2012 Bold Moves
When Boating Industry launched the Movers & Shakers program, we quickly realized we wanted to recognize more than a handful of the great leaders in the industry.
While they can’t all be Movers & Shakers, the Bold Moves showcases those who have implemented creative strategies to grow their businesses, improve operations and help the industry overcome regulatory barriers.
When Yamaha purchased Precision Propeller Industries in 2008, the engine maker’s leadership team knew they wanted to improve operations and efficiency at the new acquisition.
Enter Bill Boehman. Yamaha brought the automotive industry veteran on board specifically to run and update PPI’s production. Some of the fixes were physical improvements to the plant while others came down to management.
One of Boehman’s first initiatives was to address the layout of the facility, which had been cobbled together over the years as PPI grew.
“The flow through the production process was not linear, so there was an opportunity to take a fresh look and streamline the flow,” Boehman says.
A 12,000-square-foot expansion accomplished two major goals: improving the flow to get more product through the plant more quickly as well as making room to install new finishing equipment that Yamaha had acquired for the facility.
Boehman also implemented a data-based process built around root cause analysis. Throughout the plant, each individual work cell keeps track of key metrics on a daily basis to measure production. By working with that data, PPI management can quickly identify and address production problems.
Constant communication makes sure all of the plant’s 93 employees know what is going on. It’s taken a complete team effort to transform PPI, Boehman says.
“That’s been an integral part of the improvement process,” he says. “It’s a combination of making sure we communicate where we are and making sure that when we do problem-solve that we make decisions based on data, not opinions.”
The expansion and restructuring resulted in a 60 percent increase in production capacity, which allowed PPI to introduce additional propeller lines to serve more customers, more quickly.
“The opportunity for our customers to sell sometimes is a very short window,” Boehman says. “We have to make sure that we are able to supply them at that point in time when they have the demand.”
Since 2011, the PPI team has achieved zero backorders and 100 percent on-time shipping. They’ve also improved quality of the end product to the customer and reduced the scrap rate by 80 percent.
“We’ve had some customers that have come back and been very generous with their compliments and very frank about how the situation prior to that affected their business,” Boehman says.
After 20 years as a bond trader, David Ciapponi never intended to own a marine business, but that’s exactly where he found himself in 2008 after an investment went bad.
Ciapponi had been one of the largest investors in Southfork Development Group, a management company that owned and ran several LLCs in a variety of industries around the country. To make a long story short, the company eventually got into financial trouble and Ciapponi and other investors took possession of several businesses, including El Dorado Hills Self Storage and its struggling boat storage operations.
“We had to begin to try and figure out how to take what was simply storage for boats and create a business that could be successful,” Ciapponi says.
After taking over the business in January 2008 and putting it through bankruptcy later that year, Ciapponi landed on the idea of what became the company’s slogan: “We Take the Hassle out of Boating.”
In 2008, there were 120 boats being stored in a 350-unit warehouse. Now, the facility is 95 percent occupied, and the business has expanded to include service, two boat dealerships and invasive species inspection services.
“We want to bring together every component related to boating from the day you buy it to the day you sell it,” Ciapponi says.
The in-house service department allows Gold Key to capture business that was already being done at the facility by outside vendors. In 2010, Ciapponi bought AquaMobile Marine and brought the owner in to manage Gold Key’s service department, giving the company’s clients an off-site service operation as well.
Located only 77 miles from Lake Tahoe, Gold Key has been able to capture business by offering a less expensive storage and delivery option than on-water storage. And for those clients who sign up for Gold Key’s VIP service package, the company guarantees the mobile service company will be at the lake within 24 hours.
Another challenge of boating on Lake Tahoe is that in order to get a boat on the lake, it has to go through a seven-step inspection designed to combat invasive species. It can be a long process that can significantly delay getting on the lake, Ciapponi says.
Gold Key was able to convince the Tahoe Regional Planning Agency, which manages the inspection program, that boats that were in dry storage for nine months of the year should be able to be inspected off-site. Gold Key is now offering that service to its clients and hopes to expand it soon to all of the Alpine Lakes in the Sacramento area.
Finally, with the closure of several boat dealers in the area – and Gold Key sitting on some large pieces of real estate – Ciapponi saw an opportunity to begin selling boats. Gold Key has partnered with California Marine Sports on the dealerships, the first of which opened July 31 in Fairfield, Calif. A second one is set to open in El Dorado Hills later this year.
When you’ve got an innovative product, what better way to demonstrate it than to take it directly to the customer?
That was the idea behind the Sea-Doo Life Test Ride Tour, a 28-stop nationwide tour in partnership with the company’s local dealers.
“One of the key pillars for this was to promote the unique technology that Sea-Doo has to offer,” says Adrien De Alexandris. “The second pillar was to support our network in making sure that they could also generate sales.”
The events are free to the public and hosted at popular boating venues across the country, giving consumers a chance to try out Sea-Doo’s personal watercraft and boats on the water. Sea-Doo has product experts and local dealers on site to coordinate test rides. More than 3,800 consumers have attended the events.
It’s also an opportunity for Sea-Doo to show off proprietary technology such as the independent brake and reverse system on the Sea-Doo PWC and the improved jet drive on the company’s 210 platform boats.
“People are coming here and just don’t know what to expect,” De Alexandris says. “They are blown away by the efficiency of the technology. They also realize that Sea-Doo makes big boats, which is something that is not widespread.”
It’s difficult to pin down exactly how many people will eventually buy because of the tour, which wrapped up in August, says De Alexandris. Still, 7 percent of attendees have thus far taken advantage of a special discount coupon distributed at the event, beating Sea-Doo’s goal of 6 percent conversion.
For dealers, the only requirement was that they send display models and sales staff to the events. Sea-Doo covered all the costs of the events and promotion. Those promotions included direct mail to more than 300,000 homes in areas surrounding the event, as well as outreach to local media.
Social media was also an important part of the equation, with Sea-Doo driving attendance through its Facebook page and its “Share Your Sea-Doo Life” contest. The events also provided content and promotion for the contest through photos and video.
The contest gives entrants the chance to win a 2012 Sea-Doo GTX S 155 watercraft and MOVE trailer. Those who took a ride at one of the events could upload a photo of themselves to enter the contest. Customers could also upload photos from local dealerships or on the water using their Sea-Doo watercraft.
The contest generated more than 20,000 entries, with the average photo being shared 33 times, driving extensive social media attention for Sea-Doo.
The way George Dunigan looks at it, you either have to be part of the regulatory discussion or just let things happen to your industry.
“You can’t keep a blind eye to it,” Dunigan says. “You’ve got to be involved with these regulations right from the beginning. Only good can come from that.”
Dunigan has been working on regulatory issues for the past six years as a member of the Marine Trades Association of Maryland’s board of directors. He’s currently in the middle of a two-year term as association president.
Most recently, he and the association helped to get a new regulation on volatile organic compounds (VOCs) eased for the marine industry by working with the Maryland Department of the Environment.
Last year, the department announced plans to limit VOC emissions to less than 15 pounds a day beginning on Jan. 1, 2012. The regulation would have affected boat coating operations throughout Maryland with little time to change their processes.
“These are mostly mom-and-pop operations that don’t have a lot of employees and need help complying,” Dunigan says.
Local boatyards had several problems with the regulation, including the way the limits were calculated and the time given to comply. The key to getting concerns addressed is to be respectful. An adversarial relationship only makes things worse, Dunigan says.
In this case, the association was able to get many of the changes its members wanted. The state agreed to an extension until December 2012 for compliance, as well as a period to sell off old inventory of paint with higher levels of VOCs. Officials also agreed to a change in the way VOC emissions are calculated. Instead of a strict 15 pound per day limit, they agreed to calculate the emissions monthly, limiting them to an average of 15 pounds per day. The association had asked for a program similar to those in most New England states where the emissions are averaged out over a full year.
Still, it’s a victory for the industry, Dunigan says.
“It goes right back to the fact that we asked for it in a polite way, with good logic and good reasons and we got most of it,” he says.
For years, the state of Florida made it very attractive for potential boat owners to go elsewhere to purchase their craft with a 6-percent tax rate that could quickly drive up prices on the largest yachts.
The Florida Yacht Brokers Association estimated that six out of every 10 buyers of boats sold by Florida brokers were registering, storing and operating them outside of the state in order to avoid paying the state’s taxes. Addressing the issue was an important boost for the state’s $18 billion marine industry, says Jeff Erdmann, who led the association’s efforts to change the law.
Most nearby states have either a capped tax or no sales tax on boat sales, as do many of the Caribbean nations.
“States such as North and South Carolina were targeting Florida marine businesses to remove them from the state,” he says. “By ensuring that the boats could stay in Florida indefinitely it would be good for everyone.”
After a stalled effort in 2009, the association was successful in getting an $18,000 cap passed in 2010 as part of a jobs bill. The state saw an immediate positive tax impact, with $13.46 million in direct sales tax revenue in the first year of the cap – 10 times the amount the state had collected previously. Plus, the state benefited from the extra revenue from associated goods and services that would have gone elsewhere.
Having concrete data and research to show legislators is the key to getting a change like this made, Erdmann says.
“The state of Florida has a mandate that they have a balanced budget each year, so there had to be a number where the state would actually continue to collect revenue,” he says.
A good public relations campaign is also important, especially on an issue that could be portrayed by the opposition as giving a tax break to the rich.
“It is about the individuals that work in the industry,” Erdmann says. “If the boats are here in Florida … everybody in the industry would have the opportunity to work and continue to make a decent wage.”
A key victory in that campaign was a meeting with the editorial board of the South Florida Sun Sentinel where Erdmann and others in the association explained the impact of the change. That meeting resulted in an editorial titled, “Tax cap on yachts makes sense.”
“It told the story about the jobs and the amount of revenue the state was losing,” Erdmann says. “It was the first time where we actually got the media to tell the story more objectively.”
In all honesty, we didn’t want to honor Matt Gruhn, the first-year president of the Marine Retailers Association of the Americas, in this issue.
Not because he doesn’t deserve it — he does — but because, as loyal readers know, Gruhn came to MRAA after leading Boating Industry for the better part of a decade. We worried how the choice would be perceived.
However, a steady stream of bold moves from Gruhn and his organization forced our hand.
When he came in last October, both Gruhn and the MRAA board saw it as an opportunity to rebuild the organization’s foundation.
That included completely overhauling the group’s membership structure, which had grown to feature multiple tiers and price points. It was a system Gruhn says was overly complicated and confusing for both MRAA’s dealers and benefits providers, so, as of November renewals, retail membership was reduced to a single price with the same benefits for everyone.
The riskiest part of the decision was that it eliminated group membership, which comprised a significant chunk of MRAA’s base. Historically, trade associations and other groups could pay a sharply reduced per-member rate to cover their members, but Gruhn says those dealers tended to be less engaged with the association, less aware of the benefits and, in some cases, unaware that they were even MRAA members.
“We now have to earn their business,” Gruhn says. “They have to be knowledgeable about what we do and make the investments themselves.”
To earn that business, Gruhn spearheaded the creation of the MRAA Rewards Program, which collects the association’s member benefits under a single banner, and doubled the number of benefits available to members.
MRAA benefits traditionally included discounts on items like legal representation, shipping and freight, health and business insurance, CSI tools, and the Marine Dealer Conference and Expo. In the last year, the group has added discounted custom marketing, boat and yacht consumer insurance programs, market penetration reports, an MRAA Certified program for used and serviced engines, a credit card processing program, and a variety of other resources.
The association also invested in a software system that allows it to better track its membership as well as provides better service and communication through members-only online features, e-commerce, event registration, e-newsletters and more.
“We want to say, ‘This is who we are, what we do and why you need to be a member,’” Gruhn says. “And if we communicate it effectively, we can build a community.”
So far, the message seems to be working. Since the beginning of the year, Gruhn says the MRAA has increased its retail membership by more than 160 percent.
That kind of progress was impossible for us to ignore — and given the way Gruhn and his board have been shaking things up at MRAA all year, we don’t think many people will disagree.