Parts and service support will become ever-more critical for OEMs to maintain market share.

As we all know, Class 8 orders are on something of a tear right now, with said volumes viewed as a predictor for hefty truck production rates next year and beyond.

And even though medium-duty truck orders are sluggish by comparison to their big rig brethren – orders for medium-duty units were down 2% last month in year-over-year comparisons, whereas October Class 8 orders were up 167% year-over-year – they, too, are expected to do well in 2018.

Indeed, Stifel Capital Markets continues to believe medium duty production will be up “modestly” next year, predicting total Class 5-7 North American volumes will hit 257,000 units for 2018, which is 4% higher than expected 2017 volumes.

Yet Gary Brooks, chief marketing officer for Syncron– a cloud-based aftermarket “service optimization” firm – believes that the key for OEMs going forward will be the “after-sales service” provided to all of those new vehicles rolling off the assembly lines.

In his view, truck customers will now only continue to expect more product uptime. New trucks aren’t cheap, after all – by 2022, according to Frost & Sullivan, the sticker price for a new Class 8 rig will range between $118,000 and $147,000 – and the cost to keep them up and running isn’t declining either.

Thus keeping commercial vehicles on the road, hauling freight and making money, will probably become one of the single most important requirements in the minds of truck owners going forward, Brooks explained.

“With a greater emphasis now on maximum product uptime, heavy truck manufacturers must guarantee that their service supply chains remain efficient and optimized,” he said. “Manufacturers must keep tabs on service parts, cut out excess and obsolete stock, and better forecast when they might need to bring in additional stock. Those practices are crucial for meeting the expectations of customers, while also maintaining a competitive edge.”

Doing those things is a bigger deal than many might think in the trucking space. For example, Renaldo Adler, principal for asset maintenance and fleet and service centers at TMW Systems, recently noted that the maintenance costs for heavy-haul vehicles in North America have increased an estimated 50% over the past five years, with up to 20% of these costs are associated with vehicle breakdowns and other unplanned service events.

In fact, the cost of each unplanned event can reach thousands of dollars based on towing charges, lost labor, the purchase of replacement parts, shipper penalties and reduced margin, he stressed.

“Preventing just 35% of unplanned repairs can save fleets thousands of dollars in hard costs alone,” Adler noted.

Yet keeping parts on hand to handle such repairs isn’t cheap, noted Syncron’s Brooks. He said parts inventory carrying costs are only getting more expensive as they amount to what he dubs a “mind-boggling” 25% of the value of the total inventory on the shelf.

Thus more “real-time” inventory management is vital to help minimize such expenses, as well ensure customers quickly get the parts they need to get their trucks back on the road.

“With massive companies such as Amazon and Alibaba entering the service parts category, finding competitive differentiators is becoming more and more challenging,” Brooks stressed. “For heavy truck manufacturers, service parts pricing provides the chance to stick out – and have a positive impact on business.”

That also means pricing parts based not only on demand, but by geography, weather and other market conditions, will be important.

“As service-led initiatives become more of the norm, decisions must be made on a moment-to-moment basis,” Brooks stressed. “This can be a challenge given all the moving parts associated with pricing, inventory logistics, and how supplementary stock is distributed, among other things.”

And that’s putting it mildly, if you ask me.

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