Trailer Report 2008

Like most industries, the trailer industry has been feeling the burden of our current economic conditions. Tightened credit has affected all segments of the trailer market and manufacturers across the country are tightening their belts for what looks like a continuously slow market. However, some segments of the industry are not being hit as hard as others. Although sales are down from previous years, general-use utility and equipment trailers are fairing better than other segments.

While the lack of available credit has affected all areas of the trailer industry, pleasure trailers, such as toy haulers, boat trailers, horse trailers with living quarters and recreational vehicle (RV) trailers, have been dealt the biggest blow. The Recreational Vehicle Industry Association (RVIA) recently reported RV shipments fell to the lowest level since 2001. However, these levels are still 30 percent higher than they were in the 1990s.

Data on new registrations of the light- and medium-duty trailers reveal the industry was down 21 percent in 2008 (January through October) from the previous year. Statistical Surveys Inc. (www.statisticalsurveys.com) report horse trailers having the highest decline at 27.9 percent, with boat and enclosed trailers following at a 25 percent decline. Livestock trailers were below the industry average, declining 19 percent, while open utility and flatbed trailers saw the least decline at 16 percent. These declines are leading manufacturers to make tough strategic decisions regarding their business model. With virtually no credit to help dealers with floor plans or consumers with loans, manufacturers are looking to new business models and improved supply chain management techniques.

The trailer industry is primarily a build-to-order industry, where in peak season build orders are usually six to eight weeks out, and two to four weeks out in non-peak season. However, with excess inventory at dealer locations, many manufacturers were reporting lead times of only two to four weeks, even during peak periods. This trend may continue as dealers maintain less inventory on their lots. Manufacturers are currently working to identify ways to address these changes.

Trailer manufacturing operations have traditionally operated on very slim margins. Industries with low barriers to entry, such as trailer fabrication, tend to have a very low markup, which requires a need to produce efficiently to stay competitive. For this reason, successful manufacturers have progressed naturally to lean manufacturing operations. Lean manufacturing principles, originally developed by Toyota from the Toyota Production System, identify and illuminate waste in the production system. Lean manufacturing has a customer focus, and products are produced based on customer demand. This allows inventories to be reduced, keeping costs under control. In our changing economy, this will be important for both dealers and manufacturers to meet consumer needs.

Considerations when Buying in Today’s Market

With all aspects of our economy feeling the crunch, customers are spending their dollars wisely and ensuring they get the best value for their money. With trailers, it can be difficult for the buyer to compare apples to apples. This becomes even more critical when the trailer is used for commercial or construction work.

Not all trailers are created equal. With little standardization or regulatory control, it is important the buyer choose the right trailer for the operation. Trailers can have extreme price variation and buyers often tend to look for the best deal. If your job is to recommend, specify or approve trailer purchases, there are a few things to think about. First, make sure you are buying the right trailer for the job. Like any job, you need the right tool. For commercial use, consider the high-use and possible abuse they may receive.

Once the type of trailer is determined, look at how it is manufactured. The trailer should be in strong condition, have sufficient metal and be constructed strong enough to hold up under its intended use. It is also just as important to make sure the trailer meets all federal regulations and industry safety standards. The National Association of Trailer Manufacturers (NATM) helps manufacturers meet these requirements. NATM promotes, both to the industry and to the public, a universal recognition of safety and quality in the trailer manufacturing industry.

NATM has worked to improve the trailer industry through the promotion of compliance with Federal Safety Regulations and selected industry standards. This has been done through education, the publication of the Guidelines for Recommended Minimum Manufacturing Practices for Light and Medium Duty Trailers and the compliance program. NATM compliance consultants visit members who volunteer for this program and verify that the manufacturer has the processes in place to manufacture trailers in accordance with Federal Motor Vehicle Safety Standards (FMVSS) and selected industry standards.

Trailer manufacturers in the compliance program, allowed to display the NATM Compliance Decal, have passed a verification that they are building trailers meeting federal requirements and Federal Motor Vehicle Safety Standards covering certification labels, tires and wheels, brake components, lighting, reflectors and conspicuity, under ride protection and cargo securement. In addition, their trailers meet all industry accepted manufacturing standards and practices covering safety chains, couplers, electrical components, warning labels and consumer information.

Times are tough and the near future looks like more of the same. Trailer manufacturers are cutting costs and streamlining processes, dealers are reducing inventory and looking for ways to help finance inventory for customers and contractors are looking for value in their purchases. While there are many good deals out there on trailers, now is not the time to take chances on quality. With record declines in the market, those manufacturers putting their time and effort toward advanced manufacturing processes, such as lean manufacturing and good supply chain management, are going to weather this economic downturn. In addition, you can bet they are probably the same manufacturers that are making the effort, through the NATM compliance program, to provide safe, quality trailers. So, take the time to find the right company and the right trailer before you put down those scarce dollars.

Clint Lancaster is technical director at NATM, based in Topeka, Kan.