S1.E8: The Surprises that Eased Johnson & Galyon into a Rental Partnership that Adds Value

How the east-Tennessee general contractor made it look easy to ensure pricing, quality and service it could depend on in structuring its commitment to rent all of its equipment needs from a single partner.

Video Thumbnail

Leading east-Tennessee general contractor Johnson & Galyon decided to trade in virtually all its equipment because they believed that renting equipment would be a cost-effective way to allow the company to focus on building things. They just needed a rental partner they could count on. 

It sounded to me like a serious challenge to find that partner, and I was kind of surprised at how easy CEO Doug Kennedy made it sound to choose a vendor and set up the terms. 

Johnson & Galyon is a fixture in the Knoxville business community, after 108 years building marque projects that define the community’s downtown, medical facilities and expansion into resorts. Being a local company with local ownership and a commitment to giving back to the community is part of its DNA. Kennedy says his management team wanted to recruit a like-minded business to manage their equipment needs. 

He says the candidate that most clearly satisfied that condition was the local Caterpillar dealer Stowers Equipment and their Rental Store. The curious thing about the choice is that Stowers hadn’t really been a primary equipment vendor for Johnson Galyon. As a vertical-construction specialist, much of the company’s equipment fleet had been lifts and other equipment categories in which Caterpillar didn’t compete, and they had bought generally lower-priced brands that did compete with Caterpillar. The contractor’s project managers had for years been renting from many different vendors hunting for market share with promises of beating anybody’s price. 

Johnson Galyon had done some equipment business with Stowers and the two companies had come to know each other better when the contractor built some facilities for the dealer. 

I came into this conversation thinking this building contractor’s equipment needs must be pretty simple and in fact, they only traded in about 25 machines when company policy shifted to equipment rental. But the company had intentionally only owned enough equipment to operate through their slowest periods – about a quarter or fifth of their peak equipment need. The complete list of equipment the contractor used included 50 to 60 different types of machines. 

That set up another surprise for me in this rental-vendor negotiation. When I asked Kennedy what he needed from their rental partner, the list he gave me, in order, was:  

  • Somebody who could supply most of those 50 to 60 types of equipment 
  • Deliver that equipment to jobs, on time and in great shape, when they needed it 
  • At a competitive price 

Stowers Chief Operating Officer Ed Rottmann said the Rental Store was willing to talk about adding machines to their fleet if Johnson & Galyon needed something they didn’t have. Nevertheless, as the two businesses worked out the details of their relationship, “We developed a list of things it didn’t make sense for them to carry,” says Kennedy. “There are some specialty items like things for infection control for our work inside hospitals. All of our people know how to maintain those, and we didn’t see any reason for them to go out and buy those type pieces of equipment.” 

Delivery performance seemed like a potential sticking point, as the contractor is working on big new resorts up in the mountains outside Knoxville, but it was clear that Stowers was amply set up to transport equipment, and The Rental Store had committed personnel to attend regular project meetings to stay on top of what equipment the contractor needed, when and where.  

The price negotiation, last of on Kennedy’s list, seemed almost too simple – Johnson & Galyon shared its rental invoices and the two agreed on competitive rates.  

Eight months into the relationship, Kennedy is impressed with the quality of equipment, reliability of supply and fairness of the cost. It sounds like a partnership that works.