Editor’s Note: While with the Caterpillar Rental Services Network, Alexander Schuessler started working on an electronic solution for the company to accurately order parts from suppliers other than Caterpillar. To do it right, he and his partners thought the effort had to be industry neutral, which eventually led to the creation of SmartEquip in 2000. In February 2009, the company announced a milestone, with the completion of parts order No. 3 million through the SmartEquip Network™, less than six months after completing parts order No. 2 million. Today, only eight months later, the network has transacted more than 5 million parts, with a new part being ordered every three seconds. As more rental companies age their fleets instead of selling used equipment in the current economy, maintenance becomes more important with SmartEquip setting itself up as a network that can help everyone get the right parts and service support faster. Schuessler, SmartEquip’s chairman and CEO, is an economist with a Ph.D. from Harvard University and master’s degree from Cambridge University in the United Kingdom. He recently discussed the SmartEquip strategy and outlook with Rental Management. An edited transcript of that conversation follows:

RM: Why does SmartEquip exist?

Alexander Schuessler: We formed the company in early 2000 very quietly. I had been involved in rental for about six years before that. I was a professor at NYU and became involved as one of the partners of a startup company known as Caterpillar Rental Services Network. We took Cat into the equipment rental business in South America. I came onboard as a systems guy, then a logistics guy and did dynamic business modeling, which was with my background in economics. We realized we did a lot of things really well and some things really poorly. We did very well in getting market penetration and getting the fleet mix right and so forth, but anything to do with improving the uptime of equipment and reducing turnaround time was very difficult. If you were a Cat Rental Store — and especially if you had a piece of JLG or Multiquip equipment — it was very hard to get the right parts and the right service information to the asset to turn it back again. In those days, I started working on an electronic solution for this and realized very quickly that for this to benefit Caterpillar or anybody else, we would have to be industry neutral. We did an early test and our first commercial customer was Mi-T-M Corp. in Peosta, Iowa, on our Web-based platform. Soon after that, we had JLG, Multiquip and other large rental-intensive manufacturers. Then we started signing up on the fleet owner side with United Rentals, NationsRent, Volvo Rents and Sunbelt Rentals, a growing number of Cat Rental Stores, and — most recently — Hertz Equipment Rental Corp.

RM: How does SmartEquip work?

Schuessler: What the software does is take the disparate business systems of the manufacturers — the ERP [enterprise resource planning] systems and the technical publications systems — and ties them directly via our technology to the fleet owners’ rental management and asset management systems, as well as their financial systems. If you have a piece of equipment that comes back from the field and you type in its asset number, our system dynamically maps this number against the equipment serial number and provides a completely up-to-date and accurate electronics parts catalog, helping you identify the right part in very little time. You have the same experience regardless if it is a machine from JLG, Multiquip, Wacker Neuson or any other manufacturer on the network. Instead of taking more than two hours to identify the right part and the right serial number, it can now be done in 1 or 2 minutes, literally, by using the SmartEquip Network. Previously, as many as 10 or 20 percent of the line items were misordered. With the network, those errors go away.

RM: In September, SmartEquip reached a milestone — 5 million parts ordered through the network. What does this mean?

Schuessler: Orders via the SmartEquip Network have accelerated dramatically, even while parts transactions in the industry as a whole have slowed down. By the time we got to February’s trade shows, we announced that we had transacted 3 million parts over the prior five years. The bigger deal was that about one-third of those orders were received in the prior four months alone. Today, we are at about 5 million orders and the pace continues to quicken. We transact a part every three seconds and continue to accelerate. It’s pretty clear to us that the reason for that is the downturn in the economy. Fleet owners and manufacturers are seeking efficiency — both in procurement and in operating and supporting equipment fleets more efficiently — and our technology helps them do that. Also, manufacturers have laid off sales and after-market support personnel. At the same time, they have invested heavily in SmartEquip Network technology because they want to make sure the aftermarket value and support for their equipment is improving in a time like this, as they seek to remain competitive in a limited market.

RM: As a neutral company, you have manufacturer clients and rental company clients. How does a company become a part of the SmartEquip Network?

Schuessler: Let’s start with the rental companies. Large national rental companies install our enterprise software to cover all of their branches and subsequently they connect to and subscribe to our network for a few hundred dollars a month per location. Rental companies pay a monthly subscription fee, much like a cable TV service, and the fee scales to the number of locations connected to our network. Manufacturers have a number of options. Most subscribe to the network by using our “gateway” technology, which allows them to publish support information and receive parts orders electronically. They pay a recurring fee that scales with the number of transactions, as well as the modules or services they use. Some only care about parts, others offer service support, troubleshooting support, equipment ordering capabilities and warranty support. The important thing is to deliver something adjustable. We are bringing that same range of scale to the rental companies. We have five of the world’s largest rental companies on the network and we are now gearing up to launch a new product for the 12,000 or so rental companies out there without large computer systems and also for several thousand contractors who fit that same category. This will be a Web-based system, so the customer buys an account and pays a low monthly fee depending on the number of monthly transactions. They will get a monthly bill as well. That will increase our footprint.

RM: For someone to try to do this on their own, I would think they would need a large IT department.

Schuessler: Many companies have a large IT department, but there are two other issues. One is that they can only do so much. They can do stuff on their own Web sites and their own systems, but they can’t tell Sunbelt, “You have to run our system.” Then someone else tells Sunbelt, “You also have to run our system.” Nor can Sunbelt productively force each vendor to come on their system. These would all be point-to-point solutions, where doing business with a particular manufacturer would impose a cost on the rental company customer or vice-versa. It has to be uniform environment where everybody saves money. We also have the neutrality. For this to work, you need a single standard with nothing for one partner to gain over the other except for serving the industry.

RM: What are other advantages of using this network to order parts?

Schuessler: Ordering parts is the first driver. By making this process faster and error-free, you can help eliminate the cost of creating additional downtime. But we also re-embed the parts ordering process back where it belongs — in service. We have been given measurements by some of our rental company customers who tell us we have enabled each of their branches to reclaim 580 hours of wrench time for the mechanic, by freeing him up from what he used to have to do in order to repair machines. This includes searching for equipment information, checking parts inventory levels, doing parts supercession checks and matching serial numbers. On the basis of the 580 hours per location, we free up about 1 million man hours of wrench time per year.