Hewden's core fleet promise starts to pay off

Hewden says its ‘Core Fleet Guarantee’ is increasing utilisation and successfully generating more business with small and medium sized customers. Murray Pollok reports.

Hewden is reporting a success with the Core Fleet Guarantee project it introduced in March 2013, and is now building on the programme by adding to the range of products in the core fleet and investing heavily in new machines.

Under the initiative Hewden offers next day delivery on its 30 most popular products – excavators, telehandlers, site dumpers, rollers and aerial platforms. Any machine ordered before midday is guaranteed for delivery by the following morning, while an order placed between midday and 5.00pm will be delivered before 5.00pm the next day.

The rational was two-fold: to make it easier for companies to order the most important products, and to target small and medium sized and regional customers, many of whom may have felt that Hewden was focused on larger customers.

Hewden says that in the almost 12 months since the launch of the guarantee, it has made 35145 core fleet deliveries, of which 99.8% have met the delivery times. Where the delivery is late, customers receive a £100 rebate and a letter of apology from Hewden’s CEO Kevin Parkes.

Darren Woods, Hewden’s chief financial officer, tells IRN that this rebate had to be paid out about 20 times in the first month – costing Hewden around £2000 – and the number has been kept at similar or lower levels ever since.

The guarantee has clearly struck a chord with the target audience: spending by small and medium sized customers has increased by more than 10% since April 2013, and the physical utilisation of the core fleet – which has grown in size – has increased from 53% to more than 60% now.

The importance of the initiative – and the centrality of the core fleet to the business – can be judged by the fact that around half of the company’s total revenues are now generated by core fleet products, and £45 million of the £63 million fleet investment this year will be in the core fleet.

Mr Woods says the ‘core’ machines now represents around 4500 units in the 20000 unit total fleet, and is likely to grow to 5000 over the next few years and to 6000 over a longer timescale.

The £63 million fleet investment this year will be followed by £60 million in each of the next two years – bringing spending over the 2014-16 period to £180 million. This level of spending will also help expand the fleet following the significant downsizing that followed the financial crisis.

“This year it’s not about growing the fleet, it’s about the mix and bringing the average age down”, says Mr Woods, “Next year we will start growing.”

The plan now is to add products to the core fleet programme, with 15 standard portable accommodation units to be added later this year, says Jeff Schofield, Hewden’s sales and marketing director.

Hewden is aware of the dangers of focusing exclusively on the core fleet, to the detriment of Hewden’s other businesses, including its cranes, power generation and portable accommodation businesses.

It continues to invest in these areas, which help support Hewden’s business with major clients on projects like industrial plant maintenance. For example, investment in non-core products includes £9 million on 14 new Tadano mobile cranes. Hewden remains a big player in the mobile crane rental sector, with a fleet of 130 cranes. “We offer a credible alternative to Ainscough”, says Mr Schofield.

The core fleet guarantee may be the ‘headline’ initiative at the company, but it takes place alongside other developments, such as investment in a new IT system that has given it the real-time visibility of assets that supports the delivery guarantee.

The fleet has also been rationalised: for example, four years ago Hewden had around 280 different types of aerial platform. The 1100 unit aerials fleet now is focused on 35 main products, of which around nine are in the core fleet – these nine types represent around 950 of the aerials fleet.

In addition, and like several other big rental companies in the UK, Hewden’s depot network has been completely redesigned. In 2008, before the sale of its tool hire business to Speedy Hire, it had a network of around 300 locations. That fell to 120 after the tool sale but it is now much smaller, with a new hub and spoke structure with 35 locations, including nine large hubs and 10 ‘in-plant’ locations at major industrial sites.

The footprint is geared to providing coverage of every market area within two hours. “Customers don’t mind where the depot is”, says Mr Schofield.

Other initiatives are also underway, many reflecting Hewden’s desire to increase the ease of doing business.

So, Hewden now prints its pricing on its website and updates the prices every week (with no London weighting); it stipulates two delivery prices for core products - £75 for large products and £50 for small.

“Customers were saying to us that they wanted transparency”, says Jeff Schofield. What has been the impact of publishing the prices? “We’re not disappointed”, he says, “We’re not stopping it [the policy of publishing the prices online].”

Other ‘transparency’ policies include offering customers a flat charge for insurance and damage protection, which means that a customer will not be charged if a window is broken or a beacon missing.

In addition, what Jeff Schofield calls a “genuine” eCommerce capability, with customers able to book through the website or Hewden App, is coming later this year.

The background to all these activities is a business that has been loss-making for several years. These losses were significant when Finning sold Hewden to the private equity firm Sun Capital partners in May 2010. Darren Woods says Hewden is making progress on reducing these losses, with the potential to move towards break-even in 2014/15.

He says improvements in the UK economy and sectors like housebuilding, although obviously welcome, have not been the main reason behind the recent upturn in Hewden’s business, with the core fleet guarantee helping drive activity.

“We feel that a lot of the pain is behind us. Now it is starting to grow”, he says, “For the last two months we’ve hit our budgets, and that has not been led by market uplift.”