Alternative strategies

JLG had a US$1 billion order backlog at the end of January and there are no current signs of a fall in demand. With that kind of level of sales – not to mention the new telehandler manufacturing alliance with Caterpillar – it is a wonder the company has time for anything other than producing machines.

In fact, JLG is also putting in place a strategy that aims to see it change quite radically over the next five years or more. Two key planks of this strategy are to increase the company's after sales service business from the current 14% share of revenues to nearer 35%, and to diversify its sales distribution channels and reduce its reliance on sales to &mega–rental' companies (which currently account for just over 40% of sales).

Important to the after sales service target will be progress at ServicePLUS, the US equipment service subsidiary that was established in July 2004 under the leadership of ex–NES chief executive officer Joe Gullion, but which, since January this year, has been headed by ex–Hertz and Home Depot executive Joe Dixon.

Craig Paylor, JLG senior vice president North American sales, marketing and customer support, acknowledges the launch of ServicePLUS has not been without challenges. The initial focus, says Mr Paylor, was very much on the rebuilding and reconditioning of JLG machines, rather than the wider portfolio of services now being marketed by the subsidiary.

“We weren't sure what the formula was”, he says, “and we've now changed it, and brought in Joe Dixon...he brings a view of what customers expected”. Among other things, Mr Paylor says the company didn't spell out clearly enough to its rental company customers “that we weren't going after their end users. We've corrected that.”

The thrust now is being given to a spectrum of fleet management services, including on–site or on–depot repairs, planned–maintenance, re–rentals of machines, as well as large–scale rebuilds.

The plan, as before, is also to expand the number of ServicePLUS locations beyond the current Houston, Texas, and McConnellsburg, Pennsylvania, sites, with openings planned in Atlanta (“soon”) as well as Chicago and one on the West Coast. A nationwide network of up to 15 locations is on the cards within two to three years, says Mr Paylor.

Diversifying JLG's channels to market, meanwhile, is one of the main aims of the new Commercial Solutions Group (CSG) formed last year, and which in January this year was consolidated at the re–opened Bedford facility in Pennsylvania.

CSG, says Mr Paylor, is still in its very early days and has so far had “a marginal impact on sales”. However the creation of the group means that JLG has an increased focus on industrial and commercial markets, which include the big box stores where vertical mast machines are used for stocking and other activities.

Mr Paylor says it will be important to build a dedicated dealer network to reach this customer base, something that may even require an expansion of the product line beyond the vertical mast access products that are key machines in this sector.

The US product line–up has, however, just been boosted by the launch there of three of the French–built Toucan vertical mast line, although not sold under that brand in the US. The 26 ft 2in (8 m) platform height Toucan, for example, will be called the E26MJ in North America. E18MJ and E33MS models are the others in the series. That range could be “a crossover” machine for both rental and industrial/commercial end users, says Mr Paylor. CSG is being run by Philip Rehbein who joined JLG in 1997 and was appointed senior vice president – strategic operations in 2004.

Of course, JLG has other high–profile activities currently in the pipeline, most important of which is the telehandler production alliance with Caterpillar, which could have add–on revenues of up to US$500 million a year.

So, when you look at the company's future results announcements, look beyond the revenue growth, the sales backlog and the profit. See if after sales revenues are growing in importance, and monitor how successful they are at reducing their reliance on giant rental customers.