As we bring the curtain down on 2020, it will be remembered as one of the most difficult years as the industry considers the devastating aftershocks of this “Black Swan” event.
The COVID-19 pandemic caused vast economic breakdown across the world, as customer demand, industry activity and confidence collapsed. For the capital equipment sector, the pandemic had a dire impact on product sales. However, on the flip side, the service business has had an unprecedented opportunity to thrive.
We have spoken to a number of executives from different companies across different sectors of the capital equipment sector, and they all seem to sing from the same hymn sheet – there is a growing demand for service as fleet owners seek to sweat their existing assets, and want longer lifecycles from their equipment.
This means that a strong maintenance regime is required. For example, processing equipment on mines is being pushed to the limits of its design capability, with higher tonnages placing more demands on equipment. Mines are therefore relying more on suppliers to maintain equipment and ensure that it performs optimally. This requires closer working relationships between the supplier and customer; in the past suppliers would be called upon only when necessary.
Putting a different spin on the total solutions approach
The restrictions put in place to limit the spread of COVID-19 have had a widespread impact on the transport sector. To respond to the new realities and trends that have been brought to the fore by the pandemic, Scania Southern Africa has implemented several initiatives that ‘put a different spin’ on the total transport solutions approach.
The impact of the COVID-19 pandemic on the transport sector – all the way from the original equipment manufacturer (OEM) to the transport operator and the freight owner – has been extensive. To respond to the new realities of doing business in such a challenging environment, Scania Southern Africa has implemented several initiatives to help fortify its business, but more importantly to enhance customer experience.
In March this year, the company went through a resizing/restructuring exercise to streamline the organisation. As part of this exercise, Mark Erasmus, who has many years' experience in the local transport industry, assumed the role of GM Sales, while Alan Hugo, who comes from a sales background and has been with the company for almost 14 years, took the role of GM Services.
In a one-on-one with Capital Equipment News, Erasmus explains the impact of the COVID-19 pandemic on the transport sector: from a volumes perspective, he says the total market for extra heavy commercial vehicles is around 20% down, while Scania Southern Africa is probably 25% shy of what the company had planned for the year.
New realities in the industrial equipment sector
Amid the COVID-19 pandemic, the industrial equipment sector has had to adjust to a quickly shifting business landscape. In a one-on-one with Capital Equipment News, EIE Group CEO Gary Neubert unpacks some of the new trends and new realities of doing business in the sector.
That the COVID-19 pandemic has compelled companies to rethink their businesses is no overstatement. Despite having to negotiate the uncertainties around the pandemic, EIE Group CEO Gary Neubert believes that the pandemic has had several spin-offs for the industrial equipment sector, but has changed the “way we think about and conduct business”.
With representation across southern Africa, the United Kingdom and Ireland, the EIE Group, part of the larger JSE-listed enX Group, offers a total industrial equipment solution through a wide range of materials handling and industrial equipment solutions from globally renowned brands. The EIE Group is split into three divisions: Toyota Industrial Equipment, Heavy Lift and 600SA.
Commenting on the state of the business, Neubert says operating in the COVID-19 environment has been incredibly tough, but the EIE Group had a contingency plan from the onset. “Within a few hours of President Cyril Ramaphosa’s announcement of the lockdown in March, we had already put up a business continuity plan. Part of this plan was to set up our staff to work remotely, as well as registering the business as an essential service provider because we supported a lot of essential services businesses,” he says.
The business operated throughout the lockdown and performed really well from a cash flow point of view, despite a squeeze on the revenue and profits. Commenting on some of the current scenarios in the market, Neubert says new equipment sales are obviously under severe pressure with an overall drop of 40% compared to last year, but the operations side of the business – rental, pre-owned, service, maintenance and parts – is doing “exceptionally well” under the circumstances.
EIE Group uses a business model termed the ‘four links in the chain’, where it distributes, rents out the product, adds value through parts, service, maintenance and preowned. “We classify the value add and rental side of the business as aftermarket, and this has always been 60% of our business. However, in the current environment, aftermarket now constitutes between 75% and 80% of our business. That’s what has made us strong amid the current COVID-19 influenced challenges,” he says.