The 6 Biggest Challenges Of Wholesale Rental

As in many other industries, the last few years have seen an increasing emergence of a sharing society. We noticed this in wholesale distribution as well, where even more companies are renting equipment in addition to sales. In addition to that contribution to sustainability, it is also interesting for buyers to rent because then the goods do not end up on the balance sheet. Thus, the traditional trade industry is increasingly shifting to a modern partial system.

Due to this development, we see that wholesalers have several challenges. RentMagic founder Bart Nijssen explains them in this article and gives tips on how wholesalers can deal with those challenges.

Challenge 1: Three-Dimensional Inventory Process

One of the biggest challenges is efficiently managing the rental fleet. Wholesalers typically have multiple locations and a wide variety of rental equipment. It is essential to always have an accurate overview of which items are in stock, which items have been rented out, and when they will become available again. For this, a specialized rental system is indispensable that provides inventory and scheduling visibility.

In addition, the rental process is different from a sales process: materials are returned and must be maintained. This future stock therefore also counts continuously in the rental process. All these changes per order make the rental process much more complicated than the sales process. You have to support all that with specific rental software.

Challenge 2: Risk Management And Liability

Renting out materials also involves financial risks. There is always a chance of damage, theft, or even complete loss of the materials. This can entail hefty costs.

It is wise to draw up clear rental terms that properly delineate the liability of both the lessor and lessee. Also, consider proper insurance.

It is also important to check the creditworthiness of new tenants and require a deposit or down payment in advance. This way you reduce the risk of non-payment or failure to return materials. Wholesalers must therefore strike a balance between covering risk and maintaining customer friendliness.

Challenge 3: Logistics Planning And Distribution

The timely and correct delivery and pickup of rented materials from customers is often quite an operation for wholesalers as well. There is a lot of planning and coordination involved to make this run smoothly. 

Especially with large-scale projects involving many materials, the logistical puzzle is complex. The use of planning software is therefore a must to streamline this.

Depending on the equipment, different distribution methods are possible, such as delivery with trucks, external carriers, or collection by the customer himself. Clear communication with the customer about delivery times, transportation costs, and procedures for loading and unloading is also part of this logistics puzzle.

Challenge 4: Pricing Strategy And Long-Term Contracts

Unlike consumer rentals, where you rent a car from a Monday to a Wednesday, for example, the focus in wholesale rentals is more on long-term contracts. In addition to the longer contract duration, there is often an indefinite term where the end date is not (yet) known.

Pricing your rental fleet is then a lot trickier, because how do you deal with interim price changes for purchasing? Can you pass that on to your customers? And how do you deal with scheduling maintenance for long-term contracts? Regular inspections, preventive maintenance, and timely repairs are crucial. For example, fire extinguishers need to be checked and periodically refilled every year.

That longer contract duration and the ultimate responsibility for the materials create more uncertainties that wholesalers must consider in their pricing strategy. And which affects optimal utilization and timing of purchasing. Rental software that helps predict inventory optimization, especially across multiple locations, is then essential.

Also read: 17 Essential KPIs for Optimal Stock Management

Challenge 5: Customers Are Increasingly Demanding Transparency

Depending on the industry, there are other challenges facing wholesalers. For example, we see an increasing need for transparency among end users.

Wholesale customers want access to the rental fleet, they want to be able to see orders and products themselves. Or they want to add services themselves, such as periodic maintenance checks through a service management system.

Challenge 6: Rental Processes Must Integrate With External Software

Wholesalers are demanding more and more integration capabilities in their rental software. For example, consider automatically forwarding invoices to the end user's purchasing department. This helps simplify processes and eliminate manual work. It also reduces the risk of error.

Take that invoice, for example: previously, it went to the purchasing department that had to approve the invoice. Then it went to a colleague who had to book and pay the invoice. 

Especially in larger companies, such processes have become increasingly automated in recent years. This also demands flexibility from suppliers to contribute efficiently to that flow of information. Because the need for integration is growing.

The Ideal World Of Wholesale Rental

In short, if you maintain transparent and efficient rental operations, you'll notice it primarily in stock control. That means that the stock is optimized and also optimally monitored. Then you have better control of your stock.

You’ll also notice it in your financial figures, where you assess the return on individual items or item groups based on purchase value and rental income. It is incredibly important to monitor that continuously, based on certain indicators.

For a complete warehouse and administration, you need to be able to measure at item level and item group level. Where you then need to properly record costs in the ERP system. That includes maintenance costs, inspection costs, financing costs, and depreciation costs that come into play when renting out equipment.

These are the indicators to focus on in wholesale rental:

• Good inventory control
• Insight into returns at item or item group level
• Insight into the cost structure at the item or item group level
• A streamlined, automated process towards the end customer in the form of a webshop or customer portal.

Because the larger your fleet gets, the more interesting it is to be able to zoom in on certain article groups. We always recommend working fully integrated with your financial software package. That is why RentMagic integrates with all accounting packages such as Exact Online, Afas Profit, Microsoft Dynamics and SAP.

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