Lower Your Total Cost with MGM Brakes
Learn the distinction between low and high-quality brakes, and understand how making the right choice can make a life-saving difference and lower the total cost of operation.
Episode 317: We’re thrilled to announce that The Heavy Duty Parts Report is now presented by the Heavy Duty Consulting Corporation. Our consulting company works with manufacturers, distributors and repair centers to solve problems in their business.
Our featured guest, Len Gonzalez, Director Aftermarket of Sales at MGM Brakes, has spent over 40 years helping fleets lower their total cost of operation. Join the conversation as Len excitedly shares their new high-quality brake product called LTS Brake, designed for long-lasting performance.
Links
Sponsors of this Episode
Heavy Duty Consulting Corporation: Find out how many “fault codes” your heavy-duty parts business has. Meet with us today. Visit HeavyDutyConsulting.com
Hengst Filtration: There’s a new premium filter option for fleets. If you’re responsible for a fleet, you won’t believe how much using Hengst filters will save you. But you’ve got to go to HeavyDutyPartsReport.com/Hengst to find out how much.
Diesel Laptops: Diesel Laptops is so much more than just a provider of diagnostic tools. They’re your shop efficiency solution company. Learn more about everything Diesel Laptops can do for you today by visiting DieselLaptops.com today.
HDA Truck Pride: They’re the heart of the independent parts and service channel. They have 750 parts stores and 450 service centers conveniently located across the US and Canada. Visit HeavyDutyPartsReport.com/HDATruckPride today to find a location near you.
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Transcript of Episode
Jamie Irvine:
You are listening to The Heavy Duty Parts Report. I’m your host, Jamie Irvine, and this is the place where we have conversations that empower heavy-duty people.
In this episode, we’re going to talk about the best strategy for lowering your total cost of operation. My featured guest is a 40 year veteran who has been helping fleets do this and has become a true subject matter expert when looking at the best ways to lower total cost of operation.
If you sell parts, then you’re going to want to pay specific attention to the parts of the conversation where we talk about how to select an ideal customer profile and how you go about selling that ideal customer profile solutions and not just focusing on the purchase price of the parts.
Now, if you’re in the business of buying and installing parts, you’re going to want to specifically focus in on the parts of the conversation where we talk about the actual methodology that you should use to calculate your total cost of operation and lowering your total cost per mile, thereby avoiding focusing on purchase price only.
This is going to be a great episode, but before we get into that conversation, I want to take a moment to just talk to you about some changes that are happening at The Heavy Duty Parts Report. First, I want to take a moment to thank David Seewack and FinditParts for being our exclusive sponsor.
Over the last year, having their support has been absolutely an incredible experience and we have enjoyed working with them so very, very much so we just can’t express our appreciation enough.
You might’ve noticed though at the beginning of this episode that there was a change to the introduction of the show. The show is now presented by the Heavy Duty Consulting Corporation. Why did we make that change? To answer that, I have to take you back in time to when I launched the show.
When I launched the show, I was still working as a sales account manager and I was selling heavy-duty parts and I always envisioned The Heavy Duty Parts Report as being something that would enable me to communicate with the industry and would put me in a position to sell sponsorship and advertising opportunities to manufacturers and their distributors who actually sold heavy-duty parts.
And we’ve done this successfully with the heavy duty parts report from almost the beginning of the show. For the first few years, I produced The Heavy Duty Parts Report with a small team and I’ve been leveraging my 25 years of experience in heavy duty parts and business to work as a consultant working with dozens of heavy duty parts companies.
Last year we incorporated our consulting business and we renamed it the Heavy Duty Consulting Corporation. Since that time, our team has grown. We’ve hired consultants and assistants to help us work with heavy duty parts companies on a greater scale.
The problem that emerged though is that we have had two distinct brands in the marketplace, so we’ve had The Heavy Duty Parts report, a podcast talking about heavy-duty parts, and we have the Heavy Duty Consulting Corporation, a consulting business that works with manufacturers, their distributors and repair shops that want to get into the parts business.
Now primarily we work with all three of these kinds of companies to focus on helping them solve specific problems that they’re having when they’re trying to grow their business. Now these two distinct brands needed better alignment and that’s why we’re making the change now. As I said, having FinditParts as an exclusive sponsor was just an amazing experience.
Their support has been so incredible. We really appreciate the relationship that we’ve built with their team and specifically the relationship that I’ve built with David Seewack. I fully expect that we will continue to have a relationship with them for many, many years and work together to support the heavy-duty parts business.
However, as we approach the fifth anniversary of launching the show, I know I can’t believe it. I launched the show June 1st, 2019, so it is coming up to our fifth anniversary and as we enter the second fiscal year of the Heavy Duty Consulting Corporation, our company is now going to be the main sponsor of our podcast.
So how will this change the show? Well, it’s not going to change the show a lot. To start with we are going to continue to publish a weekly episode and we’re going to continue to have sponsors of the show we love featuring our clients’ amazing products, services, and innovative solutions. We’re going to continue to have featured guests like our guests this week, Len Gonzalez from MGM Brakes on the show to share their subject matter expertise.
All of that is going to stay the same. I will continue to cover industry events and we will continue to publish that coverage on The Heavy Duty Parts Report. The one area that will change is that we are going to spend more time in each episode focusing on more in-depth discussions about what it takes to start, build, operate, and then one day sell a heavy-duty parts business.
We think that we can provide a lot of value in this area, and since our company, the Heavy Duty Consulting Corporation is presenting the show, it’s only logical that this kind of content will be on our show and we think that it’s going to be very beneficial to those who listen. We primarily are talking to the people who sell the parts, the ones who make them and distribute them, and we’re going to continue to focus on the people who buy those parts and install them.
So the fleets, the maintenance managers, the repair shop owners, this core audience that we’ve developed is going to continue to be our core audience and going to continue to be the people that we are going to try to serve at the very highest levels on the podcast. At the Heavy Duty Consulting Corporation, we are fully committed to helping heavy-duty parts.
People flourish and we feel that one of the best ways we can do this is by presenting this kind of content on our podcast, The Heavy Duty Parts Report. We’re going to now take a quick break to hear from our sponsors and when we get back from the break, we are going to talk about how to lower total cost of operation with the help of Len Gonzalez from MGM Brakes. We’ll be right back.
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We’re back from our break, and now I’d like to introduce our featured guest of today’s episode.
Len Gonzalez is the Director of Aftermarket Sales at MGM Brakes. Now, Len is a 43 year veteran of the truck and trailer industry. He is specialized in vehicle specifications and maintenance and for the last 19 years he’s been working with MGM Brakes and he currently serves them as the Director of Aftermarket Sales and he takes the lead in the vocational business unit at MGM Brake.
Len, welcome to The Heavy Duty Parts Report. So glad to have you here.
Len Gonzalez:
I’m glad to be a part of this.
Jamie Irvine:
Thank you Len. One of the first questions that I want to ask you is this. How did Covid change the way fleets look at parts?
Len Gonzalez:
For one, they were looking at availability first because availability was king and they were starting to find out, if you recall back at the time, some of these offshore parts were hard to get into the ports in the west coast and there was a lot of shortages of those parts, so it made them look at other sources including those that were made in the United States.
By rote they had to look at it, but more than that, they had to look at what would be sustainable going forward, and also they were looking at replacement intervals.
A lot of fleets were looking at that time. It made them look at their programs because unfortunately many fleets pre-Covid, for lack of a better term, or on cruise control on their parts for replacement program, and they pretty much got into a cycle mindset that parts got replaced on mileage or our intervals.
What Covid did was turn that upside down where they had to look at, well, how long am I going to expect this product to last and what is going to be its total life? So that’s where they came to that on some products saying, okay, this is the expected life of this, and it made them go back and reexamine everything from hard parts to soft parts to vehicles themselves.
What is expected life of this vehicle? I know fleets that they changed their amortizations schedules for their vehicles out further just because of that very, very point.
Jamie Irvine:
I think you really hit the nail on the head there, Len. The way that fleets are now looking at parts replacement has really started to shift. I’d like you to listen into a short recording from an episode we did all the way back five years ago in episode three. It was published in June of 2019 just listening to what I had to say there. Now, you want the best price possible for the parts that you purchase.
Your parts distributor wants to make as much money as possible on the heavy-duty parts they sell you now you need each other, but your needs are diametrically opposed and it seems like it’s an intractable problem, but in this episode, you’re going to learn how to work with your parts distributor in a way that aligns your mutual needs and lowers your overall cost of operation.
I’m really looking forward to sharing this information with you, but first I need to talk to you about something that parts distributors commonly call the race to the bottom because on the surface it looks like it’s good for the fleets and repair shops that are buying the parts, but in actuality it’s just plain bad for everyone.
Now, it might feel like parts have never been more expensive, but if you factor for inflation, most parts are cheaper today, and that’s because of the race to the bottom, and I’ll explain how it works.
As our economy has expanded over the years, more and more distributors started selling heavy-duty parts as the number of distributors increased, the supply chain outpaced the demand, and when I started in the heavy-duty parts industry, there was a clear line between dealers who sold new OEM parts at a premium price and aftermarket distributors who only sold remanufactured parts at a discount, but that clear line is not so clear anymore.
Enter the impact of globalization and North America got a flood of cheap aftermarket heavy-duty parts manufactured by unknown factories overseas, and these parts were distributed by anybody who had enough money to buy a container load of knockoff parts.
In fact, many of the parts distribution companies today got their start this way. Now, quality was all over the map, but the purchase price was so low that to many, they just couldn’t ignore the gap between OEM parts and these aftermarket knockoffs.
And so in those early years, many people paid a heavy price with unscheduled downtime and fines for using parts that didn’t meet safety standards or OEM specifications.
In time though product quality of what is now called offshore aftermarket parts has really improved quite dramatically, and many remanufacturers were actually put out of business by being replaced by independent distributors who formed buying groups that started to rival the buying power of truck dealer networks.
Once the aftermarket buying group started taking significant market share from the dealers, the dealer networks responded by going to the same offshore manufacturers and buying parts under something called white label programs.
That’s where the products are being shipped to the dealers with their own unique brand and labels, but they’re being manufactured by the same people. The dealers still promoted their OEM parts, but now they offered a second line of parts that were approved by the dealers and were “met or exceeded OEM specifications”.
Now, all this competition was definitely initially very good for the fleets and repair shops who purchased these parts, but it did spark what is commonly called the race to the bottom. Now, this is specifically how the race to the bottom works. The distributor who you like best and provides you with great service gets most of your business. They put, let’s say a 30% markup on all the parts they sell you.
So if it costs them a hundred dollars, they sell it to you for $130. Now you buy from the other distributor in town when you need to, but they only get, let’s say 10% of your business and because they get so little business from you, they don’t really discount any of their prices except on their feature pricing, their specials, things that come out on a flyer.
Now this works pretty good, especially if the economy’s doing well and your rates have been really strong and you’ve been so busy that you don’t have time to check prices anyway, you just phone and order the parts from your preferred distributor. They show up, you’re happy, they’re happy, and business carries on. But here’s what happens.
A new distributor comes to town and they really want your business, so they decide that they’re going to buy your business with some fantastic initial pricing, and once you start doing business with them, they fully plan on raising your prices. This is actually part of their strategy and this is how it plays out in real time. On Monday morning, the new distributor sends a salesperson over to your office, they walk in with a box of donuts and a flyer.
The salesperson spends about 15 minutes talking to two of your mechanics about the weather and what they did on the weekend, and you’re actually annoyed, Len after listening to that. What changes in have you seen in the way people are buying parts now in 2024?
Len Gonzalez:
Not every fleet, but most fleets are looking for the value of it because some of them are putting a pin to it and saying, if I spend a little bit more on this product, I can extend its life of that product without having to replace it for a period longer and it gives us a little bit more value and in turn, it allows them to plan for their inventory of what they need to have in stock at all times.
Because here’s the flip on this. Before Covid, many of your fleets used to keep a massive stock of parts in their parts rooms simply to have it there just whenever they needed it.
After Covid, a lot of your fleets trimmed a lot of that down simply because one, they did not want to have that much invested in their parts inventory, and two, they wanted to start looking at parts that they didn’t need to keep a high number of just because they had a frequency of replacing them so often. So it is tied into the investment of what they had in their inventory versus what they used.
Jamie Irvine:
Len, what methodology should be used when calculating the total cost of operation or if you want to look at it from the perspective of lowering total cost per mile, how should they do that instead of looking at just the purchase price?
Len Gonzalez:
We do pretty much the same thing you did on the hood. We talk about that you do have many that they get caught in the price concept. It’s pretty much they’re looking at the sale price right up front.
They’re not looking at the value, and sometimes you’ve got to bring that value to them and it’s simple to bring to them because you first determine what is the lifespan of the product that they’re utilizing now, and it doesn’t matter whether it’s brakes, light bulbs, whatever, it doesn’t matter is what is your expected lifespan, because when you go and procure products, you’ve got a certain lifespan in mind before their replacement.
If that’s a predetermined time, and if you’re replacing those over a 24, 36, 48 month interval and how many times you’re having to replace it, what would it benefit you if you got into a product that was a higher price, but then you’re not replacing it at a 24 or 36 or 48 month interval, and that right there is where the value comes in. That goes back to your TCO. Add on top of that, the extended labor that’s involved it.
Jamie Irvine:
Can you go a little bit deeper on why the labor component is so important?
Len Gonzalez:
I’ll tell you one other thing that we will add to that argument since Covid, and it’s because there has been a shortage of technicians around the country and every fleet has dealt with this. It’s been difficult to find a lot of technicians. There’s a lot of shops that run short on technicians.
So a lot of fleets have been looking at how do we decrease how many times we’re replacing parts because of our labor challenges that we need to have people doing labor replacing other regular wear items, not just regular everyday items. And this is where a quality product comes into play.
So if you’re investing in a product and you’re going to, instead of it’s replacement interval going to be at 12 or 24 months and now you’re out to 48, 60 months, that’s a big change not only from the cost of the part itself, but the labor that it takes and the time and the resources that it takes to replace that part. So all that becomes part of the equation.
Jamie Irvine:
One of the things that we work with our clients on regularly at the Heavy-Duty Consulting Corporation is we help our clients identify their ideal customer profiles. How does MGM Brake define their ideal customer?
Len Gonzalez:
We work along with our distributor partners for one thing. We establish good relationships with our distributor partners for this very reason because they’re able to point us to those who could utilize something that we make that’s a quality product, but how we qualify those that would be a perfect fit are those customers that they’re not looking for price, they’re looking for solutions.
If they’re looking for a solution to a problem, that is our ideal customer. If they’re sending over a listing of parts to their distributor, give me your cheapest price.
That’s not our customer. If it’s somebody that’s just looking based on price, that’s not our, it will never be our customer. It’s never been our customer since 1956. We’ve never done that. That’s where distribution helps us out, finds that, and those that are looking for a solution, they have an issue.
They either believe they’re replacing something too often or maybe they’re looking for something that’s better. They look at their replacement, their parts of replacement costs, they look at their inventory and like I was mentioning before, they’re looking at their labor because labor is very expensive right now.
Shortage of technicians, their labor rates have doubled and tripled. So therefore technician time is very expensive, and if you can take and put in a product that doesn’t need extended service intervals, this becomes value to them as a product.
Jamie Irvine:
I’d say that if that’s been working for you since 1956, that just shows you how well having an ideal customer profile actually works, how well that works. And I can tell you right now that you should not try to sell to everyone. You’ve got to know who your customer is, who they’re not, and you have to use that information to really get your whole company to focus on those customers that you can actually serve that line up with the solution that you offer.
Just like MGM Brakes is doing, anyone listening, if they’re having a struggle with that and they’d like some help kind of figuring out how to focus on and which customers they should focus on, you should reach out to us because we can absolutely help you. So let me ask you something.
When you’re working with your ideal customer profile, those fleets that you have described and you’re working in partnership with your distribution to work with those fleets, what problems do you find that they are having that kind of alerts you to the fact that, oh, this is my ideal customer profile and I can help them?
Len Gonzalez:
A couple examples would be, and I’m going to speak from the vocational side, short product life or they may be having an extended amount of breakdowns that is costing them an extended amount of money in towing fees, things like that. Breakdowns cost a fleet a lot of money and it’s not something they can budget in for, especially if it’s happening at an extended interval.
That’s one of the things that they’re looking for. And sometimes they don’t know that there is something out there that can relieve that. That’s what you bring to the table beyond giving them something that’s going extend life, but this is also going to relieve their day-to-day issue. So you try to find out what is their pain point?
What is happening every day that is causing this? The other would be is their product living up to what it’s doing as far as the truck safety, the truck’s operation? Is this part not sufficient enough? Is it not working properly? Is it not giving you the value based on the way it is manufactured?
Jamie Irvine:
Yeah, it makes a lot of sense. I remember when I was selling MGM brakes, we had one fleet that took care of a national park and they had a lot of road maintenance and they were using a cheaper spring brake and it wasn’t standing up to the road conditions and it wasn’t standing up to all the salt and all the chemicals on the road, and it was wearing out really fast.
And so we switched ’em over to MGM brakes and they were able to, instead of changing it annually, they were able to get four years and some of them had extended beyond four years into the six, seven year without having to change.
And they were just so surprised that they could have that dramatic of a difference in service interval. And of course that just plummeted the total cost on what the product that they were using. So Len, how is technology changing brakes on commercial equipment right now.
Len Gonzalez:
We’re starting to see more of the adoption of the air disc. I’ve spent a lot of time on the vocational side. It’s a little slower adoption rate. Of course, you had your earlier adopters that got into air disc. This is not our first foray into air disc. I go back to air disc all the way back in the early nineties, and we’ve had several iterations of air disc and they all failed up to the generation we have now. The generation we have now, fortunately, is a winner.
The design of it is a great one. The unfortunate thing is because it’s got such a low adoption rate that the price and acquisition costs of air disc is very high. And it’s unfortunate because the platform is an excellent platform. It performs better than drum brakes will ever attain, but unfortunately, it’s still out of reach both as a new truck spec and even aftermarket parts or aftermarket replacement.
It’s a little costly. It’s a great investment. It works very well. It outperforms S-cam because the volume is so low right now. The market hasn’t caught up to it yet to where it could drive the price of air dis down.
I think eventually it will get there, but not right now. Now even saying that, will we see a day where air disc will completely replace drum brakes? And that answer is no. You’ve got a lot of applications out there I deal with, especially on vocational side where air disc is not optimal.
There’s several in that industry where that’s where drum brakes are more optimal than air disc. So is it going to replace it? No, but is it going to take over a lot of it? Yes. I mean, once there’s an equalization of the acquisition price, then we’re going to see a lot more of that adoption on the road.
Jamie Irvine:
I know how excited everyone is at MGM Brakes about the new product that you’ve launched, the LTS brake. Can you tell us a little bit about the product and who that product is?
Len Gonzalez:
LTS, it’s a long life. T stands for tubes, S means it’s for scam, so this chamber is only for SCA brakes. We do not have a disc brake variant of it. It’s a retool model from our old LTR. We retired the LTR and what we did is we improved on it greatly.
It’s aluminum headed chamber and it comes with a manual release bolt on the top. Did target for this, of course, it’s a long life chamber for the over the road, the line haul fleet, the regional haul, anybody that’s looking for longevity, it is built with high quality materials inside.
It has a corrosion fighter technology on side, which is being able to keep the spring from corroding early leading to early spring failures, especially in climate challenged areas, well, in fact, North America. Seal chamber with a breather tube on the side. We make that.
It’s a cast aluminum head, heavy gauge steel NPC, that’s a epoxy coated and it’s got heavy duty spring inside. It’s made for a long haul, but it’s not just for that. It’s also a chamber that we are bringing to the vocational market for ready mix and aggregates because that’s where I’ve been for all this time.
But a lot of your ready mix aggregates your construction, those that are dealing with municipals, governments, snowplow, things of that nature, this type of chamber will work very well for them for that very same reason.
It’s a seal chamber, it’s a chamber that will go distance for them, and we back it up with an industry leading warranty for the over the road regional line haul hauler. It’s a six year warranty between four and five year warranty depending on the vocation, and it’s worked out very well.
Jamie Irvine:
Well, I really appreciate you taking some time to talk with us today. I want to ask you one last question. What’s the one thing that you want people who either sell parts or who buy and install those parts? What’s the one thing that they should remember about lowering total cost of operation?
Len Gonzalez:
The products that are being utilized out there that is available for fleets to use, fleets need to look at their program and assess their program for where they would like it to be beyond price. Look at value, look at what a product’s value can bring to you and dollarize that product.
That’s the best word I can give is dollarize it. You see that, you make an investment on it. Your return of investment is what you should be looking at rather than what your initial upfront cost is. Your initial upfront cost is your acquisition cost. I mean, it’s pretty much the same thing as when they buy a vehicle.
Okay, they amortize a vehicle over a certain many years. It’s the same way here. If you’re looking to extend your vehicle’s life, decrease your total cost of ownership, increase your productivity with your technicians by making sure that you’re reducing a lot of your parts replacements, and it’s not just chambers, it’s everything else.
If you have that opportunity, you should look at that, see what’s available out there that could bring you maximum value and look at who is manufacturing it, who is willing to stand behind what they sell, who’s going to be there to support it.
One of the things that MGM prides themselves with, we have outside sales support. We got regional managers all over North America and Canada as well as the United States that are there to support not only be there for when it’s sold, but to support the customer after the sale to make sure that what they have is right for them.
And if it’s not right, find out what is right to make sure that they’re getting maximum value, not only from the product, but from the company and the manufacturers it themselves.
Jamie Irvine:
You’ve been listening to The Heavy Duty Parts Report. I’m your host, Jamie Irvine, and we’ve been speaking with Len Gonzalez, the Director of Aftermarket Sales at MGM Brakes. To learn more about MGM Brakes, head to mgmbrake.com. Links are in the show notes. Len, thank you so much for being on The Heavy Duty Parts Report. I’m really glad that we got the chance to talk today.
Len Gonzalez:
Thank you for having me. I appreciate it.
Jamie Irvine:
Just before we conclude today’s episode, I wanted to talk to you about something that is definitely not heavy duty. So it’s time for the segment That’s Not Heavy Duty. Now, I found a video shared by CTV News. This was published just about a year ago of a truck that was pulling a belly dump trailer and it lost its brakes at the worst possible time.
There’s a school bus that has stopped to let children off, and so of course the traffic in the other lane coming in the opposite direction has stopped as well. This truck loses its brakes and is in danger of colliding with the bus.
So he starts blasting, his horn pulls into the oncoming lane of traffic and narrowly weaves between the bus and the cars that are stopped in the oncoming lane of traffic. Now, this is a perfect example of having the wrong parts and the disastrous consequences of purchasing low performing parts that can fail at absolutely the wrong time.
So you can imagine that if someone consciously made the choice to buy cheap breaks and then they failed and this turned into an accident where children were killed, were other people were killed, any savings on those parts absolutely would not be worth it.
I mean, obviously from the viewpoint of loss of human life, but even if no one was seriously injured, but it just resulted in an accident, the fines, the liability would evaporate any of the savings that supposedly were achieved by purchasing these products that were low performing and had a lower purchase price. And that doesn’t even take into account all the labor that was spent changing these cheap parts repeatedly.
So at the end of the day, cheap parts, That’s Not Heavy Duty. What is heavy duty is buying high performing parts that perform at a high level and give you the best possible outcome, lower total cost of operation, and a safe piece of equipment that is on public roads.
Okay, so that brings this episode to a conclusion. I wanted to announce that I will be attending Diesel Connect this week.
The Heavy-Duty Consulting Corporation is a main sponsor of Diesel Connect this year, and they’ve invited me to speak as a keynote speaker where I’m going to be talking about how you can take a repair business and transition to a parts and service business where you can actually buy parts direct from suppliers. It’s not easy, it’s not as straightforward as it might seem.
There’s a lot of challenges, but if you approach it in the right way, it is possible to accomplish that. And that is what I’m going to be on stage talking about this week at Diesel Connect. If you haven’t already, head over to heavydutypartsreport.com and hit the follow button. Sign up to our weekly email so you never miss out on any of our content.
And also, if you listen to this on the podcast player of your choice, make sure you hit the follow button. It gives you the option to give us a five star rating and review, please do that. I’ve heard that it helps us to expand our reach.
If you watch the video version, hit that subscribe button on YouTube and the bell icon, so also you don’t miss out on any of the videos that we published. As always, I want to thank you so much for listening to this episode of The Heavy Duty Parts Report presented by the Heavy Duty Consulting Corporation. Thank you so much, and as always, Be Heavy Duty.