Keeping Costs Down

A highly professional business approach has become essential in the mining, construction and plant hire sectors: rates must be competitive, equipment has to be maintained at peak performance for optimum productivity and downtime must be kept to an absolute minimum.

The owner of equipment has to face important issues such as: the timeous replacement of plant; whether or not to take advantage of extended warranties offered by original equipment manufacturers (OEMs), and whether to purchase parts from original manufacturers or use alternative replacement parts.

ESP Introduction

Over the past 34 years ESP has shown considerable growth in both turnover and stock holding and today the company has 10 branches throughout South Africa.

ESP originally started business to provide alternate parts for CAT end users. The company has since expanded into the diesel engine parts supply market to meet the needs of operators of Komatsu, Cummins and Detroit engines.

In addition, the company offers a broad range of multi brand ground engaging tools (G.E.T) such as grader blades, cutting edges and end bits, bucket tips and adapters, ripper shanks, half arrow edges and bucket lips. ESP offers famous brand names such as MTG, ESCO, ETE, SHARK, FUTURA, and also its own ESP brand of G.E.T.

Another prominent part of ESP business is the supply of components for crawler undercarriages and the rebuilding of such components as idlers, sprockets and grouser shoes. ESP has fully equipped undercarriage workshops in Johannesburg, Cape Town and Durban and offers an extensive warranty on repairs and spares.

Through the acquisition of Mayne and Allen in 1987, ESP acquired the Berco distributorship and entered the undercarriage market in South Africa. Berco, a German owned company who are based in Copparo, Italy is a world leader in the supply of crawler undercarriages. Later in 2003, ESP acquired AMT Services (Pty) Ltd, the ITM distributor of undercarriage who were based in Johannesburg, Cape Town and Durban. AMT were fierce competitors to ESP and had been in the undercarriage and ground engaging tool business since 1980. ESP, has since consolidated the AMT business into ESP and today remains the authorised distributor for both the Berco and ITM brands of undercarriage. In 2012, ESP added the KBJ brand of undercarriage to its range. The KBJ brand is owned by Hoe Leong Corporation, Singapore and their range of KBJ brand undercarriage is manufactured by themselves in both Korea and China. ESP is the exclusive distributor for the KBJ undercarriage brand.

Price Comparison

Complaints by operators of earthmoving equipment about the high cost of parts from some OEMs were probably true. The difference in price between genuine and replacement parts could be attributed to the higher operating costs and the need for OEMs to maintain 100% availability.

This provides ESP with a business opportunity, which is to supply parts at a lower cost than the OEMs. It is expensive to run an OEM company but in the case of ESP, its costs are also high, because the company provides a comparable parts service to that of an OEM. ESP supplies fast moving parts and also stocks slow moving components.

The OEMs buy from their principles; ESP mainly purchases directly from manufacturers. The length of the supply chain has a lot to do with the cost of the spare parts. ESP gains cost savings by shortening the supply channels.

The buyer who is in the market to purchase a new machine should carefully assess the availability of parts. A buyer can be assured of a good deal on parts for machines which are well serviced in terms of OEM parts and equivalent replacement parts. Prices will be more competitive. Prices tend to be higher for parts for machines for which there is no alternative supply of parts. ESP believes that competition keeps OEM prices down.

Quality

There was a time when buyers were sceptical about buying “pirate” parts. ESP had overcome the challenge by convincing buyers that replacement parts supplied by ESP came from reputable manufacturers, often the same manufacturers which supplied components to OEMs.

Buyers recognised the savings and ESP invited their customers to its branches to satisfy themselves with regard to quality and back up service. ESP is particularly careful not to buy inferior quality into stock. It has taken years for ESP to build up its name and inferior products can break down its reputation very quickly.

ESP continually compares its costs of replacement parts to that charged by the OEMs. In general, ESP has found that a basket of machine parts are on average 40% less than the OEMs, and on engine parts a savings of approximately 30% can be realised. In the case of undercarriage, it depend on the brand that is being used to compare costs to that of the OEM’s. Italian manufactured undercarriage is on average 25% below the cost of the OEMs, whilst Korean manufactured undercarriage can reflect a savings of up to 40% against the cost of most OEMs. The cost comparison for replacement non-original GET as compared to the OEMs can realise savings of 35%.

Quality assurance is the most essential part of the replacement parts business. ESP constantly networks with many international parts manufacturers, wholesalers and retailers in order to keep abreast of latest production developments and product quality. There is continual communication between these companies with regard to quality and the sourcing of reliable, high quality parts and dependable sources of manufacture and supply. Often these companies purchase components from the same manufacturer. In South Africa, ESP has the benefit of the experience in other countries. Often demand will start elsewhere in other countries first, such as the United States, and ESP benefits from this first-hand experience of other retailers and wholesalers that are based in other countries. ESP Africa has its own technical staff and random samples of parts are often tested at a local laboratory. ESP’s staff also visit the various factories to ascertain production standards.

OEM Warranties

Buyers who take advantage of extended warranties offered by the OEMs were unable to buy replacement parts for a period. This facility, however, tends to suit operators who do not have their own in-house workshop facilities.

Computer Network

The 10 ESP branches throughout South Africa are linked to a sophisticated computer network which ensures prompt availability of spares.

BercoAll PicMission Statement

ESP Africa believes in serving and developing the market for parts for industrial and commercial users of equipment and engines by sourcing the highest quality product at the best price available without sacrificing price for quality. It will do so by establishing an effective and efficient distribution network and by operating in a manner which will noticeably place it well above the operating norms for the industry, as well as by providing such ancillary services which are necessary to achieve this objective.