Guest writer Sanjay Pendharkar brings a broader view of the equipment industry in this week’s blog post: Transforming Indian CE Dealerships: A Guide to Sustainable Profitability.

Introduction

The Indian construction equipment and material handling market stands at a crucial crossroads. With infrastructure development driving demand, the sector presents immense opportunities. However, dealers face unprecedented challenges in converting this market potential into sustainable profits. Traditional revenue models are under pressure, and the complexity of operations has increased manifold.

Today’s dealers navigate a landscape where equipment sales alone no longer guarantee business sustainability. The market demands more sophisticated operational models, enhanced service capabilities, and innovative approaches to customer engagement. This evolution requires dealers to reassess their business strategies and adapt to changing market dynamics.

Understanding the Dealer Landscape

Multi-Franchise Dealerships

The multi-franchise model has become the norm rather than the exception in India’s CE market. While this approach offers dealers broader market coverage and risk distribution, it introduces significant complexities:

Managing multiple brand requirements and standards
Balancing competing OEM interests and targets
Training staff across diverse product lines
Maintaining separate parts inventories and service capabilities

Revenue Constraints

The traditional dealer revenue model faces severe pressure:

Equipment sales commissions barely cover operational costs.
Intense market competition forces aggressive pricing.
Working capital requirements continue to rise.
Investment in infrastructure and training yields diminishing returns.

Challenges to Profitability

Dependence on Service and Parts

The aftermarket has become the lifeline for dealer profitability:

Equipment sales margins no longer sustain business operations.
Service and parts contribute up to 60-70% of dealer profits.
Warranty period revenue remains crucial but temporary.
Post-warranty customer retention determines long-term success.

Competition from Replacement Parts

The genuine parts business faces unprecedented challenges:

Price differential of 25-50%+ against replacement parts
Growing acceptance of quality aftermarket alternatives
Customer pressure for cost reduction
Difficulty in demonstrating value proposition of genuine parts.

OEM Branded Lubricants vs. Direct Oil Brands

The lubricants market presents a unique challenge:

20%+ price premium on OEM-branded products
Direct availability of identical products from oil companies
Customer preference for lower-cost alternatives
Impact on dealer revenue and customer relationships

Talent Retention Issues

Engineer Turnover and Freelancing

The exodus of trained technicians presents a critical challenge:

High investment in training and skill development
Loss of experienced staff to freelance opportunities
Difficulty in maintaining service quality standards.
Impact on customer relationships and trust

Impact on Service Revenue

The talent drain directly affects business sustainability:

Reduced capacity for complex repairs
Loss of customer confidence
Increased training costs for new staff
Competition from former employees

Operational Inefficiencies Impacting Profitability

Process Gaps

Significant revenue leakage occurs through process inefficiencies:

Delayed service response times
Inefficient warranty claim processing
Poor inventory management
Inadequate job card documentation

Technology Underuse

Many dealers lag in technology adoption:

Manual processes causing delays and errors.
Limited use of data analytics for decision-making
Inadequate customer relationship management
Poor integration between different business functions

Resource Management

Inefficient resource utilization affects profitability:

Underutilized workshop capacity
Excess inventory carrying costs.
Poor staff productivity
Inefficient tool and equipment usage

Customer Service Gaps

Service inconsistencies lead to business losses:

Inadequate customer communication
Delayed problem resolution
Inconsistent service quality
Poor feedback management

Strategies for Improved Business Performance

Parts Business Enhancement

Pricing Strategies

Implement tiered pricing models.
Develop package deals combining parts and service.
Create loyalty programs with cumulative benefits.
Offer volume-based discounts.

Inventory Optimization

Use data analytics for stock planning.
Implement just-in-time inventory for fast-moving parts.
Develop regional parts sharing networks.
Regular review and disposal of slow-moving inventory

Service Revenue Protection

AMC Programs

Design flexible maintenance packages.
Offer preventive maintenance programs.
Include value-added services.
Implement performance guarantees.

Technician Retention

Create career development paths.
Implement performance-based incentives.
Provide advanced training opportunities.
Develop profit-sharing mechanisms.

Additional Revenue Streams

Launch certified used equipment programs.
Develop rental solutions for specific market segments.
Create operator training programs.
Training Programs: Provide training services to generate revenue and build brand credibility.
Offer fleet management services.

Financial Management

Implement activity-based costing.
Develop robust cash flow monitoring systems.
Create detailed financial planning processes.
Establish strict cost control measures.

Digital Transformation

Deploy comprehensive dealer management systems.
Implement mobile service management solutions.
Utilize telematics for preventive maintenance.
Develop e-commerce capabilities for parts.
Data Analytics: Leverage data analytics to gain insights into customer behaviour, operational performance, and market trends.

Strategic Partnerships

Form alliances with complementary service providers.
Develop relationships with financing institutions.
Create networks for resource sharing.
Establish training partnerships.

Conclusion

The transformation of CE dealerships requires a comprehensive approach addressing multiple challenges simultaneously. Success depends on:

Embracing operational excellence
Investing in technology and people
Developing new revenue streams
Building strong customer relationships

Dealers must act now to implement these changes. The market will increasingly favour those who can deliver efficient, professional services while maintaining profitability through multiple revenue streams. The future belongs to dealers who can transform challenges into opportunities through innovation, efficiency, and customer focus.

The path forward requires commitment, investment, and a willingness to change. Those who adapt will not just survive but thrive in this evolving market landscape.

Why India is Poised to Become a Global Manufacturing Hub

Our new guest writer Sanjay Pendharkar is a seasoned professional with over 30 years of experience in sales and business development across India and South East Asia. His expertise spans market research, channel partner management, and strategic business growth. After 32 years with JCB, Sanjay founded his own consultancy in 2020, advising multinational corporations in the earthmoving, material handling, concrete, and metal processing equipment sectors. He excels in developing engagement strategies, sales forecasting, and competitive analysis. An industry thought leader, Sanjay contributes articles to niche magazines and serves as a jury member for prestigious awards, keeping him at the forefront of industry trends and innovations. His first blog post for Learning Without Scars is “Why India is Poised to Become a Global Manufacturing Hub.”

Introduction

By 2024, India has solidified its position among the top 7 global manufacturing nations, with the sector accounting for nearly 15% of its GDP. With increasing investment, a skilled workforce, and supportive government policies, India is emerging as a key player in global manufacturing.

The global landscape for manufacturing is undergoing a seismic shift. Countries and multinational corporations (MNCs) are reassessing their supply chains and production bases in response to economic, political, and technological changes. India, with its expanding industrial base and strategic policies, has gained attention as a formidable contender for global manufacturing.

Historical Context

India has a rich history in manufacturing, with industries like textiles and steel forming the backbone of its economy. In the mid-20th century, India was among the world’s leading textile producers, and sectors like steel, automobiles, and machinery began to flourish post-independence.

Despite this promising start, India’s manufacturing potential remained largely untapped on a global scale. Factors such as bureaucratic hurdles, lack of infrastructure, and limited foreign investment slowed growth. India’s manufacturing was also overshadowed by rapid industrialization in China, which became the preferred destination for MNCs.

Current Landscape

Economic Growth

India’s economy continues to be one of the fastest-growing major economies globally, with an average annual GDP growth rate of 6.8% over the past five years. The International Monetary Fund projects India to be the world’s fastest-growing major economy in 2024-2025, with an estimated growth rate of 6.5%. A young, vibrant population coupled with a burgeoning middle class is creating a favourable environment for manufacturing, with rising domestic demand for goods and services.

Government Initiatives

The Indian government has launched and expanded several initiatives to boost manufacturing:

Make in India 2.0: Launched in 2022, this program builds on the original 2014 initiative, focusing on 27 sectors with an emphasis on cutting-edge technology and sustainability.
Production-Linked Incentive (PLI) Scheme: As of 2024, the scheme covers 14 key sectors with an increased outlay of $30 billion.
Ease of Doing Business Reforms: While the World Bank discontinued its Ease of Doing Business rankings in 2021, India has continued to implement reforms, with the government claiming significant improvements in areas such as starting a business, getting construction permits, and cross-border trade.

Infrastructure Development

India continues to invest heavily in infrastructure development:

$1.8 trillion allocated for the National Infrastructure Pipeline (2019-2025)
375+ operational Special Economic Zones (SEZs) as of 2024
Significant progress in industrial corridors like the Delhi-Mumbai Industrial Corridor, with several nodes operational

Key Advantages of India

Skilled Labor Force

India’s skilled labour pool continues to grow:

550 million people of working age
1.8 million engineering graduates annually
World’s largest youth population (aged 15-24)

Cost Efficiency

India offers significant cost advantages:

Labor costs 15-50% lower than in China
Competitive real estate and utility costs
Abundant natural resources

Technology and Innovation

India is making significant strides in high-tech manufacturing:

4th largest auto industry globally, with a strong push towards electric vehicles
Growing aerospace manufacturing sector, with indigenous projects like Tejas fighter jets
2nd largest smartphone manufacturer globally as of 2024
Emerging hub for semiconductor manufacturing with major investments announced.
Rapid advancements in 5G technology, artificial intelligence, and quantum computing, further enhancing manufacturing capabilities.

Global Supply Chain Realignment

Shift from China

The trend of companies diversifying their supply chains away from China has continued:

According to a 2023 Deloitte survey, 70% of surveyed companies were considering or actively shifting manufacturing out of China, with India being a top alternative destination.
India captured 33% of relocating companies from China between 2021-2023 (JP Morgan Research, 2023)

Trade Relations and Market Access

India’s strategic location and trade agreements offer significant advantages:

Access to domestic market of 1.4 billion consumers
Free Trade Agreements with ASEAN, Japan, South Korea, and others
Part of Quad Alliance, strengthening ties with US, Japan, and Australia

Sustainability and Future Trends

Sustainability Initiatives

India has reinforced its commitment to sustainable manufacturing:

On track to achieve 500 GW renewable energy capacity by 2030
Net-zero emissions target by 2070 reaffirmed at COP28.
National Green Hydrogen Mission launched in 2023, aiming for annual production of 5 million tonnes by 2030.
National Electric Vehicle Policy 2023 targeting 30% of new vehicle sales to be electric by 2030.

Digital and Industry 4.0

India is embracing the fourth industrial revolution:

$2 billion allocated for AI, Machine Learning, and IoT under the Digital India initiative.
‘Industry 4.0 India’ platform expanded to include 100,000 MSMEs by 2024
25% of large manufacturing plants have adopted Industry 4.0 technologies as of 2023.

Challenges and Solutions

While India’s manufacturing potential is immense, challenges remain. However, significant progress has been made in addressing these issues:

Infrastructure Bottlenecks

Challenge: Ongoing need for improved transport and power infrastructure
Solution:
- National Infrastructure Pipeline (NIP) expanded to $1.8 trillion for FY 2019-25
- ‘PM Gati Shakti’ – National Master Plan for Multi-modal Connectivity launched in 2021, with a digital platform to ensure integrated planning and implementation of infrastructure projects.
- 11 industrial corridors being developed across the country.
- Dedicated Freight Corridors (Eastern and Western) operational since 2021, significantly reducing logistics costs.

Skilling the Workforce

Challenge: Continuous need for upskilling to meet evolving industry demands
Solution:
- Skill India Mission 2.0 launched in 2021, focusing on digital skills and Industry 4.0 technologies.
- National Education Policy 2020 emphasizing vocational education and skill development.
- Pradhan Mantri Kaushal Vikas Yojana 3.0 (2020-2024) aiming to skill 8 million youth.
- National Skills Qualification Framework (NSQF) aligning skills with industry requirements.

Regulatory Environment

Challenge: Complex regulatory landscape
Solution:
- Implementation of Goods and Services Tax (GST) has simplified the tax structure.
- Labour reforms: 4 labour codes consolidating 29 central labour laws, implemented in 2022.
- Reduction in corporate tax rates to 15% for new manufacturing companies

Supply Chain Resilience

Challenge: Need for robust and flexible supply chains
Solution:
- Production Linked Incentive (PLI) Scheme expanded to 14 key sectors with an increased outlay of $30 billion.
- Self-Reliant India (Atmanirbhar Bharat) initiative promoting domestic manufacturing and reducing import dependence.

Adapting to Global Events

Challenge: Disruptions caused by events like the COVID-19 pandemic and geopolitical tensions
Solution:
- Rapid digitalization of manufacturing processes to enable remote operations
- Diversification of supply chains to reduce dependency on single sources
- Government support through economic stimulus packages and policy reforms to boost manufacturing sector resilience.

Conclusion

As the world seeks resilient, diversified, and technologically advanced supply chains, India offers a compelling proposition. For multinational corporations looking to optimize their manufacturing footprint, India presents an opportunity that is hard to ignore. The time to invest in India’s manufacturing potential is now – those who act early stand to gain the most from this rising global manufacturing powerhouse.

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TESTIMONIALS

Friday Filosophy v.01.06.2023

Founder Ron Slee shares quotes from Vincent Van Gogh in Friday Filosophy v.01.06.2023.

Vincent Willem van Gogh (Dutch: 30 March 1853 – 29 July 1890) was a Dutch Post-Impressionist painter who posthumously became one of the most famous and influential figures in Western art history. In a decade, he created about 2,100 artworks, including around 860 oil paintings, most of which date from the last two years of his life. They include landscapes, still lifes, portraits and self-portraits, and are characterized by bold colors and dramatic, impulsive and expressive brushwork that contributed to the foundations of modern art. Not commercially successful, he struggled with severe depression and poverty, eventually leading to his suicide at age thirty-seven.

Born into an upper-middle class family, Van Gogh drew as a child and was serious, quiet, and thoughtful. As a young man, he worked as an art dealer, often traveling, but became depressed after he was transferred to London. He turned to religion and spent time as a Protestant missionary in southern Belgium. He drifted in ill health and solitude before taking up painting in 1881, having moved back home with his parents. His younger brother Theo supported him financially; the two kept a long correspondence by letter. His early works, mostly still lifes and depictions of peasant laborer’s, contain few signs of the vivid color that distinguished his later work. In 1886, he moved to Paris, where he met members of the avant-garde, including Émile Bernard and Paul Gauguin, who were reacting against the Impressionist sensibility. As his work developed, he created a new approach to still lifes and local landscapes. His paintings grew brighter as he developed a style that became fully realized during his stay in Arles in the South of France in 1888. During this period he broadened his subject matter to include series of olive trees, wheat fields and sunflowers.

Van Gogh suffered from psychotic episodes and delusions and though he worried about his mental stability, he often neglected his physical health, did not eat properly and drank heavily. His friendship with Gauguin ended after a confrontation with a razor when, in a rage, he severed part of his own left ear. He spent time in psychiatric hospitals, including a period at Saint-Rémy. After he discharged himself and moved to the Auberge Ravoux in Auvers-sur-Oise near Paris, he came under the care of the homeopathic doctor Paul Gachet. His depression persisted, and on 27 July 1890, Van Gogh is believed to have shot himself in the chest with a revolver, dying from his injuries two days later.

Van Gogh was commercially unsuccessful during his lifetime, and he was considered a madman and a failure. As he only became famous after his suicide, he came to be seen as a misunderstood genius in the public imagination. His reputation grew in the early 20th century as elements of his style came to be incorporated by the Fauves and German Expressionists. He attained widespread critical and commercial success over the ensuing decades, and is remembered as an important but tragic painter whose troubled personality typifies the romantic ideal of the tortured artist. Today, Van Gogh's works are among the world's most expensive paintings to have ever sold, and his legacy is honoured by a museum in his name, the Van Gogh Museum in Amsterdam, which holds the world's largest collection of his paintings and drawings.

I put my heart and my soul into my work, and have lost my mind in the process.

Great things are done by a series of small things brought together.

I often think that the night is more alive and more richly colored than the day.

For my part I know nothing with any certainty, but the sight of the stars makes me dream.

I dream of painting and then I paint my dream.

If you hear a voice within you say 'you cannot paint,' then by all means paint, and that voice will be silenced.

I feel that there is nothing more truly artistic than to love people.

What would life be if we had no courage to attempt anything?

I am still far from being what I want to be, but with God's help I shall succeed.

The fishermen know that the sea is dangerous and the storm terrible, but they have never found these dangers sufficient reason for remaining ashore.

As we advance in life it becomes more and more difficult, but in fighting the difficulties the inmost strength of the heart is developed.

It is not the language of painters but the language of nature which one should listen to, the feeling for the things themselves, for reality is more important than the feeling for pictures.

Love many things, for therein lies the true strength, and whosoever loves much performs much, and can accomplish much, and what is done in love is done well.

Love always brings difficulties, that is true, but the good side of it is that it gives energy.

It is better to be high-spirited even though one makes more mistakes, than to be narrow-minded and all too prudent.

If one is master of one thing and understands one thing well, one has at the same time, insight into and understanding of many things.

I experience a period of frightening clarity in those moments when nature is so beautiful. I am no longer sure of myself, and the paintings appear as in a dream.

Poetry surrounds us everywhere, but putting it on paper is, alas, not so easy as looking at it.

The Time is Now.

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January 6, 2023

Ever Wonder?

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In this week's installment on Lifelong Learning, guest writer Mick Vaught challenges readers to truly assess our paradigms and pre-conceived ideas in "Ever Wonder?"

Ever wonder why we tend to remain in our comfort zone and never see a paradigm shift coming around the curve?

One of my all-time favorite role models growing up was Stephen Covey and his book titled “The 7 Habits of Highly Effective People”. In my opinion, this was his finest publication ever because it really changed my views on many things. This book was a real game changer for me. Of the 7 habits he prescribed, habit number 5 “Seek first to understand, then to be understood”, was the most useful for me during my journey in the construction industry. I look back now at some of my biggest mistakes in dealing with what I thought was critical in problem solving, only to realize later that I did not understand the root cause of the various issues.

A good example of what I’m talking about was my preconceived notion of how to correct the overwhelming problem of developing and retaining top notch service technicians. Like many well intended experts, I believed the best approach was to offer better wages and benefits than the competition with hopes that money would be the answer. What I didn’t understand was the critical needs of the service managers, technicians, and most importantly, customers. Over time, I gained a better understanding of the many issues and how to address these issues. Here are some of the initiatives I found to be most appropriate.

Step 1: Identify the scope of the current needs, and those in the next ten years.

Determine current utilization of techs based on OT and customer service response times.

Measure machine populations, aging of company rental fleet, trends of growth and new skills required.

Determine and log the current CSA requirements and new product lines introduced or proposed for the future.

Rank the current staff skill sets by determining specific strengths and weak areas and score each tech on an equal and consistent measure process.

Chart the aging of current techs and estimate potential replacement cycles.

Step 2: Analyze the current mix of jobs, and skills required for the work.

Determine % of Level 1 jobs currently being performed through work order analysis. (Cleaning, Greasing, PM services.)

Determine % of Level 2 jobs requiring higher skill levels. (Inspections, Pre-deliveries, basic electrical and hydraulic repairs.)

Repeat same review of Level 3 jobs requiring troubleshooting, diagnostics, basic welding, major component R&I and exchange, equipment software usage and understanding. (Tech Tool, Matris, etc) This level will require factory and on-line training requirements for specific areas of knowledge.

Finally, all Journeyman level jobs requiring unlimited skills to be able to perform all troubleshooting, diagnostics, major repairs, component rebuilds, welding, and complete knowledge of equipment software, fault code analysis, Tech. Tool, , etc. This level will require completion of all manufacturer online training modules, and attendance at numerous factory training programs. These techs should be targeted to customer jobs as a priority.

Step 3: Rank the current service staff.

Create the same four tier tech classifications to match the service jobs and attempt to match the skills to the job.

Level 1 - Apprentice

Level 2 - Shop Technician *

Level 3 - Senior Technician *

Level 4 - Journeyman Technician, Shop / Field **

    *Requires supervisor sign off, and training requirements.

** Requires GM sign off and required training completion and testing.

Pay levels are made consistent with Tech classifications, as an incentive to move up in classifications and knowledge.

Step 4: Recruitment

You now know the needs of what tech levels are required to meet the existing needs, as well as future requirements through business growth, changing technologies, retirements, and tech development and promotions.

Recruiting Apprentices:

Today, tech school students are being drawn to the less “dirty” jobs upon graduation by trucking companies, HVAC companies, Major Rental companies, etc. Recruitment has become very competitive and many companies start there in high school years by attending college job fairs.

We need to be active in these recruitment sessions and offer significant incentives to draw the prospect to the construction industry. The biggest obstacle facing a student after graduation from a tech school is the tuition debt they have incurred, and the expense of buying tools to start work. We will prepare incentives to address these two issues:

Tuition Reimbursement Program:

The student would be reimbursed for his existing tuition debt over a period of employment as a technician with the company. This four-year program would refund 25% of the student tuition expense every year, with 100% refunded after four years. It would be required that the student achieve a minimum of a Level 3 technician to qualify for 100% reimbursement.

Tool allowance program:

The student would be given a basic tool set and toolbox to start his apprenticeship program. These tools would remain the property of the company until the employee has completed his Level 1 apprenticeship period and was elevated to Level 2, (Shop Tech). The tools would then become the property of the tech. OR, an upfront $2500 tool bonus that would need to be paid back if the employee left in the first year. Further, a $1000 tool allowance will be given to the tech on an annual basis up to the Level 3 classification, and then receive the standard company tool allowance.

Recruiting Senior and Journeyman Technicians:

The needs of these techs are different. They are looking for job security, good pay, good benefits, a clean, safe workplace, nice field trucks, and more quality in the job. To draw these potential techs to leave their current employment and join our team is more difficult, complicated, and costly.

Address their concerns:

Recruitment in regions where work opportunities are transitioning, can appeal to the job security concern. For example, the coal fields of KY and WV offer little job security at this time, and in the future. These techs are looking for what they are going to do going forward. You can offer job security with the vibrant growing markets. You need to heavily advertise in all transitioning areas.

Provide a safe, clean and modern workplace. It is important that the facilities and shops be kept clean and updated, along with providing the tools necessary to do their jobs. Service trucks are very important to field technicians that view these vehicles as their homes on wheels. This is a very big consideration for a field tech to join your team from another company.

Provide excellent training opportunities. No tech wants to get to a job and not know what to do. Offering year-round training sessions online and at the manufacturer is a big draw for those who do not have it now. You need to market and sell that.

Have specific guidelines in place to include relocation expenses, temporary housing, storage, and relocation assistance services, as required.

Offer all techs an annual tool allowance, boot allowance, and specialized skills training, such as welding, MSHA certifications, etc.

Overview:

The company will need to have a structured, consistent approach to the recruit process that will provide for the needed demand in the years to come, and fill the vacancies created by tech aging and retirement.

Balancing the tech skill levels to the work difficulty levels is difficult, but provides the best profitability to the service department, and the best customer support to the end users.

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September 19, 2022

Archive for category: Sanjay Pendharkar

Why India is Poised to Become a Global Manufacturing Hub

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