Last month, we covered performance gaps and how to avoid them because if you cannot prevent them, there is a very high percentage that the company’s value will be less than it is today.
Even though management would like to avoid performance gaps, doing so is a significant cost. And who wants to invest $100,000 + to do the “fix” and then find out it will not work as intended, which includes a negative return on the initial investment, which depletes company value?
I believe the performance caps will provide a negative return on investment, so it was suggested that dealers planning to sell within ten years may want to do so now and avoid both the performance gap and the potential negative technology investments.
I am mentioning this again because I am finding additional issues and problems, and opportunities that will cause dealers to rethink how they will be doing business five years from now and how the dealer revenue silos cash flows could change from what they are today.
For example, what types of equipment will you see on either a manufacturer or distributor floor? Is it the equipment you sold them? If not, will you be able to service any new types of equipment they have for moving objects and inventory?
I am referring to using robots in the manufacturing and/or distribution process. Over the last month, I have read many emails and articles about the use of AI (in its many forms) and robots.
To help accelerate this process, I read an article suggesting that robots cost about forty cents an hour to operate. They can work all day, seven days a week, if necessary. In other words, they are invading your market sooner rather than later.
So, what happens to the fleet in the field, the short-term fleet, the used equipment for sale and the new units on order? I expect that at some point, not too distant in the future, the demand for lift truck purchases as we know them today will decrease as robots take over more and more of the manufacturing and distribution functions.
Assume that your OEMs recognize this new opportunity and can collaborate with companies installing the latest systems and procedures associated with this evolution. If so, dealers will benefit from participating in the changes taking place by providing maintenance for the new equipment and even the robots if necessary. Who else would be best suited to do this work, especially if you participated in the transition?
Is there any doubt that customers are looking for ways to use AI et al., along with robots, to reduce costs and increase productivity? Not a chance. That being the case, dealers should get acquainted with providers of AI services and robot installations using some form of partnership arrangement that benefits both parties. Then, as current customers show interest, you are there to assist with the transition and maintenance requirements. And, if things work out right, new customers may result from introductions from the system/robot team, a win-win situation.
Training your techs to work with the new systems would be required, and your partners selling and installing systems, equipment, and robots would provide it. Knowing how tight the tech market is right now, your partners will be more than glad to have you take on the maintenance.
Should these programs start as discussed above, dealers must plan how to redistribute the number of fleet units to keep on hand for sale and rental purposes. Remember that customers will need your assistance to sell the units they own and have on long-term rental. Methods to assist customers should be finalized and presented using a formal worksheet.
As the transition moves alone, dealers will carry less inventory, new, used, and parts.
I thought I would bring this up because robots are coming, and if you have seen how the Tesla plants work, you will not see any lift trucks on the floor. So, you will start hearing stories about employee reductions on shop floors and warehouses. If you hear of any, make it a point to visit the site.
Other topics to bring up this month are as follows:
- Make sure you are not overpaying for tariffs.
- There is no decision yet regarding the business tax situation.
- Interest rates should come down mid-year.
- Equipment Watch shows reductions in equipment values.
- Doing refurbs should be under consideration.
You can assume that your bank will take more interest in your company, its collateral values, the date your loan matures, your coverage requirements, and your free cash flow. Once they get a hint that your balance sheet is moving around because of customers’ technology programs, you will be asked for more financial data to show how you will manage the change.
Enough for today….
About the Columnist:
Garry Bartecki is a CPA MBA with GB Financial Services LLC and a Wholesaler columnist since August 1993. E-mail editorial@mhwmag.com to contact Garry.
