Equipment life cycles: Ahead of the curve
02/01/2013

Manufacturers try to stay ahead of changes in equipment life cycles

 

The economic downturn over the past few years has drastically changed equipment life cycles. Though this isn’t the first time the industry has experienced tough economic times, the recent “Great Recession” has reshaped the policies and attitudes of manufacturers, rental centers and end-user contractors regarding how they build, sell and use their equipment fleets.

Gone are the days of upgrading equipment fleets every two years. Today’s fleets have pushed life cycles out to four or five years. In fact, the October 2012 Rouse Rental Report states that the industry average for rental equipment — compaction equipment for example — is currently at 47.5 months, or just short of four years. While some could dismiss this as a lingering casualty of the recession, a practice that will revert with time, experts are predicting this is the new norm.

The economic downturn has affected engine manufacturers as well. Do they look for new designs and innovations, and up their services and warranties, or begin pinching pennies to prevent getting caught in the undertow?

With plenty of pressure coming from dealers, rental centers and contractors, manufacturers are taking significant steps to accommodate the changing life cycle trends and meet the market demands. With a little research and understanding, customers can ensure they choose the best equipment for their investment.

  • Keeping the used. Over the last three years, sales of new equipment have slowed significantly. Meanwhile, sales of parts climbed to new heights as consumers have been forced to keep their equipment longer. Experts have discovered that rental centers and contractors are more willing to turn a few wrenches and replace parts as opposed to buying a completely new piece of equipment. Naturally, this places heavy pressure on manufacturers to continue producing high quality, longer-lasting equipment that’s easy to maintain, all while keeping initial costs low.

However, as the trend has set in, manufacturers have been forced to decide between higher quality or lower prices. Manufacturers either have to pull back on customer service and skimp on production to provide a less expensive product or use time provided by the slowdown to enhance designs for better, more efficient products. A select few used the downturn to boost their innovation and creativity. These companies have chosen to raise their standards and set the bar higher.

Such companies are trying to set an example for the rest of the industry to help ensure standards aren’t lowered across the board. Ultimately, they are boosting customer loyalty with parts, services and newly designed products.

  • Engine excellence. A machine is only as good as its engine. From an OEM’s perspective, a high-quality engine is imperative to building a longer lasting product. At the same time, it can mean a higher investment for the OEM and, in turn, higher cost for the customer, whether that’s a dealer, rental center or contractor. The real issue becomes the threshold of what the consumer sees as valuable and what he or she is willing to pay for a higher quality piece of equipment.

There has always been a tendency to gravitate toward cheaper engines with simple, standardized designs. Especially when dollars are tight, the engine often becomes a secondary, or even lower consideration. But the value of a quality engine, backed by solid service and support, can’t be overstated. It goes back to looking at a piece of equipment not just as a machine, but rather as an investment.

To keep in step with equipment that’s expected to last longer and perform better, the engine must be held to higher standards. When examining a product, specifically an engine, consumers should consider its technology and design. Was it built using older technology or has the engine been re-engineered to feature more modern designs that may improve performance and extend life?

For example, within the past few years, chain driven overhead cam (OHC) technology was introduced to the market. Engines that incorporate this technology have fewer moving parts to reduce mechanical noise and enable quieter operation. Further, they put out fewer emissions. This design has the potential to revolutionize the small, air-cooled engine market.

Another example of advanced technology came with the introduction of electronic fuel injection (EFI) engines to the small engine market. These engines are known to reduce fuel consumption and emissions, while providing fast, easy starts in a wide range of temperatures, providing an innovative, affordable solution for manufacturers and end-users. This design has been used in cars since the 80’s and at the time was the most requested feature for small engines.

Another quality criteria to consider is how the engine is produced. To achieve the highest product consistency, look at how the product was manufactured. Equipment that is manufactured in high-tech facilities with full automation is guaranteed to be assembled accurately. The automation process ensures tight tolerances on every single item, creating each product with flawless consistency. This type of advanced engineering and highly technical expertise are key elements to look for when seeking an engine.

  • Beyond the machine. Manufacturers aren’t the only ones feeling the heat during the extension of life cycles. For instance, independent rental companies are now holding onto their equipment for up to five years or up to three years for larger rental houses.

A three-year warranty was the best in the industry not long ago. Given current conditions equipment fleets would remain with the company long enough to extend past the manufacturer’s warranty. In addition, the decreased number of jobs resulted in fewer hours on equipment for both rental centers and contractors. Most felt they didn’t get a true coverage of three years of normal use.

Recently, some manufacturers have stepped up to offer a five-year warranty on their engines. While warranties are certainly something we all hope we never have to use, a couple of primary benefits of these extended warranties should be considered.

First, the only reason a company will typically offer an extended warranty is because it has high confidence in its product and very few warranty claims overall. That’s peace of mind for consumers. If dealers, rental centers or contractors find a product that has a longer warranty, they can be assured that manufacturer has confidence that the customer is likely to never need to use the warranty.

Second, the longer warranty will now provide protection and peace of mind through the life cycle of that product for most rental centers and first-owner contractors. Knowing that the engine is covered if anything should happen creates the confidence needed to hold
on to the equipment and maximize its use in the challenging economic environment.

Finally, if the rental center or primary contractor decides to sell that product, some warranty policies may offer a transfer of warranty, which will then offer an added advantage or incentive for the second owner. It’s important to check your warranty policy to see if it can be transferred.

  • A glance into the future. Few believe we’ve weathered the storm. The way of doing business has changed for years to come and these equipment trends will likely be accepted as the norm. However, hard times equate to better business and one thing is for certain: When the economy gains a stronger foothold and things get closer to what we once considered normal, the companies that make it through — whether they’re rental centers, contractors or manufacturers — will be likely to have gained a whole new level of strength.

Brad Murphy is vice president and chief operating officer for Subaru Industrial Power Products, Lake Zurich, Ill., a manufacturer
of small engines, pumps and generators. He can be reached at 847-540-7300 or bmurphy@subarupower.com.