Good morning, everyone, and welcome to the Tips for Lowering your TCO of your Rental Suite webinar. My name is Kate Heavener, and I'll be helping to moderate the webinar today. In just a moment, I'm going to turn it over to Theo Rindenburg, who is the Global Fleet Asset Manager at DLL. But before I turn it over, I just wanted to mention that we will have a question and answer session at the end of the webinar. So if you have any questions throughout the webinar, please feel free to enter them into the chat box that you can see on the lower left-hand side of your screen. With that, I'm going to turn it over to Theo to review the agenda and get us started for the day. Thank you, Kate, and thank you, everybody, that's online and attending. Hopefully, you can hear and see everything fine. My name is, again, Theo Rindenburg. I'm the Global Fleet Asset Manager with DLL. Just a bit of my background. I've been in the equipment business, mostly dealer distribution side, since 1980, quite a long time, the last six years in finance, and most of the roles have to do with fleet management, both of internal fleets, rental fleets, as well as customers' fleets directly. So total cost of operation and total cost of ownership are very important to me. With that, let's jump in. First, we're going to talk about who and what is DLL, of course, what is the total cost of operation and the difference between that and total cost of ownership, different levels of fleet control. I say that because I don't know how many of you are aware you guys are on the spectrum of control. Do you have inventories? Do you manage it on a regular basis, or is this all new to you? So we're going to cover the whole spectrum. Also, to help you identify or at least look for certain things that help you to figure out how much you think you should be spending on the total cost of operation. Last but not least, we're going to talk about lifecycle asset management, because that's the driving theme behind TCO, either operation or ownership. So next slide, we're talking a bit about DLL. We are the only truly global vendor finance company in the world. We're in many different areas, different business units, office technology, food and ag, construction and industrial, healthcare, clean technology, and transportation. The blue areas are my responsibility. I'm in construction and industrial and transportation, but we are innovators, thought leaders in the industry, and what we're talking about today is actually something that we embrace very much so, and it actually falls under lifecycle asset management, which we'll touch on later. Next slide. All right. So many of you have seen the iceberg graph. This has been around for a while. The purchase price is always just what people are looking at at the beginning of the acquisition of equipment. The piece that oftentimes goes unnoticed is the repairs, the maintenance, the insurance, and this is where there's plenty of articles about the total cost of ownership. You can Google this today, and a whole bunch of stuff comes up on total cost of ownership, and if you're not putting all that together and capturing it, what's the old Lean Six Sigma mantra? If you want to manage it, you've got to measure it. If you're not measuring it, you can't manage it, simple as that. What I like to look at, though, is more of, the next slide, it's the total cost of operation because we don't know if you should be owning that fleet. If you can get the lifecycle to a point where you're comfortable with it, and you know when to pull equipment out of your fleet of rental, maybe you don't need to take that hit on the credit side. Maybe you could find an alternative method that makes the most sense and has the least amount of downside. If you want to hit the next one, we had a graphic on this. The key thing here is, if you get the repair data, if you get the maintenance data, insurance, depreciation costs, downtime costs, everything together, you can then pull out the depreciation costs if you are looking at an alternative method of financing, say leasing. But again, the platform of putting all that together on an asset level is the most important part of the puzzle. Depending upon how many branches you have and how many pieces of equipment, this might be something that is easy to do, or it may be something that is very difficult. Theo, one thing that I really thought was interesting when you explained the total cost of operation versus ownership is that the changing kind of mentality that are around ownership right now. We're shifting toward a much more usage-based versus ownership-based society, and people are really seeing that the value is in the results that they get from this equipment, not just to say, I have this equipment in my garage. So that was really interesting to me to kind of look at it in that perspective as well. The important part of that is that the older line of thinking where you're saying, look, I just want to own it. I want to keep it. The problem with that that I've seen both on the rental side with construction dealers and MH, as well as end-user customers, is that they forget about the life cycle, and they end up keeping it way too long. And part of the repair cost and the maintenance, insurance, it may be depreciated, but the cost per hour is rising substantially because the equipment is needing a lot more smaller repairs. It's way past its life cycle. If you can get up front or at least start gathering the data on the cost of operation, the data actually speaks to when you should be getting rid of that particular brand in that application. Granted, rentals tend to be many different types of applications, but geographically, you need that data in order to figure out where that breaking point is, so good point. And then when you talk about control in just a minute, you're really controlling all of these things that are the underwater, the hidden cost, not the purchase price, but all of these other costs, and you can really get a great idea and an exact picture of what they are and determine what's the best solution for you. But before you control it, you've got to capture it. In order to capture it, you've got to make sure that you're getting all the data in a single location. And this brings up the overall graph here that we're going to walk through certain sections of this. But really, on the left is the cost, so with the least amount of control, you're probably spending the most on that fleet. With the most amount of control or influence over the fleet, you're going to be spending the least, and you're also going to be able to predict your life cycles in your geography. So certain parts of the country are colder, certain ones are hotter. Your TCO may be different if you have branches across the region in different areas, but you've got to capture it in order to be able to create these predictive models. So with that, the first focus will be, of course, creating an inventory and a web portal. And why is that important? Well, if you don't have a central database of everything that's serialized in your fleet, and you don't at least put meter reads in, you're spending basically the most amount of money, where you're going either by a gut feel or by an age model, which either way, they may have been good when the company was smaller, but once you start getting over a few hundred assets, it's hard for one person to really get a gut feel of what's happening anywhere in a geography. So get it all in one place, get the meter reads in there, even do inspections. There's tools out there, which we'll get on the next slide, where you can check in and check out a unit and keep it all in a central portal so everybody can see it. That'll actually save you not only a lot of time, but help to control some of those assets. But a simple web portal is the next step. The problem with just an inventory is that as soon as you share it, like on a SharePoint drive with other divisions or with other people, somebody goes in and edits it or deletes a line or puts in a questionable meter read or some information, and now the whole spreadsheet is suspect. I like to use the old adage, gold in, gold out. So if you have a central database, make sure you have one person that's controlling it or a specific way of controlling it so that you're limiting the amount of mistakes or inaccurate information that's being put in. I like web portals. There's a lot of tools out there. You don't have to build your own tools, but you could. But ideally, getting it online and controlling who has access to it is important. If you want, you can actually move that to where it's customer-focused rather than being internal and even put pricing on there. But ideally, having everything in a central location and really sharing it in a way that is the simplest way to do it, I like the portals because it's accessible and everybody is point-and-click focused nowadays. They like stuff to be immediate, to be ready, and to be the most up-to-date data as possible. So that's the main purpose of that. All right. I'm sure that everybody on this call already has their inventory in perfect order, and so we don't have to talk about this. My question is, for somebody that doesn't, for somebody that just has their inventory has gotten a lot bigger in the last couple of years, they find themselves without a really up-to-date and accurate knowledge of what's in there, what they own or what they're using, what are these dollar signs? Does that mean it's going to be extremely expensive to start this inventory? No. It means that that's how much you're spending if you're not doing an inventory or if you've never done one. Okay. So the recommendation really is, I mean, there's inspection companies out there that can do this, and you would have to go to them and say, look, we're not doing individual inspections. We want the whole fleet, and we want to get a snapshot as soon as possible, like within a month or two-month period, to get everything that is either rolling or rusting in your fleet on a list complete with specifications, current condition, four or five pictures, how many hours are on the equipment right now, whether or not it passes, like it has all the required rollover protection or the last time it was inspected, and if it's down and not running, to at least know what is wrong so that then you can actually put together a three-year game plan based on the life cycle if you know that, say, this particular wheel loader or roller is only good for 6,000 hours in this application. You know that three or four of them in your fleet are going to reach that based on current utilization if you have it, and if you don't have it, this is the best way to build it because now you have the first thumbprint of your fleet, and then you can build subsequent meter reads into that to start saying, okay, here's a three-year plan. Here's what I think I'm going to need to budget at the end of this year. Here's what I think if the usage remains the same next year, and of course, the third year is always an idea, but it's not as accurate. Okay. Thanks for that clarification. Good question. Yes, you did. All right. Okay. So we're back to the graph now, and we're going to talk about the moderate control. So imagine that you already have an inventory. You put everything on a web portal. You're getting meter reads in there, but you're still doing it in a way that is not as easy. Some people, you know, go jump right to the telematics part of the puzzle, and I'll talk to that in a minute, but there are simple solutions out there like QR codes that not everybody's explored, and I don't know if you've seen anything in that graph there that looks like that, but they're on magazines. They're in...actually, I saw them a couple of times in my travels in the airport where you're just walking by an entrance, and they're saying, how are we doing? What that thing does is you use your phone, and those of you that aren't familiar with it, you can download a free app. I do recommend the ones that don't have advertisements, but download a free app, and it actually automatically loads a web address, and there are companies out there that not only have a web portal for your assets, for asset management, but also where you can create a QR code, and then somebody can walk around in your fleet, or depending upon your locations, one person with a phone signs into the web app, taps each one of these QR codes, and then it's not touching the BIOS or the computer of the equipment. You don't have to get the manufacturer's approval to stick it on there. It's a passive QR code, but that is asset specific, so the person taps that, puts in the meter read. You have live data, and by the way, there's some systems that'll flag it where if it's not...it is lower than the previous hours, it'll say why, and you need to put an explanation in there. There's also people that do an actual RFID in that, and they sell a device that you have to buy in order to scan them. The simplest solution is if everybody in your organization has a phone, you can get the meter reads in there, but say that's not for you, and you want to go with telematics. In the past, I've done some consulting on the different telematics options that are out there. I do recommend them. The price point is dropping nowadays, where machine-to-machine requirements or requirements as far as data is getting smaller, so the price point is dropping on the monthly fees, but from a geofencing perspective, where if you know that a machine is supposed to stay in Texas and it shouldn't be going to Nevada or Colorado or Mexico, you can get an alert, and then the more, of course, expensive ones are tapping right into the CAN bus of the machine and actually giving you codes, so if you know an operator is running it while it's overheating, that's invaluable, because the price of one engine that you would be looking to charge the customer who may get into a litigation about whether or not to pay it would pay for usually the cost of these systems in the first year. Some of these engines are $60,000 or $100,000 in the larger pieces of construction equipment, so I endorse that, and if you have a web application and you go the telematics route, just make sure that they build an API that feeds into that, so now no matter when you look at that data in your web application, you know the current hour meter read on the equipment and you know where it is in its lifecycle. Any other questions? That's good. All right, so we're back to the graph again. Now this is where we're getting to the lifecycle asset management piece to the total cost of operation. This is the key that a lot of people don't move to, and it's important to think about not only when you're putting your inventory together and you're putting your website, your web application together, you need to think about the lifecycle of that asset. How long do you want to keep it? Is the technology changing a great deal on that asset, or is it the same and it's been the same for the last 30-something years? If it's been the same, then you could probably get a longer lifecycle out of it, and then you need to look at the hours and the type of environment that it's going into. That's important, but the biggest thing that people forget is getting that maintenance data on the asset level so that you know from a life-to-date perspective not only what the usage is, but how is the maintenance done, is it done on a regular basis, what's the cost, how much of that cost is related to the asset itself, or how much of that is related to damage and abuse. Those things have to be segmented, or even attachments. You don't want to blame the equipment for high cost per hour when it's, say, a brand of attachment, or that the attachments are being lost. A lot of excavators come with multiple, or bobcats, skid steers, they come with multiple attachments. If you're not tracking the cost per hour of that attachment as well on a separate line item, you could be blaming the machine for a higher cost per hour when it's really an attachment. You need to either find out what the maintenance procedures are and change it. But again, in order to make those decisions, in order to be proactive about your fleet, you've got to be managing it on the asset level and get all the total costs into that picture. I think I've touched on everything. The other thing is, too, this is really important, is when you have the usage in there and you're looking at the utilization, I know that with rental companies that the dollar utilization is important because you're figuring out how much the asset brings in versus what it costs. Also, hour utilization is very important. But from a rental perspective, if you have low hour utilization on a piece of equipment, there's either one or two things wrong. Either the market doesn't need that asset and you have too many and you need to right-size it, or you're asking too much for it from a price perspective. So again, some of this is old hat to people that have internal systems, but those that don't, you really need all this data together, not only on the usage side, but also to figure out what the cost is to say, okay, I need to right-size my fleet. I have too many of this, or I'm not asking the right price, or I don't have enough. Say, for instance, the usage is really high on a particular pneumatic rough terrain reach forklift. Well, then you need to buy a few more and get them in your fleet so you can meet the market demand. So again, this is really important. If you're not measuring it, you can't manage it, and you can't control it. And this is where the decision to lease versus buy drops in. If you have high utilization assets and you right-size your fleet, maybe you don't need to invest so much of your capital in the equipment, maybe because the way I look at it is, if you can quantify what your downtime costs, then you have a high utilization unit. And if you have a high utilization unit, get to that life cycle. Figure out where it is. If you don't decide to lease, if that's too much of a stretch, at least get that as a benchmark that you can then use your data to compare it to. So if you have a local dealer that sells that equipment and can do a fair market value lease, which is probably the least cost outlay, and it's actually a rental, if you really think about it, find out what their maintenance cost is to do that. Now there's your benchmark. If you get, you know, I've had some customers that if they get within 50% with the depreciation and the actual cost of the unit in a straight line, plus the maintenance, if they get within 50% or 75% of that benchmark, they need to think about removing that asset or at least figuring out why, if it's low in its utilization cycle, why do they need to own it, or why are they even using that asset. So this is an important thing to remember, that there are lease versus buy options. There's also a lot more usage-based products out there that are related to leasing that are just starting to hit the market, where you could pay for a smaller amount of hours, and then as you overutilize it, you can pay it off the lease early and actually turn the equipment in early if they're getting high utilization in your rental. So there's a lot of tools out there that you should definitely look at, consider, from the, if you want to go to the next slide, from the left-hand side of the graph, you know, where if you don't have an inventory, you've got to get one as soon as possible, and preferably put it on a web portal so that other people in your organization can look at it and even, you know, add data to it. Even I know a couple of companies out there that they use the QR code and they have the rental people checking in and checking out the equipment, but they also have the customer scanning it, saying that they've greased it, because part of many rental agreements with construction companies is that the customer has to grease it on a daily basis, because there's pins and bushings that will go bad in a short period of time if you don't do that. So there's a lot of tools here that can help you to control your fleet. If you're already controlling it and you feel really confident about your life cycles, at least look at telematics, and if you're not doing it now, see about mining the data. If you're, say you're already to the right of the spectrum, you know what your life cycle is. If you're not considering using the data, crunching it, and figuring out predictive life cycles from an hours perspective, then you need to, because that's where the gold is, and that's where, you know, you'll actually have the least cost of operation in your fleet. When you say least cost of operation, I understand what you're saying, but I don't understand how it can be the least cost of operation when we're spending so much money on implementing these controls. It seems like that's going to be a big expense to me. Tell me what you mean. How is it the least cost of operation? Well, two things. First of all, yeah, so it goes back to what I said originally. If you're still buying equipment and you're not really getting rid of it until somebody says, hey, you know something? Maybe we should get rid of this thing. If you don't know how much you're spending on it on a regular basis, you're spending, you know, 20 times what it would cost to basically, from labor standpoint, to just put a simple inventory together, or to have a web portal. These web portals do not cost much a month. And they're often SAS, software as a service models. So you just pay a monthly fee. You don't even have to invest in anything. I know a lot of people on the call probably have their own internal system, and they've already invested in it. And I think for them to turn back and say, well, how much would I lose if I didn't use this system? They could probably quantify that. But it's not really that expensive to dedicate a few operational folks and either hire out or, I don't recommend building a system because if you hire out and you have an outsource provider that offers this, they tend to have a competitive price point. And more than that, they're always upgrading the product, and you have an opportunity to actually influence them to tweak the product for your industry. So even though it looks like you have to do a lot of work to get to the right side of the graph, the amount of money that people are spending, if they're not doing, or they're doing little of this, if any, is huge on their rental side. So it's really savings? It's really savings, yeah. Okay. The more control you have, the more you can save. The lower your cost of operation. Okay. Okay. So everything that we're spending right now, we could be saving? Well, it goes right to your bottom line. Okay. The more you save on a particular app, it goes right to your bottom line. It's kind of like if I have a paid-off car, I feel like I'm saving money, but if I'm pumping in, you know, $300 worth of gas every week. Or maintenance. Yeah. Or maintenance. Then it's costing me money, even though it's money that could be going to a nicer car and lower cost of operation. Right. Or, you know, and again, a newer model. That's where the technology piece comes in. The other thing is, too, if you're building those predictive life cycles and you have a benchmark from a local dealer or whatever, and you do decide to do a major component, you're doing it not with the blindness of like, well, I guess it's only four years old, it's a gut feel. You're doing it with data, and you're saying, okay, let's do that $60,000 transmission on this big wheel loader, but we have to keep it for another 22 months in order to recoup that using the benchmark. If you're not having that discussion, and you're just making those decisions to just do the repair based on gut feelings and not data, you're on the left-hand side of the graph. Did I answer your question? Yes. Yes. Okay. Thank you. I think that's it. I think that's... Oh, we got questions? Let's see. Great. Audience questions. Oh, I hear crickets out there. All right. Someone's handing in questions. Unfortunately, Alan, thank you for raising your hand, but we don't have the option to unmute your line. Oh, yeah. If you could put in your question in the chat box, we'd be happy to answer it for you. And anyone else that has their hand up. Yeah, of course. Anybody else that has anything... Well, you asked such good questions during the presentation. Well, I'm pretty new to this as well, and it's very interesting to me. And I think it's hard to understand. It's hard to grasp how you could save money by spending money sometimes like this when it's something out of your realm. But it makes a lot of sense when you explain it that, yeah, the way you explained it. Well, a lot of companies are doing pieces of this. Yeah. And they're looking at the bigger picture. Yeah. And is it important? Can you just jump into the high control, or do you have to do... Is it more like you build on all of these? Yeah. That's a great question. I've seen a lot of folks that once they understand the savings, once they figure out how much they could save by having more control, they want to build the full TCO model. They want to jump, build a rocket, when really all they need is a minibike to cross the field. I do recommend doing this in steps. And I know even in the IT world, there's something called the Agile method, where you do small pieces of the overall project. I recommend that entirely. So if you already have a web portal, but you're not doing inspections, or you don't have a way to get that in, then think about adding QR codes to your web portal. If you already have telematics, but the telematics is not linked to your web portal, you should get that. If you have maintenance, but you don't have a full inventory, I don't see how you could do those two separate. But it all depends. I've met customers that have many different pieces of that location. Okay. We do have a question that came in. It says, how can DLL help support getting this implemented at my company? How can it support it? Well, we have people like myself. There's a lot of folks within DLL, because we've worked with vendors for so long. But we have a lot of folks from the industry that have background, like mine is, and can help people, not only direct them towards tools that are available in the market, but also some of the ones that we have. We actually give some advice on fleet management as well, as TCO and maintenance predictive. We do a lot of advisory stuff as well. Well, one of the things that you've mentioned was that you can do the software as a service model, which is not...it doesn't put all of the effort and all of the burden on these companies. There are experts that we could direct you to that are used to doing this. We also have some tools ourselves that we could show them how we do it, but there's some pretty advanced ones out there in the field that are really good as well. All right. Thank you. Any other questions? Any other questions? We'll keep it open for about another minute, and if somebody else comes in, we'll give you 30 minutes back in your day. But... Oh, wait. Wow. Several questions came in. Great. AEMP, so it's the associated equipment. There is a movement, I guess, within AEMP to adopt telematics. If it's a standard platform, again, I'm not familiar with all of it, but depending upon the different industries we're involved with, there's been a push for a while. I think the price point has been an issue. I know that machine-to-machine language, meaning it's small packets of information, it's not large packets of information, is driving the cost down. So what I do know about telematics adoption is that there should be a clear idea of what the savings is. It's easier if there's damage or equipment that leaves and is hard to recover. It's easier to justify. But in general, I think getting the meter reads on a regular basis, however possible, is so important, especially on a rental side, when if you don't know how often the equipment needs to be maintained, your assumptions are going to be wrong. So if you go in there after two months or a month when you realize you should have gone in there in two weeks, the damage is already done. So I like telematics. I just look for the simplest option first. Again, like I said about this model, if you can do it in steps, don't necessarily buy the Cadillac just yet, unless you can totally justify it. Do it in steps. The adoption rate is better, the usage is better, and then the proof of concept is cheaper, actually. So the next one, and Dana, let me know if I've answered your question. Who distributes and manufactures great residuals, but they're not willing to give them to dealers to finance rental? I don't know if I can answer that one. Again, my background is in fleet management and TCO management. But there tends to be certain programs that are set up with the manufacturer. I think you'd have to get the manufacturer and whoever's financing the equipment in the same room to talk about that. Can DLL match the manufacturer's residuals? Again, I'd have to hand that off to a program manager, but we can take that offline. Can you send the slides? Yeah, we can PDF these and send them along. This also will be viewable on the AEB website after the fact, if you have anybody want to direct someone else to the recording of the webinar. And Dana said that I did answer the question. Cool. Anybody else? Cool. Scroll up, make sure that none that I missed in the beginning. Yeah, okay. Was there anything else, Theo, that you want to touch on or say before we release these people back into their normal work days? No, just thank you very much for your time. Hopefully we helped you think more about your TCO model, and if not, and you already have an awesome system, and this just validated it, that's cool too. Thank you for your time, and talk to you soon. All right. Thank you very much.

TCO

fleet management

asset tracking

maintenance data

lease vs buy

cost control

efficiency improvement