By Bill Adams
Ten years ago, my “Apparatus Purchasing” series addressed manufacturers (OEMs) selling fire apparatus factory direct.
The dynamics in the fire apparatus market have changed in the past decade. At the decade’s beginning, a large manufacturer, along with the half-dozen manufacturers it had acquired, disappeared. So did several smaller manufacturers. The trend to amalgamate OEMs’ manufacturing facilities continued, as does merging dealerships.
In viewing various manufacturers’ Web sites, some interesting distinctions were found concerning dealers. Some show dealer representation for every American state and Canadian province. Some list partial dealer coverage, and others show a combination of dealer representation and factory-direct sales. Others do not list dealers at all. Some OEMs openly advertise selling factory direct. The pandemic virtually eliminated face-to-face vendor and purchaser interaction. And, supply chain issues are still problematic. There must be advantages and disadvantages to selling factory direct, through dealers, or through a combination of both. Thus, reviewing selling “factory direct” is in order.
Multiple OEMs—both large and small—were invited to comment on the pros and cons of selling factory direct in today’s marketplace. They were not given specific or leading questions. They were asked only one question: What are your pro and con comments on apparatus manufacturers selling factory direct? They were encouraged to convey the pros and cons from their own organization’s perspective.
Those responding are Philip Gerace, director of sales at E-ONE; Sarah Atchison, president and CEO of Midwest Fire; Ed Boring, fleet sales manager at HME–Ahrens Fox; Joe Messmer, president of Summit Fire Apparatus; Joel Konecky, vice-president of sales at SVI Trucks; Robert Pike, corporate service manager at Fort Garry Fire Trucks; and Wayde Kirvida, municipal project manager at CustomFIRE.
JOEL KONECKY
SVI Trucks’s focus is building high-quality custom-designed fire apparatus, and we pride ourselves with providing industry-best service after the sale. An important part of providing great service is a strong dealer network that has invested in the infrastructure and personnel to provide warranty and repair services either at their facilities or as a mobile service. SVI, in some cases, sells factory direct when we don’t have factory representation in certain areas. But, we try to partner with a local service center to provide warranty work or we will partner with the customer to reimburse them for warranty work they perform—this is the exception, not the rule.
I understand customers’ desire to purchase factory direct, but that doesn’t always equate to a lower cost or at least a lower cost of ownership. The costs associated with providing warranty work and repair are passed directly onto the customer. If the customer has the facilities and the personnel to do the work, then maybe it’s not a big deal. If they don’t have the infrastructure, then doing their own warranty and repair work will cost a lot more, and you have to factor in that the apparatus may be out of service longer.
We hear over and over from our new customers the reason they stop buying from a manufacturer is lack of service after the sale as well as continuous decline in quality. The only time I hear a customer complain about price is when the quality, workmanship, and service are less than their perceived value of the product they have been buying.
Your dealer isn’t only there to provide service after the sale; it is also your advocate to hold the manufacturer accountable for its work. If there is a warranty claim denied, the dealer will always advocate on the customer’s behalf to get the manufacturer to accept the claim. Dealers are also valuable resources to guide the customer through the sales and specification process. The dealer is your subject matter expert, especially when the dealer has been selling the product for several years. There is no replacement for experience. This may also save the customers money by purchasing the right product for their needs.
In this day and age, there are fewer individual fire apparatus manufacturers, and the big ones keep getting bigger. I would argue a dealer’s role is more important now than in the past. I think there is a trend for certain apparatus to go to a factory direct sales model, but [because of] the type and complexity of apparatus SVI builds, I don’t see that ever being the business model for us. In the end, the customer needs to consider the value that a dealer adds to the sale and the costs associated with purchasing direct.
JOE MESSMER
I’ll begin with the bottom line, which is cost. Sometimes, depending on the sales representative, it can be less expensive to buy direct. Speaking from Summit’s point of view, by selling directly to the customers, we can become more aware of their priorities and concerns. We ask a lot of questions about how the truck will be used, and often we are able to offer suggestions regarding design, for example, that the department didn’t think about. All dealers are not as knowledgeable about the endless design possibilities and what structurally can and cannot be changed. I have seen where some local sales reps just give the department what it asks for without offering suggestions. The department never knows or, worse, discovers too late that there were ways to enhance the purchase or even lower the cost.
Working directly with the factory generally eliminates any possible confusion relating to what the customer wants. It offers clarity to the process. By working directly with the factory, there is more of a personal connection between the customer, the people designing the unit, and the people actually building it. The customer may feel more of a sense of control by that connection.
ED BORING
For the most part, the only factory-direct sales that take place at HME are to federal and state agencies. These sales are large, complex arrangements where the agency dictates that it will negotiate and contract with the manufacturer. We see great value in the dealer-customer relationship—it’s a very rare occurrence where a direct sale other than to the Feds or the state would occur. We partner with our dealer network on the sale of apparatus. It’s common for our staff to assist and actively participate in the sale.
Regarding financial considerations, there is a perception that buying direct is cheaper than through a dealer. In reality, the process and structure of specifying, preparation, and sales are similar, making the cost similar.
Like I mentioned above, the Feds’ and most state agencies’ insistence on purchasing factory direct is due to the size and scope of their projects. Manufacturers may choose to sell a municipality direct when extreme requirements or restrictions are dictated by the buyer. Examples include unique payment and finance requirements; extremely specialized specifications; and protracted and complex warranty, service, and parts requirements. These arrangements are usually with large fleets, which could tax an average-size dealer beyond its capabilities.
From the manufacturer perspective, the advantage to selling direct (to the correct buyers) is that the line of communication is direct, which can eliminate miscommunication and simplify the process. Again, large fleets tend to be very specific about what components they want and how and where they want them mounted. From my experience with federal and state fleets, it’s very helpful to our continual improvement strategy to work direct. Our customer service and engineering staffs see the firsthand feedback in the field in real time; it helps us identify trends (good and bad) and make product modifications and improvements quicker. The average U.S. fire department, however, is much better off buying and maintaining its apparatus through the local dealer network.
I would say that the disadvantage for the average municipality buying a single truck factory direct is that it’s easy to get lost in the process. The local dealers are your voice and advocate to the manufacturer. They are vested in the process; they keep the communication open and follow up on the details.
As a former buyer of fire apparatus and ambulances and personal protective equipment, self-contained breathing apparatus, tires, oil filters, etc., I would ask what they expect to gain by wanting to purchase factory direct. If there were a rift with the dealer and buyer, I would seek to find the gap and see what we as the factory can do to remedy the situation. Often these issues are minor, and a fresh perspective can put all parties back in the same orbit.
I’m not too sure if factory sales will increase or decrease. But, I do know we are doing a hybrid approach. With protracted lead times, more complex components, and many experienced dealer sales personnel leaving the industry, there is a gap developing. There is still a need to have experienced salespeople to interact with the customer, share information, and make the deal. An experienced factory salesperson with a new dealer salesperson or a factory guy acting on behalf of the dealer is a great bridge to the gap. The customer gets to speak with the factory guy regarding the specs of the truck and still enjoys the localized parts and service arrangements with the dealer.
PHILIP GERACE
In the best interests of our customers, E-ONE is committed to offering outstanding sales and support through our dealer network. Generally speaking, we do not sell direct. In addition, many states don’t allow factory-direct sales. I believe we’re great at designing and building fire trucks, and our resources need to be around those critical functions. Over the past few years, we’ve continued to grow our network because our dealer partners are best positioned to provide our end-user customers with local sales, service, and parts support.
SARAH ATCHISON
When this was addressed last time, I was new to Midwest Fire and new to the industry. Over the past 10 years, I have worked with and in the factory-direct delivery model. This experience has convinced me, completely, that factory direct is the right model for Midwest Fire.
The easiest pro comment, from my perspective, is that we can control product design/specifications, our processes, our messaging, and how we interact with and serve customers. This helps us to “get it right” for the customer consistently. We don’t have to train and update a network of dealers across the large geographic model we serve. Our small team, all on site in Luverne, Minnesota, certifies that we are delivering products and service the same way with each individual customer. Customers start the sales, design, and specification building process with our team in Luverne.
Throughout the prebuild and manufacturing process, customers work with this one team in Luverne, and when delivery day comes, the customer visits us on site in Luverne, inspects its new truck, and receives training with this same team. After they return to their community, they receive follow-up service and warranty support through this same team in Luverne.
For Midwest Fire and our customers, this factory-direct model delivers a seamless and simple point of contact and support for the customer. Another easy pro for the factory-direct model is cost savings. Customers are smart; they understand how business works. They are fully aware that the middleman doesn’t work for free. One of the operating principles of Midwest Fire is to help our customers get the most truck for their money. The factory-direct model allows us to deliver this. The markups and fees earmarked for the middleman can be allocated to a bigger fire pump or a crew cab chassis or more compartments, etc. This is of great value to fire departments serving small and medium communities.
Our Midwest Fire team is small and close knit; our salespeople and project management team develop strong and personal relationships with the fire departments they serve. People expect this with a smaller, family-owned company inherently, I suppose, but it’s also something we accept and encourage as part of who we are as a company and how we operate.
Our organizational structure is very flat, meaning that, as the CEO of a factory-direct company, I am closer to the customers. I interact with them directly. I get to know them, I learn how they utilize our trucks, I learn about their challenges and the things that are working for them, their needs, wants, etc. These interactions are the best part of my job at Midwest Fire. Selfishly, I’m not interested in passing this interaction or these relationships off to a network of dealers.
From the beginning of my involvement at Midwest Fire, “experts” have advised that it would be much more difficult to grow the company with a factory-direct delivery model. That is true, and my guess is companies often choose to offer their products through a dealer network to facilitate rapid growth. The dealer network allows them to gain customer awareness faster by partnering with local and regional companies already in place. Fast growth and becoming a big company have not been driving considerations for Midwest Fire. We’re okay with being small, provided we can seamlessly deliver a high-quality product at the right price for our customers and do so in a hands-on, high-touch way. Not all business ownership models support this slower, smaller way of operating. Publicly traded and very large organizations report to shareholders and business analysts and boards of directors—we answer only to ourselves.
The factory-direct model has made us aware of an increased operational complexity, which we addressed by investing in capabilities and assets, such as a customer relationship management platform, a North America-wide marketing strategy, customer service, logistics, and inventory management to support our factory-direct operations. For us, this increased cost was at the front end. Shortly after our acquisition of the company, the increased complexity has become a normal course of business for us. The risk of utilizing the factory-direct model has lessened for us over time as more U.S. and Canadian customers have purchased from and gained comfort with Midwest Fire, the trucks we offer, how we offer them, and how we support them over time.
In the fire service, the fully factory-direct model is still somewhat unique and unusual. The very large manufacturers of fire apparatus work almost exclusively through dealer networks. They have and continue to sell the majority of apparatus to fire departments everywhere through their dealer networks. Smaller manufacturers utilizing the factory-direct model are left to educate the customer about the how’s and the why’s of the factory-direct model. Many fire departments assume that if a manufacturer doesn’t work through a local dealer near their community, the customer experience, service, and support after the sale will be a challenge. This expectation is one that is often difficult for a small company to overcome.
The factory-direct model is one of the foundations of how our company operates. It’s part of our brand. Likely, it’s part of what has kept us small. Not everyone would see that as a good thing, and I’m OK with that. The other manufacturers with whom we compete and their dealers are good people and good competition. We respect them and appreciate the differences we offer. In the end, these differences are good for the customer. Fire departments small, medium, and large deserve options—lots of them. We are proud to be a small, family-owned manufacturer in an industry long dominated by very large, very old companies.
From an interesting anecdotal perspective, over the past few years, I have received more and more inquiries from dealers wanting to represent Midwest Fire in the marketplace. They are often interested in becoming dedicated salespeople for Midwest Fire. I don’t know if this means that the big dealer-network companies are facing more challenges with their model or if Midwest Fire has gained more brand awareness and market share.
ROBERT PIKE
Fort Gary Fire Trucks (FGFT) builds its various sales methods on communication, value, and customer service. The range of sales expertise and methods is extensive. FGFT has direct sales (factory-direct) staff and dealerships that look after dedicated regions and have a strong understanding of customer needs and product offerings. FGFT will sell factory direct for larger contracts, areas not covered, or federal contracts. FGFT is a major dealership itself and provides sales, service, and support for a major manufacturer. Regardless of the means, a contract administrator is assigned to every sale, for another line of quality and communication with the customer. This ensures a second contact point for customer questions, updates, clarifications, etc. They work with engineering and, along with the salesperson, become a strong advocate for the customer. Various sales methods give the ability to be close to the customer.
Factory-direct pros: FGFT is well versed in supplying apparatus through factory-direct methods. On our Web site, we have our factory-direct regional salespeople listed right beside our dealers’ names, so customers can quickly identify their contacts. Both are linked factory direct with one step. The customer has a direct line to their salesperson, which is appreciated by many customers.
Direct-sales staff ensure flexibility and knowledge is communicated across the sales network. Trends, needs, wants, and problems come right back to the factory through regular meetings and updates. Changes, improvements, new models, or options are explored by the group. Our dealers are part of that same network, so they have the same strengths.
Customer inspections are done at the factory, not only with the factory-direct salesperson or dealer representative, but include the contract administrator. Everyone is part of any prebuild, midbuild, or delivery inspection. This ensures continuity right through the entire order.
Direct sales maintain a competitive price for the customer. The salespeople know of customer plans, can help with quotes, and understand the needs and wants built into tenders. They provide details and input to the customer at no charge to help them formalize the tender. Value is added direct from the factory right from the beginning.
Factory-direct cons: No misunderstanding or perception by the customer that a FGFT dealer costs more vs. a factory-direct sale can exist. FGFT provides its trucks competitively priced regardless of the method. Simply, only one method exists in a region, so communication, value, and customer service are strengthened.
The salesperson may become spread thin over a region at times. FGFT reduces that risk to any lack of sales support by having a contract administrator for each sale, reinforcing the salesperson and customer needs, right through final delivery. An example of factory-direct salespeople having lots of responsibility is the salesperson may not be able to deliver the truck himself. A factory-trained driver provides that coverage. The salesperson in each region knows this group and even formally trains and tests with them.
Customers don’t always know the relationship their salesperson has with the factory. Importantly, any salesperson should educate the customers about how that relationship exists. The customers can understand how their contract is going to be handled.”
WAYDE KIRVIDA
I reframed the question from the customer’s perspective. The customer may not or should not worry about what’s best for the manufacturer or the dealer but should only be concerned with what’s best for them. Each comment is labeled as a “theme.”
Advantages to factory-direct sales:
- Access: The customer has better visibility of the project when working directly with the manufacturer. Communication is with the manufacturer. The sales rep is often at the factory.
- Commitment: The customer has a better long-term relationship with the supplier when working directly with manufacturers. Dealers change brands frequently. Look back 20 years. Which manufacturers are gone? Which dealers are with someone else?
- Focus: Manufacturers are focused on building the truck and meeting the specifications. Dealers are focused on several products and lines to drive commissions. One day it’s a pumper. The next day it’s turnout gear.
- Cost: Lower cost through elimination of dealer markup.
- Clarity: More clarity of expectations when the middleman is removed. There is a spec, but the interpretation may fall on the dealer.
- Accountability: The customers have direct results from the manufacturer. They either met the specification or they did not. The manufacturer cannot pass the blame to a third party (engineering, corporate, fabrication, etc.) like a dealer can.
- Product Knowledge: No one knows the product better than the person who designs and builds it.
- Quality: The dealer commission can be put toward a better product. Commissions can pay for a lot of material upgrades and added manufacturing labor. Compare a manufacturer’s specification (stainless body and subframe and nonprorated paint warranty) to a dealer specification (aluminum body, steel subframe, prorated paint warranty) to see the point.
Advantages to the buyer of purchasing via dealer sales channels:
- Awareness: A manufacturer in the Midwest might not “get” the Mid Atlantic customer. The disconnect with equipment preferences can be disconcerting.
- Access: Dealers are generally physically closer to the customer. Zoom is great, but it isn’t a handshake.
- Responsiveness: Dealers are more geographically able to visit the customer.
- Service: Dealers generally have more local service facilities or access to mechanics. The manufacturer will need to assign a local service center without a dealer.
- Focus: The dealer is interested in the sale and the ones after it. They aren’t dealing with engineering, suppliers, staffing, regulations, and infrastructure.
. . .
There are two sides to every story. I do not take sides. Regardless of purchasing through a dealer or factory direct, there ought to be a degree of mutual trust, honesty, and respect between buyer and seller. Good luck!
BILL ADAMS is a member of the Fire Apparatus & Emergency Equipment Editorial Advisory Board, a former fire apparatus salesman, and a past chief of the East Rochester (NY) Fire Department. He has 50 years of experience in the volunteer fire service.
