Fleet managers: to outsource or not to outsource?
by James Morgan
Ten years ago, the largest contractors in the GCC region, famed for its cash-rich buyers and ‘do-it-yourself’ attitude, purchased, ran, and maintained their own machines.
Today, there is an increasing tendency for such outfits to hire in both equipment and operators.
Although relatively new to the Middle East, this operational mentality represents a tried-and-tested model in markets such as the US and Europe. Nevertheless, the GCC is catching up with its global elders, and catching up fast.
A similar shift is taking place within the region’s transport sector, although with one major difference – companies are not turning their backs on vehicle ownership. It would make little sense for a logistics firm to rent its trucks as they represent the lifeblood of its business.
Instead, increasing numbers are choosing to outsource fleet management expertise, freeing themselves to focus exclusively on their raisons d'être: taking people and goods from A to B.
On the flipside stand the organisations offering this expertise. One such firm is Netherlands-headquartered Intertruck Group, which has been active in the UAE market for seven years.
With roots in the parts distribution sphere, the company has succeeded in staying ahead of the curve, exploiting the Middle East’s growing fondness for third-party fleet management specialists.
Rather than abandoning its post as a distributor, Intertruck has married these activities with its burgeoning operations-focused business.
Indeed, it was at a parts-related launch event that I was able to sit down with the company’s chief executive officer, Marcel van Eeuwen, and Eric Zahrai, EMEA commercial director for truck and aftermarket at Eaton, one of Intertruck’s principals.
“This is the official launch of Eaton’s full aftermarket clutch business in the Emirates,” Zahrai began. “We signed an agreement with Intertruck at Automechanika Dubai 2014. It was at this point that the company became our authorised distributor for the UAE.
“Previously, we have only been able to supply spring-angle clutches, which are those typically used in the North American market. We are now in a position to provide diaphragm-angle clutches, which are commonly used by European trucks and buses.”
You’d be forgiven for assuming that the launch of Eaton’s diaphragm-angle clutches in the UAE, represented a niche news story.
However, this is a move that could have significant ramifications for the country’s commercial vehicles sector. It’s common to find both North American and European trucks on the roads of the Emirates, the balance weighted towards the latter due to traditional trade routes. With this in mind, a manufacturer that can offer clutches that are compatible with both segments could prove popular indeed.
As van Eeuwen explained: “There are two core products that exist within the field of clutch manufacturing: the North American model, which is an angle-spring technology, and the more traditional diaphragm-spring technology from Europe. The 430mm diaphragm-angle clutches, which Eaton is introducing to the UAE today, are suitable for use with all leading European brands. What’s more, Intertruck already has them in stock. We’re ready to roll.”
By all appearances, this message had been received loud and clear by the UAE’s transport community.
The jointly-held launch event, which took place in Dubai in April, was a veritable who’s who of region’s largest fleet owners and transport players; representatives from Al Jaber Leasing, Emirates Transport, Solaris Bus & Coach, Cemex Topmix, and Dubai’s Roads and Transport Authority (RTA) were all in attendance.
You might well be wondering how a clutch launch succeeded in generating so much industry buzz. Essentially, this is because with the introduction of its diaphragm-angle product line, US-headquartered Eaton has become the first manufacturer to supply both North American and European clutches to the UAE. It’s now possible to cater to entire fleets with a single brand.
“Eaton has been selling North American clutches in the UAE for a long time, and for the past year, through Intertruck,” van Eeuwen explained.
“Now that Eaton has added European clutches to its product offering, it can cater to any customer, regardless of the vehicles they own. Most firms in the UAE run European trucks and buses. Some operate with North American models. It no longer matters; in conjunction with Eaton, Intertruck is now able to serve all UAE fleet owners with just one brand. What’s more, Eaton is the only manufacturer in the market that can offer both types of clutch.”
Previously, Intertruck sourced its European clutches from German manufacturer, Sachs. However, following its US principal’s decision to enter the diaphragm-angle segment, van Eeuwen and his team have taken the decision to deal exclusively with Eaton. Nevertheless, the Intertruck CEO was keen to point out that his company’s priority is not to sell products but to provide a service.
“We work with big fleets,” he outlined. “Intertruck exists to help bring its customers’ costs down, but cost is not just about the initial price of a part; it’s about the total cost of ownership (TCO). Unfortunately, there are lots of people in this region who focus too heavily on the initial monetary cost of parts.
“The problem with this outlook is that it doesn’t make sense to buy cheap if, for example, you are having to replace your clutches every six months. The products that we use might not be the cheapest on the market, but they last for much longer periods. And don’t forget, installing a clutch takes six to eight hours. This is a cost in itself, both in terms of the mechanic’s time and the downtime of the vehicle. Say you choose to buy a clutch that’s AED1,000 ($270) less expensive than the equivalent Eaton component. When you factor in labour and lost earnings, it could prove AED5,000 ($1,360) more expensive than if you’d selected Eaton at the outset.
He added: “Ultimately, shifting the sector’s focus away from initial price towards TCO is a matter of education. This is what Intertruck is trying to do. We are trying to educate the market.”
This, according to Zahrai, is a philosophy shared by Eaton. Regardless of the global market, the manufacturer strives to ensure that the regional channel partners it selects are in keeping with its premium philosophy.
Zahrai commented: “When we decided to join forces with Intertruck, we did so very carefully,”. “Eaton does this in all regions of the world. We find what we think are the best partners; those that share our way of working. It’s about being close to the customer and really trying to provide the support and responsiveness that is so critical.
“We do have high expectations of our partners in terms of their aftersales support, just as they have high expectations of us when it comes to product quality. This is a two-way street.”
Indeed, during their first year as partners in the UAE, the companies have chosen to share the burden of investment in staff.
As distributor, Intertruck has one salesperson dedicated solely to Eaton components, and five others who offer Eaton as part of their wider product portfolios. Keen to show its commitment to the market, Eaton has also been active in the field of procurement.
“We have hired a dedicated salesperson for the UAE, who operates out of Dubai,” Zahrai revealed.
“This appointment was made in mid-2014, shortly after the announcement that Eaton and Intertruck had joined forces in the Emirates. It was always our plan to hire staff specifically for this region. This forms part of our broader strategy to train GCC distributors to be the front face of Eaton; to give them the tools and knowledge they need to serve customers effectively,” he added.
This shared commitment to customer service links back to Intertruck’s mission to act as a service provider in addition to a parts supplier. Over the past year, the firm has made significant headway within the fleet management sector, and van Eeuwen contends there are a number of reasons behind this success.
“Anybody can see that commercial vehicles are becoming more complex,” van Eeuwen noted. “It’s no longer enough to grab your tools and go at it; it doesn’t work that way anymore. When it comes to modern trucks and buses, you need to have access to high-quality components that complement one another.
“I like to use the following analogy: 20 years ago, a single tail light would have been compatible with vehicles from all major manufacturers. Today, you’d probably need 25 types of lamp to cover the same range of vehicles because they’re all different. The specificity of trucks and buses has increased dramatically within a relatively short period.
“At the same time, operators have started to ask fundamental questions about the nature of their businesses. What is the core business of a transport company? It’s not ordering replacement parts. It’s not servicing trucks. Whatever the cargo – be it cement, foodstuffs, people, etc – the primary function of these companies is to transport things from one place to another,” he shared.
Within the context of this market-wide re-evaluation, van Eeuwen and his team have succeeded in promoting the fleet management side of their business.
Last year, Al Jaber Leasing Services became the first company in the Middle East to take advantage of Intertruck’s Vendor Managed Inventory (VMI) package, an announcement that was made simultaneously with that of the Eaton distribution deal [July 2014].
During the intervening months, the firm added a string of high-profile names to its client list.
“Since mid-2014, Al Jaber LEGT Engineering & Contracting (ALEC), Al Jaber Steel Products, Cemex Topmix, Emirates Transport, and Solaris Bus & Coach have all come on board,” revealed the Intertruck chief.
“These companies were already customers, but we approached them and asked what additional services we could provide. They have all expanded the range of services that they use us for.
“Fleet management doesn’t necessarily mean taking over their entire operations. It could be as simple as more comprehensive parts provision; same-day delivery, lifetime guarantees, etc. I
"t’s about TCO, and our customers – the UAE’s largest fleet owners – understand the benefits of this approach. They don’t focus on the initial cost of a component; they want to know how long it will last. Intertruck, meanwhile, can look after logistics, maintenance, spare parts; you name it. It all boils down to one thing, and that’s maximising uptime.
“Intertruck grew 40% last year. Much of that growth was driven by our fleet management concepts and VMI system. During the first quarter of this year alone, we have grown an additional 35%. It’s nice to grow 40% in a year, but this brings with it its own set of problems.
"Let’s just say that these are nice problems to have,” van Eeuwen concluded.