RESHAPING THE FARM EQUIPMENT LANDSCAPE
by R. Kelley Schwalbe
The idea sprouted from the desire of a southern Kansas wheat farmer nearly 15 years ago to save money by sharing ownership and utilization of a combine with another farmer in Nebraska. It grew into a way of helping other producers share equipment through a Web site for networking and a platform for buying and selling machinery.
In the last six years, MachineryLink, Inc., located in Kansas City, MO, has evolved into what is today a leading agricultural equipment resource company. Through its unique managed lease programs for combines, tractors and cotton strippers, it offers producers a more affordable equipment alternative to buying, without the costs, hassles and risks associated with equipment ownership.
"The growth of MachineryLink is the result of the increasing costs of production, slimmer margins for producers and demand for greater efficiencies throughout agriculture," says Scott Hazlett, who was recently named chief executive officer of the company. "Because of this environment, we've been able to offer producers a new way to think about the high cost of under-utilized equipment and its impact on their farms by providing a fractional or shared lease alternative to ownership."
Fueled by good timing and a high level of interest and acceptance by innovative producers, the company has grown from a handful of machines being utilized by farmers in five states to hundreds of machines rented by producers across the grain and cereal belts of the U.S. and Canada. And at the same time, MachineryLink has transformed itself into not only the owner of the largest private farm equipment fleet in North America, but also a sophisticated logistics, fleet management, information technology and service company.
A HISTORY OF SHARING
When Kingman, KS, farmer Dave Govert and his wife started the concept behind MachineryLink in the mid-1990s, they had one goal in mind: Create an opportunity for farmers to access newer farm equipment technology without having to leverage their farms or tie up large amounts of capital.
The premise for the business was rooted in the traditions of early 20th century American agriculture, where neighbors shared equipment and labor as a means of getting crops harvested. "I believe this same principle can be applied today in helping producers access equipment and remain profitable and productive," Govert says.
In 1999, Govert met David Forsee and Mike Plunkett, two business executives who shared Govert's vision and who were looking for unique venture opportunities in agriculture. The three saw an opportunity to expand on the original MachineryLink concept by purchasing equipment; adding seasoned veterans to manage the operations, logistics, service, maintenance and sales and marketing needs; and then "sharing" the combines with grain producers across North America.
A year later, they refined the company's business model and incorporated MachineryLink as it exists today. "We positioned the company as an asset management company," David Forsee, co-founder, explains, "and serve as an ag equipment resource that gives producers access to late-model equipment through unique 'managed' lease programs and partnerships with hundreds of local dealers, affording both the many advantages of equipment cost sharing."
Under the current model, MachineryLink owns and operates a fleet of combines, as well as tractors and cotton strippers, which are moved around seasonally to meet the harvest and power needs of producers in 33 states and western Canada. This usually begins with winter wheat harvest in Texas and Oklahoma in May; moves north through Kansas and Colorado in June; through the Pacific Northwest, Montana, the Dakotas and Canada for summer grain harvest; then back into the Midwest and Delta for fall corn and soybean harvest.
"Our business model is similar to the fractional lease or ownership programs popular in the private aircraft and industrial equipment markets," Hazlett explains. "And unlike traditional equipment lease programs, producers use the equipment just for the number of hours they need during the time periods they want. Then it goes away.
"Plus, we offer a fleet that consists of the more popular late-model Class 6 and Class 7 John Deere and Case IH combines that are commonly used by growers for harvest," he adds.
Over the last few years, the company has added 240- and 270-horsepower tractors to their fleet, as well as several John Deere model 7460 cotton strippers, primarily for upland cotton growers in the High Plains. In addition, other types of often under-utilized or related equipment are being evaluated for the fleet.
To manage the business and provide the high level of service that customers demand during the busy harvest season, MachineryLink has facilities strategically placed across the market. The company has business offices in Kansas City, MO, and operations hubs in Kansas City and Kingman, KS. In addition, it has major staging facilities in Pratt, KS, and Atlantic, IA, as well as several remote staging yards in Kansas, Nebraska, Oregon, North Dakota, Iowa and Texas that function as distribution hubs for machines that are used in those regions.
Along with guaranteed on-time delivery of machines, another MachineryLink promise is fast in-field service in case of breakdowns or other problems. The company has a toll free service number that is answered 24 hours a day, seven days a week during the season, and works with local John Deere and Case IH dealers to provide the in-field service. The company's service people can help customers identify problems and will contact the customer's local dealer to make sure the repairs are made quickly, usually within 24 hours and oftentimes less.
Unlike many other agribusiness companies, each MachineryLink customer may have as many as 24 touch points in a year, ranging from contact with regional sales managers, contract administration, accounting, scheduling, transportation, field service and customer service.
In addition, MachineryLink maintains an extensive sales force automation system and database that assist the company in prioritizing who is contacted for each stop and enrolled for the current or subsequent season. To maximize machine utilization while meeting the needs of customers, the database also contains information on customers' equipment preferences and cropping practices, and identifies those producers who may need additional machines during peak usage periods.
THE RIGHT TIME FOR CHANGE
According to the USDA, machinery costs are the largest annual non-land expense for farmers, accounting for 41 percent of annual production costs. This, combined with the fact that most farm equipment is greatly under-utilized - from 18 percent for the average tractor, to a low of nearly 7 percent for the typical combine - puts an increasing price tag on this newer technology that producers need to be productive.
Doug Ballou, vice president of marketing for the company, says one strategy the company has taken over the past few years is to help farmers understand not only the economics of equipment ownership and its impact on their bottom line, but also the other factors associated with equipment ownership and utilization.
"We take a consultative selling approach that encourages the producer to understand what his equipment costs are, especially his harvest costs, and then show him options that might fit his operation," Ballou says. "Every farm is different and there's no single approach that fits every farmer, so we have to be flexible in what we offer."
Communicating the advantages of leasing equipment, as well as building awareness of MachineryLink has been a major focus of the company's marketing efforts. Timing of communications is key to reaching producers when their situation is such that leasing equipment becomes a good fit. Ballou says the most effective mix has been to use advertising for continuity; public relations for education; targeted direct mail and inbound/outbound call centers for lead generation; and maintain a sizable Web presence to connect with producers when they are in the market for equipment.
"Our marketing communications efforts have to build the MachineryLink brand, educate producers on how leasing might best fit their operations, and encourage them to raise their hands for more information," Ballou explains. "We've found that it's important to give producers multiple options to communicate with us when the time is right for them. Then let the field and internal sales organization take it from there."
Ballou notes that the company has assembled an outstanding team of 20 regional sales managers who come from a variety of backgrounds in agricultural sales and service, finance, farm management and equipment rental, and six inside marketing representatives. They are trained to help producers assess their equipment needs for their specific farming operation based on current and future acres farmed, current equipment situation, financial plan and other factors.
In addition, there are 20 full-time field service representatives, as well as seasonal and support staff, who work closely with operations, fleet management and logistics. Together, these teams coordinate on-time delivery and pickup for customers and anticipate "open slot" availability for other producers looking for a machine.
The flexibility of the company's leasing programs makes it an attractive alternative for medium-sized producers and larger commercial operators, each of whom is solving a unique need with a MachineryLink machine. "Our customers can vary from a group of two or three producers who are sharing a combine to get their crops harvested," explains Ballou, "to 10,000-acre commercial farms that need three or four machines, but don't want to deal with the hassles associated with owning several machines."
IMPORTANCE OF LOCAL DEALERS
A critical link in the MachineryLink model is the role of local John Deere and Case IH equipment dealers in providing the fast, reliable field service needed to keep all the machines running and the customers happy. Equally as important has been dealer acceptance of the company and the rental programs it provides grain producers, says Company Co-founder Forsee.
"Early on there were a lot of questions dealers had about who we were and what we were doing," Forsee explains. "We worked hard to talk with dealers across the country as we started to expand and to show them how we wanted to include them in the process and the important role they played in providing service.
"Most dealers quickly recognized this as an opportunity to meet a different need that our mutual customers have," he says. "In fact, we rely on them for in-season service and maintenance when equipment is being used by farmers, as well as winter service, equipment procurement and referrals."
To demonstrate the importance of the dealer-customer relationship, and to recognize those dealers who provide high-quality service and help support the MachineryLink products and services in the field, the company initiated the Dealer Alliance Partnership last year. Today, MachineryLink works with nearly 300 John Deere and Case IH dealers across the country to ensure that all customers have timely and quality service they need in case of breakdowns or other problems.
A LEADER IN USING TECHNOLOGY
Keeping track of hundreds of pieces of equipment across much of North America can be a challenging task. That's where state-of-the-art technology comes in. Using the latest GPS tracking and Qualcomm remote monitoring and communications products available, the company is able to locate, track and monitor utilization of equipment all from one location. This technology is critical in managing delivery, pickup and movement of hundreds of combines, trucks and other equipment during the season.
"We can quickly see exactly where each combine is, monitor how many hours it's been used and determine if the customer is close to being finished, based on the number of hours he's contracted to use," says Mike Plunkett, head of logistics and operations. "With a quick phone call, we can confirm when the customer is finished and have a field service crew and truck scheduled to check out the customer and pick up the combine for the next customer to use."
Operational scalability and maneuverability are important when dealing with the uncertainties in agriculture. "We have the fleet size and logistical flexibility to be able to meet the growing increased demand for equipment, as well as adapt to the conditions that Mother Nature might throw at us," Plunkett explains.
"We are in a service business and our success relies on meeting the seasonal equipment needs of producers and, ultimately, the success of their farming operations," Hazlett adds. "We've made significant investments in the equipment, people and technology to allow us to more effectively meet those needs and help improve the profitability of producers." AM