Getting E-Quipped

Bricks & Clicks this month interviews Mark Morgan, who has developed web-sites and e-commerce strategies for several manufacturers, rental companies and construction supply distributors.

RER: Why do equipment rental companies need to pay attention to e-commerce and the Internet?

MM: Traditional business definitions can no longer be taken for granted with the progress being made in Internet connectivity and standards in which information can be served across differing operating systems. Many rental business owners say, "My customer will not use the Internet," or "That's not my customer." If these industry outsiders that are developing e-commerce tools have their way, it won't be their customer. By waiting around and doing nothing, rental businesses are handing over the biggest advantage a customer could ever ask for: time.

What's is driving the e-commerce push in the rental industry? Contractors are looking for methods that can increase profits, streamline jobsite communication, reduce paperwork and speed up the procurement process while reducing costs. They see the Internet as a viable alternative to doing this.

How is it working? To understand the opportunities, you first have to understand some of the e-commerce models. The digital marketplace comes in as many varieties as there are markets, but three basic models are emerging: direct, portal and distributed.

How do they work? The direct model is what we often see in a distribution chain that doesn't provide a high level of value-added services at the various tiers of the chain. The buyer logs onto the Internet, does a Yahoo search for a product, is presented with hundreds or even thousands of hits and ultimately makes his buying decision based on price. Since product is shipped UPS, it really doesn't matter whether he's buying from the manufacturer, distributor or retailer - price is the motivating factor, and service differences are not significant.

The portal model has several forms. Some portals simply bring together buyers and sellers in an electronic marketplace, yet maintain the supplier/customer relationships that exist today. The current distribution chain remains intact with no new layers added. Other types of portals actually add middlemen, and redefine the role played by each tier in the supply chain. This type is insidious in that it promises the contractor lower costs and better service while adding another layer of markup or transaction cost and requires the cooperation of the rental centers that it seeks to disintermediate.

Disintermediate? One of the new buzzwords - to change the distribution process in a supply chain, typically by removing or redefining a tier the chain - in this case, the rental company. Orders won't come from customers but from the portal. Rental companies will supply delivery information, pricing contracts, billing information and other services to the portal. Contractors will, in effect, turn their buying decision over to the portal, which will determine where to source the goods.

And the third model? The distributed model relies on the existing distribution chain to provide products and services. Rental companies remain the primary points of contact for the contractor, but transacting business electronically takes significant costs out of the transaction chain. Orders, acknowledgements, advance ship notices, invoices, notice of scheduled deliveries and any other transactional documents are sent via the Internet. On the supply side, orders to manufacturers and reps are also processed electronically. Electronic transactions can eliminate up to 90 percent of the costs of a transaction. This connectivity supports the exchange of any type of information - on-hand quantities, sales histories, projected needs, so a rental center can better manage inventory and reduce costs.

What are the obstacles? The technology is in place. The difficulty is that it requires changes in partner relationship. Those changes - sharing information, agreeing on how to share costs and savings, working together to make the process more efficient - are much more difficult than installing an Internet connection.

What chances do you give rental centers in the e-commerce world? Rental dealers have a distinct advantage in their locations, people and inventory. But those assets alone are not enough. They need to implement an effective battle plan where all their assets, including e-commerce tools and strategies, are deployed in an effective manner that provides the most value to the customers. - Cummins Engine's new portal offers mining customers performance data to get the lowest operating costs from their Cummins-powered haul trucks, excavators and drills. Operators can access a variety of information, including how their equipment is running, how many hours it was operated the day before, fuel consumption and if there are any performance issues in need of attention. The site also offers customers links to the local Cummins distributor and free user forums which allow customers to post questions or information about their engines and equipment.

By 2003, the market for installed handheld computers is expected to reach 32.5 million units and by 2004, it will be a $17.8 billion business, up from $2.4 billion in 1999.

Source: International Data

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