Creating Value on Distribution

Original equipment manufacturers are increasingly taking cognizance of the role of distribution to ensure positive sales and equipment performance. The notion is being increasingly driven to promote equipment across the value chain, based on the idea to popularize point of convergence concept from the sales perspective. In addition, the need of equipment integration at the job site and increased equipment uptime is also driving the strategy to collaborate. P.P.Basistha reports.

Facing fierce competition, the new adage for equipment manufacturers in construction equipment business in India is to ensure equipment 'reach' at the job site. Ensuring equipment reach is synonymous with ensuring equipment availability. However, 'equipment availability', examined in the context of present day tender rules, when job schedules are increasingly getting compressed or the project developer has put up maintenance clause for the project for a good period of its lifecycle, (ports, roads and now increasingly power projects) the connotation of 'equipment availability' would be quite wide beyond the physical presence of the equipment. It would encompass timely scheduled and safe delivery of the equipment at the job site, post placement of the order by the contractor, commissioning of the equipment, if necessary running of the equipment by the OEM to provide the requisite construction output solution as per the technical commitment of the OEM, based on the equipment features. The required additions are operators training, total parts support, operational safety for both man and machinery. All ensuring total 'equipment availability.'

Creating Value on Distribution

However, ensuring 'equipment availability' to the customer under the broad connation would be a task, it would seem difficult to achieve by most of the original equipment manufacturers, precisely when coming on equipment performance. Not to mention, ensuring positive sales in potential demand pockets as well. This makes it indispensable to select a distributor to add value to the productline. The majority of industry majors as Terex, Caterpillar, Escorts, Zoomlion, JCB, Volvo, Revathi Equipments, Manitou, Manitowoc, Sennebogen have opted to go for a distribution collaboration. Most interestingly, collaborations forged, have continued to stay on, even when the OEM has created its sufficient brand presence in the country. Fine examples galore.

But how to turn out the collaboration as the most successful continuing episode both from the OEM's end, looking to enter into a marketing collaboration, dually from the dealers end with an aim to provide business support? There are numerous equations that need to be highlighted and successfully solved by the OEM's and distributors quarters prior to entering into a collaboration.

Creating Value on Distribution Creating Value on Distribution

Broad Equations

First of all, it would be vital to ensure that the distributor has its branch network well spread in his territory with adequate skilled manpower to successfully promote sales of equipment. Now, the part of ensuring successful sales is much synonymous with service supported by adequately trained manpower for ensuring equipment performance for a high value engineering product. A well trained personnel would ensure successful equipment performance for commissioning as well as running the equipment throughout the project cycles. To create well trained personnel, there has to be joint training for the distributors personnel at the OEM's end supplemented by training at the distributors end. The training levels, can be numerically classified as under various technical competence programme by the OEM's and distributor. Across the classification, technical competence level-1 can be termed when the personnel have adequate exposure in hydraulics, mechanical, controls and trouble- shooting.

The dual training programme is one of of major new practices that is being adopted by many OEM's and their distributors.

Creating Value on Distribution Creating Value on Distribution

Adequate infrastructure comes next, to aid the trained personnel, in ensuring equipment performance. Infrastructure availability from dealers, has to be in the form of tools, custom built to undertake maintenance of the plant and machinery during break downs. The distributor needs to have right number of service vehicles to ensure timely turn round of the vehicles for servicing the equipment population within the network of the distributor. It is quite important for the distributor to have right numbers of service engineers. The number of service engineers should be rational to service the equipment working in the region of the dealers. As per the distributor industry estimates, representing road construction and earthmoving equipment, a single or two service engineers can be ideal to service a fleet of 17-18 machines. Adequate pool of trained service engineers is also important to ensure timely availability for commissioning and servicing the equipment within the network of the dealers's sales outlet.

Parts Availability and Site Support

Creating Value on Distribution
An ideal OEM and distributor collaboration for high equipment uptime can be ensured through timely parts and components availability which is of vital importance to end users.

To add value in ensuring timely availability of spares, the mother warehouse of the OEM, should be logistically well connected to ensure seamless transportation of parts and components to the stock points of the dealers involving multimodal logistics linkages. There are good numbers of tailor made logistics solutions available from logistics service providers which can be put into use for timely availability of parts to the end users, based on the range of equipment distributed.

Another model of ensuring timely availability of parts could be to stock components at the user points itself to ensure sustained equipment uptime. The same stock can be cycled to the other equipment user point from the previous one in case of contingency requirement of the latter. The importance of ensuring timely availability of manpower, parts supported by infrastructure also arises from the fact that most of the OEM's supported by the distributors, are increasingly entering into annual maintenance contracts with the equipment users. Deficiency in the supporting linkages of service availability, can affect the revenue stream of the OEMs and distributors.

Creating Value on Distribution
Ensuring availability of components, software solutions can be used by the OEM's and distributors to analyze and predict the component consumption pattern at the job sites. Based on the consumption pattern, inventory can be planned. Software support can be used also to track the intra movement of the components from the factory point of the OEM to the distributor stock points and further to the user points.

Though there are available supply chain models and software solutions for timely movement of spares. However, ensuring parts availability remains a challenge when it has to be transported to a job site, often located in remote location with sparse connectivity. To bypass the shortcomings of incomplete road network, the mother warehouse can be connected to the branch locations from where they can be transported to the job site through dedicated transportation arrangement with the logistics service providers.

Realising Sales and OEM Support

While timely availability of parts and service is one of the vital parts of the deal with the OEM and distributor but the marriage is all about realizing the sales. To provide requisite sales, the distributor has to live up to the brand image of the OEM. A vital element of the sales and subsequently service support can be ensured through adequate investment by the distributor in the sales and service network. Right product based on the actual price value of the equipment. Appropriate market forecasts of demand for existing equipments at par elaborate study on new application potential can help in realizing sales of the equipments.

However, it would also be the necessary support from the OEM's under the distribution tie up, that can well help to realize sales. While it is quite important for the dealer to have adequate cash flow reserves to maintain timely equipment availability and service through rationally managing the funds, the OEM's can opt for supporting the dealers through capital support in credit terms with low interest bearing to manage sales and service.

Creating Value on Distribution

On the engineering support front, the OEM should have adequately trained manpower to supplement the trained personnel of the distributor. OEM's having broad marketing plan through distribution tie ups should provide emphasis on total equipment solutions as a part of the business plan, so as to provide discounts through dealership support to corporate buyers. This is well likely to drive sales. Consequently, well linked equipment integration and required work output at the job site.

To ensure optimum equipment usage, in terms of service support it is quite essential that a solid 'engineering link' is established in between the OEM and the distributors. Based on the engineering link, the OEM should support customer education through the appointed dealers. Customer education would be to inform the users various aspects of the proper usage of the equipment and its preventive maintenance procedures. Information sharing has also to be on precautions that need to be taken care of while operating the machine units. Customer training in association with the dealers has to be a continuous process. Sustained training is important as because, the role of the machine goes on changing based on various job site requirements. Training will improve the skills of the operators to run the machine in different working conditions.

Evaluation

And finally, it is all about evaluating the strengths of the dealers by the OEM for ensuring positive sales realization and customer support. While appointing a dealer, it is quite essential to evaluate the market exposure of the dealer to promote the desired equipment. A dealer having requisite exposure in mining may not have his marketing exposure in construction or industrial sector. It is also important to evaluate the engineering skills as sales would essentially be supported by technical support.

The capability of the dealers to promote the desired portfolio of the equipment would also require to be judged by the OEM, because a dealer having technical expertise to market and support one set of products could be deficient in technical competence to support other range of products. Instances are many that big bang collaborations by OEM with dealers of repute had an abrupt ending. The best way to avoid the mismatch on all accounts would be a thorough examination and introspection of capabilities by both the quarters.
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