While much of the current news flow surrounding Daimler Trucks North America (DTNA) is predicated upon the growing acceptance of the Cascadia Evolution product, which has achieved over 20,000 orders from its launch in March, attention is now beginning to focus on the aftermarket business, a segment for which, according to Senior Vice President in charge, Friedrich Baumann, the company now has clearly defined aims: “undisputed leadership”.
This may sound like an ambitious aim, but it’s one that is worth pursuing; the US heavy duty aftermarket segment is worth around US$22bn per year, according to figures from the Heavy Duty Manufacturers Association. DTNA’s Aftermarket operation currently boasts seven distribution centers, a two call centres and some 730 dealer and distributor outlets.
“About 50% of vehicle TCO is related to what an OEM can manage,” Baumann explains. “Of this, about 35% is related directly to fuel economy and 15% related to parts, service and downtime. That’s why all of our initiatives are designed to help customers better manage their TCO.”
Underpinning the customer facing side of the operation are seven remanufacturing facilities, six of which are based in the United States and one in Mexico. These facilities remanufacture a variety of components, both conventional parts such as engines, fuel injectors and turbochargers but also, in the case of the DMR Electronics facility in Hibbing, MN, electronic componentry such as electronic control modules and power inverters. This latter is of growing significance, and Baumann is at pains to emphasise the operation’s growing importance to DTNA: “We see a huge opportunity in electronic component remanufacturing, especially on the powertrain side,” he says.
Retail inventory management (RIM)
DTNA’s strategy for growing its aftermarket business is founded upon a number of initiatives. At a customer facing level, it will expand its retail approach and also make changes to its retail inventory management (RIM) systems. Underpinning this will be increasing leverage of the remanufacturing network along with a process of raising both dealer and distributor network performance.
“Parts availability is the biggest driver of success in this business,” explains Baumann. “We need to make sure downtime in minimised for the customer, that our parts business is more closely aligned with the TCO goals of the customer. We must deliver on this, day in and day out.”
Elite Support
Coupled to this is the “Elite Support” certification process, which is focused on dealer performance. This uses 135 identified performance criteria measured across what Baumann describes as 19 “customer experience points” that measure overall performance across variables including customer service, diagnosis time, parts availability, repair times, quality of workmanship and consistent communication.
This process takes around nine months to complete, and 120 locations have been thus certified to date, with Baumann targeting in excess of 300 certified locations by the end of 2014. One of the key elements of the Elite Support programme is Express Assessment; this mandates that, within two hours of a vehicle being brought into a dealership, a diagnosis will be made and the customer informed of the likely length of repair and the availability of parts. To ensure complete visibility of the process, some 240 dealers are now using Uptime Pro software that records every stage of the repair process from diagnosis to remedy. During 2014, DTNA’s aftermarket division will roll out a fleet portal system that will allow the fleet owner to have complete visibility of the repair process in real time.
Customer retention
Todd Biggs, DTNA’s Director, Aftermarket Parts and Service Marketing, places the broadening of the retail approach into clear context. “The first owner gets 50% of his parts from the dealer, but after six years, customers tend to look for alternative sources for parts because they are in value mode,” he explains.
This gradual hemorrhaging of revenues over time lies at the heart of the development of the Alliance Truck Parts business. Described by Biggs as a “true all-makes portfolio”, Alliance is DTNA’s response to the vendor parts segment, the attraction of which increases as a truck ages. Currently, the Alliance Parts portfolio is constituted of 32 lines spanning three product groups; accessories, repair and replacement and maintenance and is aimed primarily at the owner-operator and small fleet segment.
“We want to get a bigger piece of the pie but not just for DTNA brands,” says Biggs. “Part of that is helping the dealers see opportunity. By pulling customers into the dealership for parts, whatever their make of truck, we can help build trust in that dealer so that at the point they need to buy a new or used truck, they go to them.”
While the Alliance Parts strategy may seem all about increasing revenues from increasing aftermarket sales, Biggs also sees a secondary benefit in retaining and lengthening the customer-dealer relationship. “Our research shows that while 50% of the ‘first owners’ of a truck come back to the dealer for parts and service, only 34% of second and third owners do,” he explained. “Basically, after six years of ownership, most aren’t returning to the dealer. So we want to create more value for them so they do return.” Biggs’ strategy posits that by retaining dealer involvement in a truck, the customer will be more likely to consider that relationship an ongoing one at the point when that same truck falls due for replacement.
While these different initiatives may seem to be slightly disparate, the roll out – due in the first quarter of 2014 – of the new Detroit Connect Visibility all-makes telematics solution will do much to integrate DTNA’s aftermarket offering. This is a tablet-based system developed on the Android platform and builds off Detroit’s already much-used Detroit Connect system, currently used by more than 60,000 operators of Detroit Diesel-powered Freightliner and Western Star products.
“By expanding the availability of the On-Board Tablet and Visibility fleet software to mixed fleets, we are arming all fleet managers with powerful tools that streamline communications, benefit fuel efficiency and enhance driver productivity,” says Joe Saccio, Manager, Sales and Marketing for the systems at DTNA.
Visibility fleet software monitors and delivers real-time data on the entire fleet to track the status of one or all trucks. The software generates reports with detailed information on vehicle location, speed, mileage, routes, stop times, idle times and more, to help managers adjust operations and enhance fleet productivity.
The On-Board Tablet delivers Hours-of-Service logs for reporting; two-way messaging, including text to voice; advanced navigation for asset-specific routing; and simplified pre- and post-trip inspections.
A constant revenue stream in a highly cyclical market
The value to a fleet of having predictable and reliable aftermarket service isn’t difficult to imagine. But there is also a considerable value that accrues to the OEM – in this case Daimler – in having a viable, sustainable aftermarket operation. Parts and Aftermarket services represent a formidable part of the top line for any OEM. Moreover, they represent a relatively constant revenue stream in what can be a highly cyclical market for new trucks.
Oliver Dixon
About the author: Oliver Dixon is Principal at West End Companies, www.westendco.com.
