Machinery rebuilds are an intriguing option in tough times.
A German company is Volvo CE’s biggest customer worldwide.
Manfred Hoffmann launched his plant rental business in the late 1970s in Germany and built Baumaschinen-Hoffmann into the largest independent rental company for heavy construction equipment in the country.
The company is located at Dorsten in the industrial Ruhr area of North West Germany, historically the country’s coal and steel powerhouse. As the coal sector started to decline in the 1980s, Hoffmann identified a niche in offering rental construction equipment as a short-term solution for the difficult business conditions. This was a new idea for the German market, particularly for construction machinery.
“At the time there were only companies in the UK, the US and Canada exploiting this opportunity. We gave companies the possibility to rent by the hour. Today nearly every second construction machine in the world is rented,” explains Managing Director Barbara Hoffmann, Manfred’s daughter and now running the company’s day-to-day operations with commercial manager Peter Lormann, who is also her husband. Both are trained economists.
The pioneering rental business model developed by the team of Manfred Hoffmann and his wife Ingrid was based on providing extended full service rental service to blue chip industrial organisations, of which there were many in the Ruhr area. Today 85-90% of company business is related
to long-term rental contracts with end customers.
With 1,200 machines located with customers, the fleet is dominated by wheel loaders and articulated dump trucks, but also extends to excavators, bulldozers and compactors etc. according to customer needs.
The strength of the business is the concentration on rental of heavy equipment above 20 tonnes, including comprehensive service and maintenance.
Hoffmann has long-term contracts of up to seven years with major industrial concerns from typically iron and steel works, open cast coal mining, power station operators, recycling companies, and construction firms.
The company is unique in Germany offering plant rental combined with comprehensive full repair and maintenance services, with guaranteed availability and stand-by equipment.
While Hoffmann has its own 20,000m2 service centre, it also integrates with the infrastructure of its main customers, since many steel factories, quarries and coal mining operations have their own service and repair stations. The major energy utility firm RWE, for example, makes available service stations that are exclusively used by Hoffmann. Indeed in 2014, Hoffmann received an accolade from RWE when it won an award as the best supplier in the region. RWE praised the company for its service mentality, stating: “You are there when we need you”.
With some 120 employees, more than eighty of are fitters/service engineers who are assigned long-term to customers.
“We don’t see many of our employees for weeks on end,” explains Lormann, “as they are continuously engaged in servicing the machines located with our customers. They keep us informed nevertheless through daily reports.
“The type of person working for us fits into our family, non-hierarchical structure. With the support of Volvo CE and dealership SWECON, we give them full training, and then give them full responsibility to manage the customer and use their initiative to ensure they achieve the high level of service demanded. The fitter is then the first contact point for the customer – they have just one number to call.”
Hoffmann encourages feedback and constructive ideas from its people in the field. “In our case it is a case of ‘many cooks make for a better broth’ – we respect them and they respect us,” Lormann adds.
Though the regional industrial giants are the anchor and strength of their business, Hoffmann also services a growing number of SMEs.
“We try to balance our client base with smaller businesses as well as the big league players,” explains Lormann. “Some require three to four machines, others 40.”
To manage customers in eastern Germany the company has a second 20,000m2 service centre located at Schwarzheide in southern Brandenburg, 40km from Dresden.
Since the early days as a two-person business, Hoffmann has grown to become a major customer of Volvo CE.
“The fleet of Volvo machines at Baumaschinen-Hoffmann now exceeds 400 units [general purpose and production equipment], making the company Volvo CE’s biggest customer in the world,” says Christian Krauskopf, Managing Director Volvo CE Germany. “And we expect it to expand further – Hoffmann has bought 99 machines this year alone.”
Alongside good products and support, Volvo’s financial arm, Volvo Financial Services (VFS) is
a key element of the package.
“We have had a close working relationship with Volvo Financial Services going back many years,” Hoffmann explains. “We have always had an open books approach, keeping VFS fully up-to-date with our business situation, clients and prospects.
“This paid great dividends earlier this year when a major new contract was confirmed and we were able to meet senior Volvo CE personnel at the Bauma trade fair and conclude an order for 30 A30 articulated dump trucks within a few days.” Several weeks later, Hoffmann ordered a further ten machines.
Key to the fast progress of the contract was VFS’ in-depth appreciation of the company’s business and finances.
“We have worked with this company for many years and fully understand the business model and client base, and we also know the people well,” explained Michael Ksionzek, sales director of VFS. “The company was prepared to confide in us regarding the details of a potential major order and we were thus well prepared when the contract was confirmed.”
“Through VFS we were able to have the bulk of the finance secured very quickly,” adds Hoffmann.
“At a meeting attended by VFS, Volvo CE Germany, the dealer SWECON and the President of Volvo CE, Martin Weissburg, Volvo CE were able agree the deal and commit to delivering a large fleet of A30 articulated haulers at relatively short notice. The final machines were delivered and out with our customers by July.
“The speed at which Volvo was able to move was impressive,” she says.
Though Hoffmann rents primarily leading brands of construction equipment, it steadfastly maintains an independence from manufacturers.
“Our main responsibility and the success of our business it to provide the right solution to our customers, whoever the manufacturer is,” Hoffmann explains. “In providing a high level of full service, we need partners who can support us with everything from training to spare parts at the ‘just in time’ tempo of our business. Only a few of the manufacturers can achieve this.”
Another aspect of working with the ‘premier league’ in the construction business, is the re-sale value of older machines,” adds Lormann. “Like any machine or car rental business, we are constantly analysing the operating hours and maintenance costs of our enormous fleet. There is always an optimum point to replace a machine and the best resale prices are always for the well-known brands.”
Founders Manfred and Ingrid Hoffmann maintain a keen interest in the company.
“It is still a family business and every time we meet for lunch, however much we try, we never stop talking shop,” Manfred Hoffmann admits.
He now sits on the Supervisory Board of the company and keeps up his contacts in the business.
“Construction equipment continues to be a personal business,” he stresses. “A lunch or a round of golf with the head of a big company can still be worth its weight in gold.
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