RERMAG

The Rental 'Yes' man

The most important word Steve DiLoreto says when he answers the phone is "yes."

Most rental people, when a customer asks if a particular machine is available, consult their computer screens. Those less technologically advanced or dependent walk around the yard and take a look.

But not DiLoreto. He's got it all in his head.

Considering a good memory one of the keys to running a successful equipment rental operation, DiLoreto, vice president of rental operations for FMC Rents, Downingtown, Pa., and Frederick, Md., has trained his mind to know the exact whereabouts of hundreds of machines at the same time. And he trains his staff to work the same way.

And if memory falls short? Although he will look in the yard when necessary, it really doesn't matter. Because if a customer needs equipment, DiLoreto automatically says yes. And figures out later how to make it work.

"'No' is not in my vocabulary," says DiLoreto. "I don't say the word 'No.' I say 'Yes' and then I try to figure out afterward how we're going to do it. To me, a 24-hour time period is enough time to get things done. I'm resourceful, and if you have resourceful employees, you can make things happen. And that's what we do every day."

In addition to that original "yes," DiLoreto asks a series of questions, beginning with "What do you want it for?" He asks because he has learned, through his 18 years in the rental business, that there is often more than one way to perform a particular task. And the machine that the customer thinks he wants is often not the ideal piece for the task at hand.

Finding a better way for customers to get a job done will win their loyalty, DiLoreto says. "If I answer the phone and the customer says, 'I need to rent an excavator,' that goes in one ear and out the other with me," he says. "My next question is, 'What are you doing?' Because maybe he doesn't really need an excavator. The customer might say, 'I've got a field I have to clear and I need to go in and excavate some stuff out.' Well, maybe a small dozer can do it. If you listen to what the customer says, you may provide him with the machine he requests, but it may not, ultimately, be the best thing for his job."

DiLoreto and the FMC staff try to help customers find the best solution for their jobs and also to educate them about equipment they may not be familiar with.

"I had a customer call recently for a crawler-loader to dig a basement," he says. "I asked him if he had ever used an excavator. I said, 'You're going to have less backfilling and you're going to dig it twice as fast. Why not give it a try?' He's had the machine two-and-a-half months now. So educate the customer and move him to the next level."

Educating customers also involves teaching them about the advantages of rentals. Ron Ludchak, president of Furnival Machinery Co., FMC Rents' parent company, says contractors in eastern Pennsylvania are still behind the times when it comes to embracing the rent-to-rent concept. And Ludchak can understand that lack of awareness, since he himself really discovered the rent-to-rent business only a couple of years ago, after Komatsu acquired seven-location equipment dealer Furnival.

Discovering rent-to-rent FMC Rents is not the first Komatsu dealer to become a serious player in the rent-to-rent business. San Diego-based Clairemont Equipment was a rental company before it became a Komatsu dealer in the late 1980s, and other Komatsu dealers have embraced rentals to varying degrees.

But FMC Rents was one of the focal points of a strategic shift by Komatsu into the rental business several years ago. To facilitate the Vernon Hills, Ill.-based manufacturer's move into rentals, it acquired Furnival Machinery Co. and two other distributors in 1997, with the intention of launching a rent-to-rent division.

Ludchak recognized that he didn't know the rent-to-rent business and sought an experienced rental manager to run the short-term rental division. A consulting firm found 33-year-old DiLoreto, who started in the rental business as a U-Haul yard assistant at age 15 and later worked for 12 years for current competitor Modern Equipment.

"We had always been in the rental business as a rent-to-sell company," says Ludchak. "But we weren't responding the way you need to do in the rental business. We didn't have the availability and we frowned on short-term business, which is something you don't want to do in rent-to-rent. Everybody had to have a purchase option. Even weekly rentals were frowned upon because of the costs associated with picking up and delivering equipment, servicing and turning it around."

Furnival, like most Komatsu dealers and most heavy equipment dealers in general, wasn't structured for a quick turnaround.

"When you're in the sales business and the rent-to-sell business, the machine being sold and the customer's repair work take priority in the shop," Ludchak says. "We weren't set up for short-term rentals. We quickly realized there were two different mindsets."

Ludchak decided that the rent-to-rent division needed to be run as an entirely separate company and opened FMC Rents' first dedicated rent-to-rent facility in Downingtown in July 1998. The company bought land to build a facility and opened temporarily in the back of another company across the street. It moved into its new facility last month.

One of the main reasons for separating the rent-to-rent division from the dealership was so customers wouldn't seek rental favors while dangling the possibility of buying equipment. "If we have too close a tie, then the customer expects favors from the rental guy," Ludchak says. "They say, 'I'm gonna buy this big machine, can't you lend me this little one for a couple of weeks?' We tell them we can't do that. It's a separate company."

To DiLoreto, one of the main strengths of FMC Rents is its wide-ranging inventory. "I've seen it in the past where you have all the small equipment and you only get so large, and so your customer base deals with you about 75 percent of the time," he says. "And 25 percent of the time they deal with somebody else to get the bigger equipment. So we've picked up a lot of customers that way, dealing with one end of the scope to the other."

DiLoreto says companies with limited inventories risk losing customers to competitors with more complete product offerings. So one of the first points he made in developing a plan for FMC Rents was that the company had to be well-stocked from the first day of business.

"You've got to have all your ducks in a row," he says. "You can service them for a while, but the next time they want something you don't have, they'll say, 'You were nice to deal with, but I'll go over and see Joe.' If we have dozers, but the customer wants walk-behind rollers and he goes somewhere else for the roller, the other company might say, 'I've got the dozer, too. Why don't I just get both for you next time?' And you may not get another opportunity with that customer. I've seen that happen."

Another immediate requisite, DiLoreto told Ludchak, was a tractor-trailer for deliveries. "Ron said he used an outside hauler," DiLoreto says. "That's what he was used to. But if you call an outside hauler and say you need it now, you're lucky if you get them in two or three hours. When a rental customer wants something, he wanted it yesterday."

Ludchak laughs at his own learning curve. "Steve ordered the tractor-trailer and I said, 'What are you going to do in the meantime?' And he said, 'We're going to rent one.' I said, 'Rent! You mean you're going to throw all that money away?' He said it wasn't throwing it away. That's rental. We're in the rental business."

"The thinking is completely different between an AED house and a rental house," DiLoreto says. "We drop whatever we're doing when a customer calls. Every morning I drive to work and think, 'Here's what I'm going to do today.' And I have to laugh because the minute I get here and the phone rings, my whole schedule changes. I walk in the door and the guy who didn't want the machine delivered is on the phone saying, 'I need it now.' Now you have to fit that in without telling him no and getting him upset. You have to respond immediately."

FMC's shop runs a rent-to-rent mentality. Not only is it equipped for quick turnarounds, but it is prepared to do maintenance and servicing on the customer's jobsite as well as in the shop. Which means, most of the time, equipment isn't even returned to the shop for service. Running at 100 percent utilization with some of its earthmoving machines, FMC typically sends its mechanics to service them right on the jobsite and then deliver directly from there to the next job, without returning them to the shop. For major repairs, the FMC staff bring the machines to Furnival.

One advantage of being an earthmoving specialist is being on a job from the very beginning. "The way we get a job is by knowing the excavating contractor," DiLoreto says. "It's still a green field and we know the guy who's got the job. So we're there right from the start because we're bringing excavators and dozers, and we stay until it's complete."

In addition to the large Komatsu line of excavators, wheel loaders and backhoes, FMC Rents carries a wide variety of items including air compressors, pumps, generators, compaction equipment, light towers, aerial work platforms, welders, pressure washers and concrete equipment. To fill out its operation, FMC has small items such as fans, heaters, lasers and boring tools.

Small company attitude FMC Rents has some competitive advantages as it approaches its market. A large capital base enabled it to start with an extensive inventory, which most start-up companies lack. It also was able to begin with an extensive array of heavy earthmoving equipment, which few new companies are equipped to purchase.

As part of a growing national network of Komatsu dealers developing their rent-to-rent capabilities, FMC has the advantage of being able to take care of customers that leave the area to pursue jobs in other states by referring them to Komatsu dealers in those states. And FMC, which already does a healthy business with out-of-state contractors, hopes to be able to take advantage of similar opportunities as the Komatsu network matures. FMC also benefits from being able to buy equipment through Furnival at dealer prices.

But along with its large inventory, FMC has what DiLoreto and Ludchak consider an even more important attribute - a small-company attitude. "When mom-and-pop companies are bought up, they lose that 'You're my customer and I'm going to take care of you no matter what it takes' attitude," DiLoreto says. "Attitudes change in those stores and customers aren't treated the same way. We buy big equipment, but we're still a small company. We've got the advantages of a national company, but we're still a mom-and-pop company."

DiLoreto considers his outside sales reps - Bill Morrow and Brian Staley from the Downingtown store, and Mike Burns and Bob Dean from FMC's branch in Frederick, Md. - to be among the main strengths of FMC. DiLoreto looks for people who really enjoy finding solutions to customers' problems, as well as people with knowledge of the construction business.

"Somebody who came from the construction business knows that side of the business and the complications that go on every day," DiLoreto says. "You put them on the other side of the fence and they can find solutions for the customers. They have the knowledge of running their own business, or running jobs, so they can certainly run themselves from day to day and they can provide solutions to problems."

FMC does have a segment of homeowner customers. With many new homes being built, homeowners do rent skid-steer loaders, mini-excavators, backhoes and vibratory plates. Because of the expanding market, FMC plans to expand its offering of lawn-and-garden equipment. But still, the vast majority of its customers are contractors that specialize in earthmoving projects - site developers, utility contractors, some road construction and pipeline contractors.

FMC has a lot of room to grow. It has a current trading area of about 50 miles from each of its two branches. It plans to expand to other areas in Pennsylvania and Delaware, close to other Furnival branches, located in regions where heavy growth is taking place.

And if the company continues its current growth rate, DiLoreto will continue to answer the phone saying "yes."

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