Serving small and mid-sized OEMs

Distributors can capture more business from small/mid-sized OEMs by continually upgrading value-added offerings.

by William Moore, SKF USA Inc.

Many distributors assume that manufacturers prefer to bypass distribution and handle most original equipment manufacturer (OEM) business direct. But regional distributors of rotating equipment technology are positioned both geographically and by business model to serve most small/mid-sized OEMs with more services than large manufacturers that sell direct.

Consider these advantages: Your salespeople can make more frequent calls and visits than remotely located manufacturers. You can offer a broader selection of related products than any one manufacturer. You are free to find alternate sources of supply when necessary. You represent a single point of accountability for OEM purchasing departments, allowing purchasers to lower costs by reducing the number of vendors and transactions.

A value-add involves your ability to streamline the supply chain. As a regional distributor, you are more likely than a direct seller to offer small OEMs logistical services, including inventory management, warehousing, just-in-time delivery, shipment consolidation and repackaging. Economies of scale typically prevent manufacturers from offering such services to smaller OEMs.

But even with these distributor advantages, some small OEMs may prefer to source direct from a manufacturer. They anticipate better access to the manufacturer’s expert engineering assistance than they would have by sourcing through distribution channels. In fact, the reverse may be true. As an authorized distributor with long standing relationships with your manufacturers, you probably have quicker access to your manufacturer’s technical expertise than nearly any small OEM.

Most leading suppliers of rotating-equipment technology are eager to support authorized distributors with technical resources that can lead to new product or add-on service sales to small/mid-sized OEMs. The degree of assistance may vary from simple catalog and product literature services to dedicated applications engineering support.

Onsite expertise
Consider the example of SKF-authorized distributor DXP Enterprises Inc. in Houston. Founded in 1908 as a sole proprietorship, DXP is now a publicly traded company that provides bearings, power transmission equipment, pumping solutions and other MRO and OEM products and services.

DXP’s annual revenues surged from $25 million in 1986 to almost $160 million in 2004. According to John Jeffery, senior vice president of marketing, close business relationships with small/mid-sized OEM customers contributed to his company’s growth.

“To add value to an OEM, we offer supply chain solutions for a multitude of products,” says Jeffery. “We want to offer assistance and proactively support their business.”

Case in point: a sales call to an OEM customer that prevented a potentially costly mistake. The customer was a mid-sizedmanufacturer of pumping equipment. While visiting the OEM’s production facility, Jeffery and two DXP colleagues noticed dozens of ball bearings fitted with standard steel cages. The bearings were specified for the OEM’s new line of centrifugal pumps.

“Because of our experience with industry applications, we immediately suspected that these were the wrong bearings for the application,” says Jeffery. “Machined bronze cages, rather than steel cages, had become the industry standard for these pumps, which encounter harsh conditions. Bearings with steel cages are more likely to fail prematurely in harsh environments, leading to customer complaints and higher product warranty costs.”

After returning to the office, Jeffery and his colleagues consulted an SKF engineering catalog describing machined bronze cages. The brochure confirmed that these cages offer longer life in heavy-duty applications. More, in the event of problems, the cages provide warning signals in advance of failure. This allows users to avert unscheduled shutdowns and to schedule repairs during planned maintenance periods.

DXP faxed the technical literature and then followed up by phone with the OEM’s head of engineering. Within a few days, the OEM switched to angular contact ball bearings with machined bronze cages. The original steel-caged bearings were returned unused to their manufacturer; none made it into the new line of pumps.

DXP also provides logistical and supply chain services to the OEM.  Because the customer does not have the space to properly store bearings on site, DXP inventories the bearings at its distribution center and delivers them on a just-in-time basis.    

Gaining an aftermarket edge
Servicing the small/mid-sized OEM market can provide valuable insights into the repair cycle of original equipment, giving distributors an edge in capturing aftermarket business. For example: DXP’s familiarity with the wind turbine industry led to increased business with a turbine reconditioning center.

“The first generation of these turbines had gone into operation at about the same time throughout the U.S.,” says Jeffery. “We realized that they were reaching the end of their warranty period and would soon be arriving at the repair center for reconditioning. They would need replacement bearings and other components. So we decided to act proactively and create a wind turbine repair kit.”

DXP’s proposal received a favorable response from the reconditioning center. As the warranty date approached, DXP officials consulted with an SKF wind turbine expert and developed a complete repair kit consisting of 10 bearings, as well as seals, lubricants and other components.

DXP inventories and ships the repair kits as needed to the repair center. It times deliveries to coincide with wind turbines arriving for reconditioning. This business constitutes a new income stream for the distributor and provides an important service to the OEM.

Cultivating OEM relationships
Interstate BearingSystems, based in Minneapolis, also emphasizes value-added services for OEMs. A privately held company, Interstate has more than 700 employees and offices throughout the upper Midwest. OEMs account for a sizable portion of the company’s business, says Chuck Kitchen, vice president.

“We have longstanding relationships with OEMs in our territory,” says Kitchen. “Over the years, they’ve come to rely on us as rotating-equipment and power-transmission specialists.”

Recently, a longtime OEM customer turned to Interstate BearingSystems for assistance following two unexpected bearing failures during final inspection. The failures occurred in original equipment that had been in production for years. SKF deep-groove ball bearings play a critical role in the application.  

At Interstate’s request, SKF engineers examined the application data and performed a root-cause analysis. They quickly pinpointed the source of the problem: discrepancies between actual bearing and housing dimensions and the specifications used by the OEM during production and assembly.

“It’s common for bearing dimensions to change over time due to technological advances and changes in bearing materials and design,” says Kitchen. “These changes are noted in bearing specifications. In this case, the OEM was using outdated specifications, leading to assembly errors and failures during factory testing. Once the OEM updated the specifications, the assembly-related problems were corrected.”

Interstate also offers inventory, packaging and warehousing services for OEM customers. In the case cited above, Interstate ships product in accordance with the OEM’s requirements for container size and weight. Large bearing shipments arriving on pallets are broken down at the distributor’s warehouse and repackaged in small boxes weighing about 30 pounds each.

These short stories demonstrate how you can boost income by delivering creative, service-related solutions to small/mid-sized OEM customers. Assistance from your rotating-equipment and components suppliers is usually a phone call away. c

Bill Moore is senior vice president, Sales Development and Channel Management, SKF Service Division, based in Kulpsville, Pa. He can be contacted at William.C.Moore@skf.com or at (215) 513-4851.

This article originally appeared in the September 2005 issue of Progressive Distributor. Copyright 2005.

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