Heavy Duty Opportunity

In today’s hyper-competitive automotive parts market, it is sometimes easy to forget the sales opportunities that exist in the trucking industry. Contrary to current environmentalist wisdom, the number of trucks on Canadian roads is on the rise, and it could mean an increase in opportunities from both traditional heavy-duty sources and fleet service specialists.

According to the research experts at Frost and Sullivan,

the current business environment of the North American heavy-duty truck aftermarket is in a state of consolidation. The aftermarket continues to witness greater truck complexity, a declining skilled worker population, and distribution-channel cost compression.

New analysis from the firm finds that demand for on-road freight hauling continues to rise along with the number of vehicles. The number of class 3-8 commercial vehicles is rising at an annual rate of 2.0%, and is forecast to top 11.4 million by 2014. The firm’s recently published study examines the various challenges facing the heavy-duty repair and service industries, and highlights where participants need to direct their focus to sustain market growth.

“The North American heavy-duty truck aftermarket is faced with a multitude of challenges and opportunities related to service, distribution, consolidation, and advanced technology domains,” notes Frost and Sullivan consultant Mary-Beth Kellenberger. “The future of the aftermarket will depend greatly on the agility shown by market participants to integrate advanced technologies that complement service and maintenance initiatives, reduce downtime, offer greater control on supply chain and distribution flows, and manage inventory.”

Technology drives revenue opportunities in this market, and is one of the crucial tools to meet the challenge posed by the technician shortage. Advanced diagnostics and prognostics capabilities can help meet service and maintenance demands, while also helping to reduce downtime. Technology accelerates the distribution flow, and creates standardized operating procedures that increase efficiencies and provide insight into the entire supply chain. Therefore, technology helps to control supply chain variability.

Increased consolidation within the heavy-duty aftermarket parts and service structures, distribution mechanisms, and flow channels has meant, for many aftermarket players, an ongoing struggle with downtime and cost issues associated with this change.

“Moreover, original equipment service (OES) channels are amassing a greater share of the aftermarket revenues, driven by the increasing prevalence of proprietary technologies in commercial vehicles,” notes Frost and Sullivan program manager Sandeep Kar. “That being said, OES channels are struggling to keep up with demand, thereby offering opportunities for independents to partner with these channels to support their businesses.”

“In addition, increasing distributed electronic content in commercial vehicles is forcing the need for new technology and equipment acquisitions by product and service providers, in turn inflating product and service costs,” says Kar. “There is also a need to streamline the parts distribution structure to improve product and service flow.”

The current market conditions demand that the aftermarket should look to the most cost-effective use of technology throughout the distribution system, product development channels and service flow. Over the short to medium term, consolidations will continue to influence the demand from large fleets. However, independent suppliers and providers of service, maintenance, and parts must retain their interest in small-to medium-sized fleets and owner-operators who aim to reduce the downtime of their mobile resources.

Tremendous growth opportunities exist for companies that cater to the product and service needs of local markets and smaller-and medium-sized fleets with a broad spectrum of vehicles.

Fleet service customers could mean big business

The North American commercial fleet industry faces rising fuel costs, new vehicle-related legislation, and mounting service demands. Currently, the industry’s practices are incapable of dealing with the mounting workload.

Frost and Sullivan finds that the commercial fleet industry faces several challenges, each with pressing implications for the market. How commercial fleets choose to deal with these issues will affect their profitability and service effectiveness.

An economy that depends heavily on the movement of goods requires a reliable on-road transportation system. Efficiency has gained greater importance as freight volumes have grown. In the near term, freight volumes are forecast to grow at an annual rate of 6%, and profits will continue to be squeezed.

The increasing demand for replacement services and maintenance support strains the aftermarket service industry. This presents both challenges and attractive opportunities.

“The North American heavy-duty truck aftermarket currently offers tremendous growth opportunities to both the product and service segments,” says Kellenberger. “The distribution structure faces changes to the competitive landscape and market dynamics, while the product side must adapt to pressures emanating from increasing vehicle electronic content and the introduction of proprietary technologies by truck-makers.”

Proactive and innovative service companies can turn this situation to their advantage by creating new structures that can better manage rising operating costs, technology complexity, inventory management issues, and the rising influence of original equipment manufacturers.

The decline in the number of fleets performing onsite repairs and complex system maintenance has led to increased opportunities for independent repair facilities and dealers. Central to this repair equation is the availability of qualified

technicians. Even though the overall number of technicians will likely increase, industry participants remain concerned about the decreased skill level and quality of technicians available in the commercial vehicle industry. Low wages, a dirty work environment, and lack of resources continue to deter workers.

The industry has to stop relying on market forces to provide technicians and must make concerted efforts to procure the necessary talent. Participants must devise viable and cost-effective talent retention strategies as repair services become increasingly competitive.

“The service industry must look at the ways in which it can secure as well as foster existing talent to support the growing repair demand,” notes Kellenberger. “The time is right to test the waters with new strategies for talent retention, technician development, and service delivery.”