How an Online Marketplace Can Improve Equipment Rental Procurement Part I

Today’s guest post is from Robin Salter, CMO of KWIPPED.

Today, when people are planning their vacations, they typically use an online marketplace like Travelocity or Expedia. Why? Because if you need to book a flight, hotel, rental car or some combination of the three, it’s much faster and easier to go to a single website that:

  • Displays availability
  • Provides ratings and descriptions
  • Offers pricing comparisons
  • Enables scheduling and booking

The cumbersome, time-consuming alternative is to research and compare each airline, hotel and car rental company individually before making a particular booking decision. The online marketplace model provides obvious benefits to the traveler in the form of convenience, simplicity and efficiency. Of course, the travel industry is just a single example. Online marketplaces have popped up across virtually every industry — and why wouldn’t they — the benefits they offer to buyers and sellers are undeniable.

Oddly, the B2B equipment rental industry has been slow to adopt the online marketplace model despite the fact that the granularity of the industry seems to make it a natural fit. There are more than 27,000 rental businesses in the U.S. and that number does not include many businesses that may not consider themselves rental businesses even though they do rent certain equipment.

It’s important to point out that there are currently a few online marketplaces that support the construction/heavy equipment industry; but equipment rental is estimated to be a $38 – $50 billion market, of which construction represents less than half. Businesses and organizations rent all kinds of equipment, for example:

  • Medical equipment
  • Laboratory equipment
  • Audio/Visual equipment
  • HVAC equipment
  • Farming equipment
  • Film production equipment
  • Electronic testing equipment
  • Environmental testing equipment
  • Materials handling equipment
  • Roadwork safety equipment

The list is practically endless, but the point is, equipment rental is big business and is ripe for an online marketplace that provides the technology to connect renters and suppliers across all industries in a more efficient and productive way.

In Part II we will discuss how an online equipment rental marketplace differs from traditional equipment rental sourcing and the advantages it brings.

Thanks, Robin.

Organizational Damnation 61: Leadership

In an average organization, leadership is both a blessing and a curse. While good leadership can be the saving grace for an organization on the verge of collapse, bad leadership can quickly take an organization at the top of its market into obscurity in just a few years. (Remember what happened to Apple during Steve Jobs’ absence?)

Plus, even the best leadership can be a curse if the leadership is more insightful than the rest of the organization and tries to steer the organization on a course that the organization is not yet ready for (and won’t be until it gets the proper education to understand where it needs to go, the training to get there, and the systems and processes to support it). If the leadership decides that the organization needs to change its modus operandi in a mere six months, but the best estimates are that it will take eighteen months to get the organization there in a controlled and orderly fashion (that will decrease organizational chaos instead of increasing it), it’s not hard to see that there is at least one disaster waiting to happen.

But this isn’t the biggest problem. A leader that is insightful enough to realize that the organization needs to do a 180 can often be convinced of the necessary means and with the right education will often reach a realistic compromise. The biggest problem is a leader who is stuck two decades in the past, refuses to change his ways, and is intent on bringing the entire organization down with him if that’s what it takes to keep doing things the same way he’s done it for the last twenty years until he hits retirement in five years.

Such a curmudgeon will not only block every advancement effort you try to put forward, but will deny his team any training that relates to new systems or processes, instruct them to keep doing things the old way regardless of what Supply Management adopts as a new standard, and even publicly disparage Supply Management’s efforts (and might even go so far as to threaten dismissal of anyone who sides with Supply Management).

In addition, such a curmudgeon, who will rule his fiefdom with an iron fist, will do anything to make sure the size of his domain does not decrease (so forget about any efficiency improvements that could eliminate the need for tactical personnel who are the most expendable, least able to find a new job quickly, and desperate to hold onto their jobs at any cost, even if it includes serving as the court jester). He will badmouth your organization and its efforts. Stab your leadership in the back. And generally do his best to make your life a living hell should you threaten his current way of life in any way or attempt to do anything that would increase the effort he needs to apply to his job.

And if the CEO, CFO, or C-Suite at large feels he is essential to the organization, there isn’t a thing you can do about it, until such time as you manage to convince them that the cost savings or value that will be generated from your plan will significantly exceed the cost of the effort required and may even be the difference between success or financial ruin. A task that will require considerable effort with the curmudgeon blocking your way at every turn and a task that might not succeed until the CEO realizes that the only way to quell the uprising is to take a lesson from the monarchs of old and deal with problematic fiefdoms in a terminal fashion — off with their heads! (Figuratively speaking, of course.)

Is Your SRM in a State of Flux? Maybe you need to be a customer of choice!

Right now you are probably thinking that you are a customer of choice with your most strategic suppliers because you went through an in-depth, multi-stage, strategic sourcing event, spent a long time qualifying the supplier and emphasizing that the buy was significant and makes your organization a customer of choice, and inserted language into the contract that said you were a customer of choice and will always get preferred pricing at least as good as other customers of the same size for the same products. But are you really a customer of choice?

A supplier’s customer of choice gets more than good pricing. That customer gets preferential delivery (if inventory gets low or transportation options become limited due to strikes or other supply chain disruptions). That customer gets suggestions on how it can help the supplier serve the customer better (through timely order placement, different delivery schedules or options, or slight alterations to specifications that the supplier can produce faster or cheaper). That customer also gets first access to supplier innovation (that would allow it to use new production lines or technologies to produce superior or significantly cheaper products using different materials or production techniques). And, sometimes, it even gets operational insight into how to streamline its logistics on the sell side from the supplier. The reality is that if you’re not getting this from your supplier on a regular basis, even if you are getting what you perceive to be competitive pricing, your organization is not a customer of choice.

Why do you want to be a customer of choice? The recent Global SRM Research Report by State of Flux found that many of the organizations that were leaders, fast followers, or that realized returns that were greater than the average return in their category had one thing in common — they were all perceived as a customer of choice by their most strategic supplier(s). Also, the study found that one market segment not only understood this need better than other segments but also better understood what the requirements for being a customer of choice truly were. Can you guess which segment it was? Contrary to what your intuition might be, it was not the segment with the best cost performance in their market or vertical. It was, in fact, the producers of luxury goods who often saw more value in working with a supplier who treated it as a customer of choice and went the extra mile to understand the organization’s brand and market segment than with a supplier who could cut costs. And while it might be counter-intuitive at first that these organizations often saw more value when they paid more, when you consider that luxury good producers profit by expanding their market share to people who care more about brand and quality than price, and will pay more than necessary for the product they are buying, these companies can often profit much more by selling more units at higher double (or triple) digit markups than by saving a couple of percentage points on the unit cost.

Thus, while cost reduction and control is important to the average company, if a company wants to realize long term success from its SRM efforts, it needs to take a page from the luxury brands’ playbook and make sure it is a customer of choice with each and every strategic supplier it does business with. (The Global SRM study found that more luxury organizations were regarded as a customer of choice than any other organization type.)

Why are luxury brand organizations so successful at becoming a customer of choice? While it’s hard to zero in on just one activity that they do differently that makes a difference, there are a set of activities that, collectively, cause these luxury brands to stand out with the average supplier:

  • They proactively listen to suppliers.
  • They use collaboration to innovate.
  • They work hard to create supplier loyalty.
    — AND —
  • They recognize they are only as good as their worst supplier.

And the best part is that there’s nothing unique or special about these activities that limit them to luxury brands. Any organization that truly wants to be a customer of choice and is honestly willing to work with its suppliers can pull these activities off and become a customer of choice.

In other words, there’s no reason for your organization to be in a State of Flux when it comes to SRM. The recipe for success is easy to understand, it just takes hard work, adaptability, and perseverance to master the art of the relationship soufflé.