35 Trends That Might Come True

Feb. 1, 2007
Some will come true; some might not. But these 35 trends should give you some clues about where the rental industry is going. 1 Passport required Globalization

Some will come true; some might not. But these 35 trends should give you some clues about where the rental industry is going.

1. Passport required

Globalization is a business fact of life in the 2000s, but the equipment rental industry lags behind when it comes to spreading out across borders. Although not uncommon in Europe, where national markets are smaller, other countries are likely to be just a couple of hours away, and the currents of commerce are well established, few North American rental companies have had the size and bulk to expand abroad. And with abundant opportunities within North America, with many not-yet saturated and still-fragmented growing markets available for reasonable investment, few American companies have considered international expansion other than to Canada, and even those players are relatively few.

But globalization is the trend in the business world and rental will not be an exception for long, especially as interest in the rental option takes hold around the world. Caterpillar is already an international rental player with 1,639 rental centers worldwide, on every continent except Antarctica.

In some cases, Caterpillar dealers from the United States are pioneering rentals in other countries such as Colorado's Wagner Equipment, which owns dealerships in Russia and Mongolia and is fueling the growth of the rental market in those countries. Caterpillar has been a major rental player throughout Latin America for some time with rental operations run by independent locally owned dealerships. Vancouver, B.C.-based Finning International owns dealerships with rental operations in Chile, Argentina, Bolivia and Uruguay.

Volvo is taking its rental franchises internationally and has 66 European locations, including 34 in Italy, 23 in Germany and a handful in Spain, Portugal, Italy, Austria and Poland. Hertz Equipment Rental Corp. has 85 rental locations in France and Spain. Some industry participants expect other major U.S.-based rental companies to enter the European rental market in the near future. Whether they launch by acquiring existing rental players, as HERC did in France and Spain, and Caterpillar's Finning did with its acquisition of Hewden in the United Kingdom, or by launching startups, many rental industry observers expect across-the-pond expansion in the very near future.

Many European rental companies are multinational. For example, Helsinki, Finland-based Cramo plc operates in 11 central and eastern European countries, with 250 branches, and is listed on the Helsinki Stock Exchange. Also based in Helsinki is Ramirent, which operates in 284 locations in a dozen countries. Both of these companies are active in acquisitions on an international level. International joint ventures in rental are already developing in China, involving Japanese, Malaysian and Singapore-based rental companies. To many, India and China are the next frontier, where the prospect for dramatic rental growth emerging in the coming years is potentially large.

Although waves of European rental companies have washed ashore and entered the North American market before, the most recent wave continues on an upward arc. The most significant is Ashtead, a large British rental company that owns Sunbelt Rentals, the United States' fourth or possibly third largest since its acquisition of NationsRent last year. Pon, a Netherlands-based company owns Waco, Texas-based Equipment Depot as well as another large material-handling rental specialist in Chicago also called Equipment Depot. Perth, Australia-based Emeco Equipment has started a fast-growing North American division, based in Houston and already No. 78 on the RER 100. Emeco gained a significant foothold into Canada's booming oil sands rental market when it recently acquired River Valley in Edmonton, Alberta.

As rental companies go international, Wacker Corp.'s vice president of sales and product support, Dave Christifulli, says they will then be asking manufacturers how they can support products internationally. “I expect this international rental trend to accelerate in the next five years,” he says.

2. Private equity infusion

Private equity has embraced the rental industry enthusiastically in recent years, providing significant levels of capital, and speeding the industry's growth. Private equity made significant acquisitions of major companies — RSC Equipment Rental, HERC, NES Equipment Rental, Neff Rental, United Rentals' traffic safety division — and provided significant capital infusions in a number of others. It has also provided capital to enable a number of compelling and innovative startups to infuse energy into the rental market. While welcoming the infusion of investment into the rental industry, industry consultant Dan Kaplan raises some concerns.

“Private equity has only one goal, and that is to make money for its investors,” Kaplan says. “Its primary goal is not necessarily to grow market share and grow the business, unless that happens to coincide with the goal of increasing return on capital and returns investors. Today you have a situation where private equity owns two of the larger equipment rental companies in the world, Hertz and RSC. In my opinion both of these rental companies enjoyed in the year 2006 the best year in their entire history in terms of both revenue and profit. Both firms are reducing their capex spending budgets for 2007. The result will be more positive cash flow versus taking a business that's doing incredibly well and growing it further.”

Private investment, notes Kaplan, has fueled a trend that began to develop when rental companies began going public during the late 1990s.

“Today's CEO probably spends more time addressing investors and investor conference calls, significant shareholders, SEC issues and quarterly earnings releases than anybody ever has in the past in the industry,” he says. “Today's CEO has to be articulate, and both financially and operationally astute.”

3. Age of the niche

As national players continue to strengthen their presence in mainstream equipment categories — earthmoving, compact equipment, aerial work platforms, telehandlers — such rental niche areas as hoists, liquid storage tanks, trench safety, traffic safety, scaffolding, studio equipment and pumps are likely to attract professional independents with strong operating systems and financial backing. National players seem less likely to pursue some of these niches, as evidenced by United Rentals' recent sale of its traffic safety division, leaving some substantial market niches where a company can carve out a kingdom for itself.

The niche areas are likely to “see a new wave of fragmentation as the large consolidators realize — or through market pressure from the end user customer — that these specialty segments' market sizes are not large enough for them and/or these specialty segments are not a good fit for their general rental equipment business model,” says Ron Chilton, president of Houston-based National Trench Safety. Chilton, a former executive of a company acquired by a national chain, is an example of this trend — an experienced industry professional growing a strong presence in an under-serviced market segment.

Chilton believes the rental industry is seeing a re-emergence of the smaller, yet more sophisticated, rental specialist. “To be successful,” Chilton says, “the new specialist must have the same modern facilities, financial strength and system sophistication that the consolidators have brought to the market while also being able to establish the expertise and personal relationships with the end user customer,” that will be necessary to succeed in the current marketplace.

The new specialist will have to be as sophisticated on the financial side as a large consolidator, says Chilton and others. “These new players will be quick to react to local market needs, work hard to establish personal one-on-one relationships with the customer and also have the ability to move across markets in a regional or limited regional basis.”

Niche specialists will have to act small locally, but gain efficiencies from back-office operations, intelligent software, training and other avenues, and have the ability to raise capital.

4. Operate, doctor

Once the first phase of consolidation became, by and large, complete — as Credit Suisse First Boston analyst Blair Brumley calls “the land-grab phase” — national companies have become more operations-oriented.

“This is good for them and good for the industry,” says Jamie Cowin of Birmingham, Ala.-based distributor Cowin Equipment. “Hopefully we will not see rental rates collapse in the next downturn or see some of the other management gaffes from the acquisition phase.”

In fact, rental rates have been a major area of concentration for many of the larger companies that have cited significant gains in rental rates in recent years, although those gains are likely to be put to the test if demand slows as some expect, at least slightly, over the next couple of years. Meanwhile, national companies have concentrated on improving margins and running their companies more efficiently, a trend that is likely to continue.

5. Phase two: Lonely at the top

The next phase will be consolidators consolidating other consolidators. We certainly saw an acceleration of this in 2006 with Sunbelt Rentals acquiring NationsRent, and Aggreko buying G.E. Energy Rentals. That's been the trend in every industry once the initial consolidation of smaller companies slows down. “The trend to discover greater efficiencies, drive productivity and implement technology is insatiable,” says Bob Kendall, CEO of Seattle-based Star Rentals.

“I predict there will be more consolidation in the top 10,” adds Kaplan. “The consolidators will further consolidate, and you're going to see more efficiencies, more pressure on vendors for pricing as they get larger, and a greater, larger rental industry with bigger players.”

6. Rapid identification

One way of strengthening efficiencies might be through the expanded usage of radio frequency identification devices, which can enable rental companies to scan items as they leave the yard as well as when they return. In a way, RFID may function similarly to handheld billing devices now commonplace at car rental agencies that scan a car and print a contract without a customer having to go to the contract counter. In addition to customer convenience, RFID will facilitate inventory control by tracking equipment and tools as they leave the yard or return to it.

“There are people putting enormous amounts of investment into RFID technology because it's so significant in the logistics phase, and the side benefit is that it's going to be very useful in the asset management space,” says Texada CEO Don Whitbeck.

“RFID is a readily available technology that has revolutionized the way many other industries manage their inventory, but rental businesses have been inexplicably slow to adopt it,” says Jack Shea, CEO of Solutions by Computer. “The tiny, encoded computer chips transmit constantly and are more practical than barcodes for rental, since barcodes require extreme reader proximity and line-of-sight. RFID has recently been mandated for vendors to Wal-Mart and the Department of Defense, among others. This has fast-tracked many developments in the technology and hardware, particularly in the area of standards.”

While not many rental companies are using RFID, several are experimenting with it. “RFID's applications are exciting because they span all the various sectors of the rental industry,” adds Shea. “We have a linen rental customer who has RFID chips sewn into the hems of thousands of rental items and uses it to process orders and returns. A heavy equipment rental company can put a chip on a machine and have its activity automatically register on a reader at the gate every time the machine enters or exits the yard. You can use rental software to verify that the equipment should in fact be leaving or entering the yard by checking its status in the rental system.”

7. Renting the digital fence

RFID has additional applications such as in training, where a construction company can use it to make sure an operator is trained to use a particular machine.

“If an operator has an ID card with RFID, he scans that over a piece of equipment that has a communications package on it,” says Nick Mavrick, vice president of global strategy and marketing for Volvo Rents. “The operator can't start the engine unless his ID card shows he has been properly trained.”

RFID could have security applications as well.

“The RFID could involve security and authorization,” says Mavrick. “You would have to be authorized to be in a certain area. We could be renting the digital fence. A lot of the conversation in rental is how can we extend our enterprise. What else can they outsource to us? They are renting equipment from us, bringing machines to be serviced by us, what else? By providing security services, we become embedded into the enterprise.”

RFID technology can be applied to internal security problems for rental centers as well. “By equipping employees with RFID tags, in addition to passwords, rental companies can add an extra layer of security in a relatively unobtrusive way,” says Whitbeck. “Current RFID technology is well-suited to this application and is most likely to be the first widespread RFID-enabled application in the rental business.”

8. Part of the package

Extending the enterprise, as Mavrick says, is becoming a popular concept, the idea being that a rental company provides a variety of services to customers, not just an equipment rental.

“The trend to provide sales, service, parts, application design, operators and life-cycle product management will continue and build,” says Dave Griffith, CEO of Bristol, Pa.-based Modern Equipment.

“Rental companies will migrate away from being only rental companies to service providers constantly looking at additional services they can provide their customers,” adds United Rentals CEO Wayland Hicks.

Even small and mid-sized rental companies are likely to accelerate this trend, looking to extend full-service maintenance contracts to end users. A number of companies have experimented with storing, managing and servicing customer-owned fleet, which they simply deliver to the customer when the customer needs to use it. And Greensville, N.C.-based Ameco has made site services a division of its company, providing, in addition to equipment, tools and supplies, such services as planning and forecasting, maintenance, parts inventory management, fueling and lubricating services, insurance, operator training, equipment disposal, ice trucks for remote areas, chemical cleaning, fastening equipment, mobilization and demobilization, project feasibility studies and preliminary estimates, and more.

9. Keys to the business

While 24/7 serviceability has been a growing rental service in recent years, and will continue to be so, a more futuristic concept is customers physically accessing the rental yard as needed, whether staff is on duty or not. So if a customer represents a significant percentage of a rental company's volume they inevitably will be extended certain privileges. One frequent-renter perk could be physical access to a rental facility.

“We'd give them the keys to the business,” Mavrick says.

For example, a customer is on a major round-the-clock job and needs equipment and supplies in the middle of the night. One way is for on-call staff to get out of bed and deliver the customer anything it needs. Another is give the customer the physical keys and let them enter the physical facility using certain protocols. Authorization is given electronically or using broadband video and the customer is in the door.

Another application of electronically administered privilege could be the provision, to selected customers, of a special access card that enables them to arrive at a rental center, select desired items, and access a special express checkout service enabling them to pick up items and leave without going through the standard contract-preparation process.

“It will be a while before we see a completely unmanned facility in a public place, but we have rental companies working with us now to implement the first iterations of ‘automated rentals’ in specialty areas like plant shutdowns, tool cribs, as well as subcontracted space management,” says Whitbeck.

10. Big Box Rental & Supply Inc.

With large rental companies such as United Rentals and Hertz Equipment Rental Corp. developing large supply inventories, and major supply houses such as Home Depot and Lowe's becoming significant rental players, the distinction between supply house and rental company is already breaking down. Some in the industry look for an eventual partnership between a major supply house and major rental company, creating large superstores combining full-service rental operations with mass merchandiser or supply superstore inventory. Home Depot's acquisition of White Cap, a major retail chain that supplies contractors, seems to contribute to the possibility of a logical extension of this. The partnership of a major rental company and supply giant such as Grainger or McMaster Carr would seem to be a similar possibility where the supply store would already have the real estate and could conceivably set up a rental facility on the same property as the supply store.

Would the supply house have to train special staff to operate the rental facility? Home Depot, for example, uses this approach where its store staff also operates the in-store rental center. A more likely approach would be for the supply store to partner with a rental company, which could operate under its own management on the same property.

11. Account access.com

This concept was begun by national players to allow selected major customers to be able to access account information electronically at any time. Smaller companies are working on developing this capability and many expect to offer it in the foreseeable future. Some people, such as Joel Harper, general manager of Knoxville, Tenn.-based Stowers Rents, the rental division of a Caterpillar dealer, expect customer electronic account access to be the norm in the near future.

“Internet access and the new ‘wireless world’ we live in will make transacting business much faster and easier in the future,” says Harper. “Customers' access to account information, rental history and equipment solutions are already available today. It will be necessary for all rental companies to provide this type of access to their customers if they are to remain competitive.”

12. You have a new bill

Some construction companies and industrial facilities already expect to be billed electronically, forcing rental companies to enter into this brave new world if they want to compete for those customers. This trend obviously works both ways in making it easier for rental companies to receive invoices from manufacturers and other suppliers, pay electronically, and order supplies and services online.

As Harper says, “Paperless transactions such as e-mailed statements/invoices and the electronic transfer of payments are all out there and will be commonplace in the equipment rental/distribution world of the future.”

“We're being asked more and more to provide for those companies we deal directly with to provide invoices and billing directly electronically,” adds Dave Garton, marketing manager for Deere & Co.

13. Train by cell phone

When Apple Inc.'s Steve Jobs introduced his company's new iPhone recently, it was just another step in the fast-growing field of electronic communications, reminding us that it wasn't that long ago when sales staff first began carrying cellular phones or laptop computers. In a short time, rental companies might routinely send equipment demo “streaming video” to customers' cell phones.

“A lot of companies are also looking for online service training for their technicians,” says Garton. “We are also doing some pilot programs to take electronic parts programs to a different level,” which would involve customers having passwords to take advantage of volume discounts and, in general, be treated as unique customers.

“The systems will become a lot more intelligent,” adds Garton.

14. Reserve.com

Predicted for years, rental reservations via the Internet still have not taken hold on a widespread basis, although some rental companies — such as Newport, Ky.-based Art's Rentals, and Montreal-based chain Simplex — have done consistent, if not voluminous, business with it. However, some rental owners believe this trend will inevitably take hold on a larger scale, to the point where Modern Equipment's Griffith predicts that in the foreseeable future half of rental contracts will be done over the Internet.

15. Diet coke with that order?

Every company wants to provide faster service to differentiate itself from its competition. Some branches of Seattle-based Star Rentals, for example, try to begin the rental process before a customer gets out of his car. If the counter person sees a regular customer drive onto the property, he can bring up the customer's file and be ready to prepare the order before he even walks in the front door.

Another way to speed up service is to encourage customers to call in advance so the rental company can have the order ready when they arrive. This can be especially easy to implement for account customers who would just need to sign, load and go. With credit cards becoming the preferred method of payment for many, call-ins may grow in popularity.

At least one company — Tiffin Rentals in Tiffin, Ohio — built a drive-through where customers can drive in, be attended by rental center staff, have the equipment loaded and even make payment without having to leave the car.

In addition to convenience, there are safety benefits to the drive-through. “If the customer is picking up a rental that needs to be on a trailer, doing it out of the weather helps immensely,” says Tiffin vice president Jim Steinmetz. “If you remove weather elements that distract a customer from hearing your safety and operation presentation, everyone benefits.”

16. 10-4?

National rental companies began several years ago to offer national 800 numbers — such as 800-URRents — where customers can call at any time and order equipment, which would then be dispatched from the branch nearest to the customer's job. Regional rental companies such as Trico began the same thing with 800-Go-Trico. In recent years, rental companies such as Stephenson's Rental Services in Toronto and Capital Rentals began using dispatching software provided by Cube Route, which facilitates the organization of deliveries and electronically maps routes to enable the dispatch function to operate more efficiently between branches spread out over large metropolitan areas such as Toronto or Washington, D.C.

One company, Gainesville, Va.-based Theros Equipment is building a central dispatching facility.

Numerous other companies are studying the best way to develop centralized dispatch. Stowers Rents' Harper predicts that centralized electronic dispatch, along with GPS, will be standard in the industry in the very near future.

17. Hydro seeders and tower cranes

More than one rental person predicts the emergence of new products in rental such as the portable, self-erecting tower crane under 20 tons. “This type of crane will only be good for large rental companies,” says Jim Dietz, CEO of Franklin Park, Ill.-based National Lift Truck. “The dealers will get onto jobsites earlier and will tie in rough-terrain forklifts and large boomlifts. The problem will be having the proper manpower and knowledge to handle the product.”

Also likely to increase is erosion-control equipment, predicts Pat DeVitto of Brooklyn, N.Y.-based Cardinal Sales. “The EPA has become very aggressive,” he says. “Under their new requirements (Phase II legislation), construction sites as small as one acre must have runoff protection. Straw blowers and hydro seeders will become very common in most rental fleets.”

Many see continuing growth in the compact equipment market. “Manpower expense and shortages will create even more focus on smaller labor-saving machines,” says Wes Stowers, owner of Stowers Machinery and its Cat rental stores. “The walk-behind mini-skid-steer market will grow exponentially over the next several years.”

18. Embedded telematics

In a very short time, suggests a large number of interviewees, telematics systems will be embedded as a standard feature — or at least as an elected option — in equipment offered by a large number of manufacturers, many of whom are already started on this pathway.

“GPS and remote monitoring systems will become a part of every rental unit, integrating service scheduling and run-time tracking along with other valuable data,” says Terry Dressel vice president of national operations for Houston-based Aggreko.

“The use of GPS to track vehicles will increase to improve efficiency and customer satisfaction,” adds Harper. “As cost of the units decline, it will become more cost effective to include them on all mobile equipment. The ‘real time’ service information provided will create more efficient service departments, better-maintained fleets, and provide machine-performance information that will allow service technicians the ability to better diagnose problems and increase machine up time. Machine location and hour information will allow rental coordinators to more accurately invoice customers, schedule machine pickup, and increase inventory accuracy. Not to mention the benefits of theft recovery and deterrence.”

Better tracking of preventive maintenance schedules, better systems that flag rental companies and track hours in the field remotely, will cut ownership costs of equipment for rental companies and enable them to significantly reduce downtime.

19. Master's degree in rental

The need to train and develop personnel is growing, and many rental people expect the industry to take major steps forward in this area. “Each rental company will have, if they have not already, to develop a management training program and apprentice training program for the vocational side,” says Sunstate Equipment CEO Mike Watts. “I believe we will see more rental companies employ full-time recruiters for the purpose of attracting help at all levels. There will be a greater push and competition for graduates of vocational schools and colleges.”

In addition to the continual need for more skilled technicians, training of management and leadership personnel will be undertaken on far more sophisticated levels in the coming years.

“Even areas like how does a driver talk to customers [is important] because a driver can have a big effect on getting business,” says consultant Kaplan. “Training coordinators how to answer the phone, sales people how to make sales calls, counter people and sales people how to overcome price negotiations, train branch managers how to be financially astute, it's a training task at every level and position within the rental company that's forever ongoing. It's important to hire trainable people. Going back to my old theme: Hire people for the next-level position, don't hire for yesterday's position.”

“Companies are going to continue to commit more funding to training and development,” adds Aggreko's Dressel. “Recruitment and retention success will be enhanced by those companies that offer employees more opportunities to develop their skills and grow.”

“At the end of the day it is still and will be all about talent and how you hire, train, mentor, keep and develop folks,” says Modern's Griffith. “Great people make for great companies.”

20. Regional training

The need to train and develop personnel could take on a regional characteristic or involve joint efforts between various rental companies, or rental companies and manufacturers.

“In the future it may be necessary for the large rental companies and equipment distributors to establish regional training centers,” says Harper. “These centers would be used to teach service personnel the basic knowledge and skills needed to work on the variety of equipment offered through the rental channel. The increasing sophistication of equipment demands that service personnel have more skills than in the past. Everything from engines to electrical, hydraulics, computers and service procedures would be offered. To some extent, I would expect manufacturers to somehow share in the expense associated with this concept.

“Upon completion/graduation the individual would be sent to a rental branch. A constant stream of candidates would be available throughout the year based on expected growth.”

One of the tasks of such a center, points out Harper, would be to improve the image of the equipment industry and the way it is portrayed to young people.

21. Penetrate

It's been an ongoing trend for some time, but many believe the shift toward rentals still has a long way to go and will continue to accelerate on a worldwide basis. “When I came into the industry in 1997, it was estimated that 17 percent of the equipment was owned by rental companies and 83 percent owned by contractors,” says United Rentals' Hicks. “Today the estimates are that 35 percent is owned by rental companies and 65 percent owned by contractors. Over the next five years, I would expect to see 45 percent to 50 percent of the equipment owned by rental companies.”

Although he didn't predict numbers, Deere's Garton agrees with the trend. “As more customers look to increase their own financial results, we think rental is going to come forth more,” says Garton. “Especially if we have a downturn in the economy. Contractors are really going to look at their fleet utilization and look at purchasing versus renting and they're going to rent more. We expect to be selling more to rental companies.”

22. Diversify

There's no denying that the rental industry has traditionally been an industry dominated by Caucasian males, with people of color primarily working as yard personnel and service technicians, with a few exceptions. And it has certainly been a mostly male industry, although this has changed significantly in recent years.

“Over the next few years you will see a substantial increase in the number of females coming into the business, as well as black and Hispanic Americans,” says Hicks. “In the past we achieved more diversity in our mechanics and yard personnel, but now we are driving this throughout the rest of the business, on the counter and logically in outside sales. Today we only have 13 women branch managers, one female district manager and one female regional vice president. I would expect this to change a lot in the next few years.”

Other large rental companies, such as RSC Equipment Rental, have showed considerable commitment toward diversification of their employee base.

“Our industry is made up of companies with a broad cross section of ownership structures — from local family businesses to multinationals with thousands of employees,” says Ellen Steck, vice president of marketing for RSC Equipment Rental. “But one common thread in rental seems to be that it's a local business. And because of that, we believe that its success in the future will be driven by people with an even stronger entrepreneurial spirit. National trends indicate that minorities are excelling in entrepreneurial businesses, so it seems sensible that the rental industry is also creating more and more opportunities for women and minorities in all job positions.”

23. Articulate

The next few years are likely to create high demand for articulating boomlifts. “The projected massive refurbishing and/or expansion of North America's refineries over the next two to three years will impact the shortage of articulating booms,” says Larry Workman of Illini Hi-Reach, Lemont, Ill. “There is a lot of work in refineries all over and some deliveries of 60-foot articulated booms could be six months out.”

With rigid safety inspections at refineries, most companies are inclined to buy new or very recent model machines. “The machines can't have a cracked weld, or a bent basket, or a crack in a tire, and they can't be unsightly,” adds Workman. “They have to be diesel.” The growing demand for new or late-model articulates could lead to significant price gains in the category.

24. A rough terrain

Also facing shortages are rough-terrain scissorlifts, report several rental company owners. With demand high and not many being made, prices for new units are high and larger companies are unlikely to want to sell off used units and then be forced to pay high prices for them, especially while rental rates on scissors remain on the low side.

25. Re-rental alliances

With rental companies likely to be more conservative in their expenditures on fleet over the next year or two, and with potential shortages in some equipment categories, rental companies might look more to re-rent from other rental companies to meet their customers' needs. But many companies remain hesitant to re-rent to a competitor in the same market, a tendency that might exacerbate the problem if demand flattens over the next year or two. Some rental companies are already experimenting with developing re-rental arrangements with friends in not-too-distant markets that don't regularly compete for the same customers.

26. Partners

Relationships between manufacturers and rental companies are changing, and just as rental companies must scramble to differentiate themselves from other rental companies to keep customers coming back to them, so must manufacturers. As Deere's Garton says, “They are looking for a partner more than just a supplier.”

Deere, like other manufacturers, looks to do joint product development with its rental customers, seeking customer input into the design of rental-oriented equipment.

“We're saying we want to make these products work for the rental business, so what do we need to do that?” says Garton. “We can sit up here in the factory and say, ‘They want these bells and whistles,’ but some don't. They may want some modification that we didn't think was that important. Sometimes that makes the difference between one product over another.”

Rental companies continue to raise the bar in their expectations of what the manufacturer should provide in terms of technical training and other services, such as more intelligent warranty processing.

“OEMs can take direct control over the service, maintenance, warranty, and other requirements of their customers,” adds Alex Schuessler, CEO of SmartEquip. “They are under increasing pressure to do so, and industry leaders such as JLG, Multiquip, and Wacker are taking the lead in directly decreasing the cost of fleet ownership of their equipment through these electronic means.”

27. Intelligent warranty

Rental companies are using software to become far more intelligent in monitoring warranty claims and processes as well. Not only do the more advanced software systems facilitate the ability to electronically file claims and determine what components might be covered, but it enables them to see patterns in equipment that could influence buying decisions, feedback given to manufacturers, and choice of supplier.

“We track them through the software from the time we submit to the time that they're paid,” says Lance Sullivan, director of fleet management and service for Sunstate Equipment. In addition to seeing how many claims the company was paid, “We can also see what potential issues might be out there with the fleet with regard to warranty and in the equipment's history itself. We have a good track record of the types of failures that a particular piece may have encountered.”

More intelligent warranty systems will also facilitate the capability of manufacturers to electronically consider a customer's unique relationship and buying terms.

28. Keep it lean

The concept of lean has had a significant impact on manufacturers, and is starting to attract the interest of distributors and rental companies. In a nutshell, lean means eliminating “muda,” or waste, defined as activities that don't add value to the customer.

A good place to start is the shop. If a technician has to take time looking for poorly organized manuals on a shelf on the other end of the shop, or can't easily locate parts or tools, all that wasted time and motion is “muda,” preventing him from doing his job efficiently and adding value to the customer. The same concept can be applied in every aspect of a service business.

Rental companies are likely to pay closer attention to waste in their processes as they look to maximize efficiencies in the years to come.

29. Spare parts

Some rental companies — such as Ahern Rentals — like to carry a lot of parts, have the space to do so, and organize them well. Those that serve as dealers or perform repair services or long-term maintenance contracts are more likely to stock a lot of parts.

But the trend industry-wide is to reduce parts stockpiles. With the ability to order parts online quickly and order and track parts effectively with the aid of intelligent software programs and services such as SmartEquip and Parts Smart, and then have the shipment delivered within 24 hours by courier services, the need to stockpile large quantities has lessened for most.

“Companies will tend to elect to stock fewer parts onsite and redirect capital to more productive uses,” notes Volvo Rents' Mavrick.

30. Toolbox, screwdriver, wrench … laptop?

The image most people have of field service mechanics is that first the phone rings informing the rental center that a machine is down at the jobsite. A mechanic grabs his toolbox, jumps into the service truck and heads out to repair the machine on the spot. If the problem appears serious enough to where a repair will be complex or time-consuming, the mechanic brings a replacement machine with him and swaps it out.

But if a replacement machine is not readily available, onsite repair is the more likely course, and when the technician heads into the field, he is increasingly likely to bring a laptop along, enabling him to look up service histories. The laptop might be connected to the Internet, allowing the mechanic to perform troubleshooting diagnostics in the field through his laptop, or it might be connected to parts-ordering systems so he can make sure he is looking at the right component or part and be able to order it or check his own company's inventory through his company's software system. He might also have manuals stored on his laptop to facilitate immediate service when required.

The growing proliferation of wireless systems will facilitate connectivity as will increasingly sophisticated PDAs and cellular phone technology, including cell-card-based connectivity.

“A laptop and a printer can be installed in the service truck to inquire about parts, consult a plan, order a part online to a distributor, and emit a service ticket or an invoice to the customer,” adds Andre Gilbert of Orion Software.

31. Compact but not rental direct

Although some, particularly Caterpillar and Volvo rental companies, might beg to differ, the consensus seems to be that manufacturer interest in renting directly to the end user seems to have passed. Manufacturers such as Deere, which owned a large minority of Sunstate, and Atlas Copco, which owned RSC Rentals, have divested their ownership of rental companies.

“They will try to get their piece of the channel by selling directly to rental companies,” says Sunstate's Watts. “[Caterpillar] will continue to grow its rental stores as a way of protecting its market share as end users shift from owning equipment to renting.”

However, manufacturers will continue to be attracted to the compact equipment market, leading them toward alliances with the rental channel, one way or another.

“Manufacturers will continue to diversify their product lines through acquisition or new introductions,” says Stowers' Harper. “As more manufacturers enter the compact construction market, more rental companies will have opportunity to become distributors. The best way to market compact construction equipment will be through the rental channel.”

32. Going … going … gone.com

Internet auctions increased dramatically in 2006, and rental executives such as Sunstate Equipment's Mike Watts see the trend accelerating.

Ritchie Bros. sold $446 million worth of trucks, equipment and real estate to online bidders in 2006, a 57-percent increase over the previous year. With more than 57,000 customers from 150 countries participating, Internet bidders represented about 24 percent of total registered bidders, and were the buyer or runner-up at about a quarter of the lots offered online.

IronPlanet.com, a newer auction company established in 1998, had a record year in 2006.

33. Equipment and theft

Much progress has been made in recent years in tracking equipment theft. Anti-theft systems such as LoJack's and Qualcomm's have made the tracking of equipment much easier and some thefts have been prevented as a result.

A major problem still exists in that law-enforcement agencies still pay little attention to the problem.

“Getting the wrinkles ironed out in the recovery and prosecution of those responsible will continue to be an increasing challenge going forward,” says Sunstate's Watts. “Right now, just getting police to respond to a stolen tractor and then getting an arrest made are significant issues. The police agencies all operate somewhat differently, but an item does not get their response via a LoJack system tracking unless it is reported as a vehicle theft. “

34. Computer knows first

Just as doctors can learn so much more about their patients' ailments through MRI machines and ever more sophisticated scanning capabilities, diagnostics will enable rental companies to know what's wrong with machines often even before the customer himself knows. Imagine, for example, if a fuel truck could go out to a jobsite to refuel a machine before the customer even realized the fuel was low, or a service truck coming to fix a faulty part that hadn't begun to malfunction yet.

The day is not far away, if it's not already here. “Computer-aided diagnostics will become more prevalent for our mechanics,” says United Rentals' Hicks.

Diagnostics systems such as those provided by Qualcomm, SmartEquip and others will enable rental companies to access current troubleshooting information from manufacturers; and have the ability to recognize patterns of failure and therefore predict likely future failures, and a telematics stream from the equipment that includes equipment performance data, including oil temperature, oil pressure and voltage, with the ability to compare the information against OEM-originating operating parameters.

35. Money for safety

Keeping complete and accurate safety records is not just a question of a company's service technicians having more information to go on when looking at a piece of equipment. Not only do service records provide valuable data in analyzing the performance and profitability of an asset, they are becoming increasingly important in marketing used equipment for re-sale. Accurate safety records can significantly affect used equipment values. As one official from a major rental company recently said, accurate safety records can add 10 percent to the re-sale value of a machine.

Rental companies will, in the coming years, increase the support of safety records when negotiating with financial institutions and insurance companies.

Customers in industrial facilities as well as some construction jobs want to see rental companies' safety records when considering bids or preparing rental agreements. “Safety records will be more important than price in many situations,” says Caterpillar dealer Stowers. “We may even be able to charge for safety in the future.”

Indications are that “future” is on our doorstep.