Missing Link

Feb. 1, 2000
Here's another plus for those techno-savvy companies already utilizing e-commerce:E-commerce will change the way many rental transactions are done and

Here's another plus for those techno-savvy companies already utilizing e-commerce:

E-commerce will change the way many rental transactions are done and lower costs for both the vendor and rental center. Many rental chains believe if the product is in their inventory, it will rent, regardless of brand differentiation or brand preference, and they will win the battle based on the lowest rental rate. But this approach fosters "commodification" of products, so they must focus on cost reduction instead. To achieve this, the large national rental chains, in particular, are scrutinizing every aspect of their cost structure - from the cost of obtaining products and equipment, to the cost of warranty, servicing and maintaining the equipment, and finally to back-end administrative costs.

Regardless of the quantity of goods purchased from their vendor partners, rental chains can squeeze only so much out of the manufacturer. Today, viable manufacturers competing in this global economy must already be engaged in cost-reduction techniques to stay competitive. They are already partnering with their vendors to maximize savings on components. They must be utilizing value analysis techniques and statistical quality analysis to retain product quality, performance and function. They are engaged in just-in-time inventory management techniques to improve flexibility and reduce costs. And some leading-edge manufacturers are partnering with their employees and making them owners to improve productivity. However, as rental chains increasingly demand more discounts, technical and field service, on-site sales support, marketing support. The manufacturer can only go so far to reduce the cost of the product without jeopardizing its quality and other deliverables required by their customers.

Enter e-commerce. Significant opportunity exists to reduce costs through effective use of technology and through partnerships between manufacturers and rental chains. When they can get their people working together and each develops interactive systems that truly interface, they can greatly reduce administrative costs and effort. Online order entry, online warranty claims processing and online invoicing, to name a few, hold significant cost savings prospects for both parties. Unfortunately, few rental chains and manufacturers are capable of implementing this type of e-commerce partnership. Their systems are not configured appropriately yet, and their MIS resources are deployed in other critical internal operations. But companies who agree to partner and venture on e-commerce can only stand to gain reduced operation costs and will strengthen the manufacturer/rental chain relationship.