Customer demands push distributors past products
Range of services
Many times jobs begin with simply selling equipment or small value-added services, such as kitting a product with related parts. Sometimes the project stays small, but other times it grows from the original order. Being able to work with one supplier makes it much easier to scale a project upwards.
One distributor specializing in this area is Northwest Instruments and Controls Inc., a manufacturers’ representative for process control equipment serving Colorado, Montana, Wyoming, and northern New Mexico. For more than 20 years the company has been helping customers in several industries: power, oil and gas (upstream and downstream), water and wastewater, pharmaceutical/biotech industries, and others. In addition to leading-edge products and highly trained staff, the company’s ability to provide complete engineered solutions has helped with its success, according to company representatives.
Dan Burton, the president of Northwest Instruments and Controls, said, “Many customers call with a single idea in mind, such as installing a pressure transmitter on a tank. By taking the time to fully understand their system requirements and focus more on an overall solution we end up many times providing a complete turnkey package including HMI, PLC, and all field devices,” benefitting all involved.
This phenomenon of customers wanting more services along with their equipment was the impetus for Northwest Instruments and Controls to expand its capabilities through Burton Automation to open a repair facility in Fort Collins, Colo. The facility employs factory trained technicians in the repair and automation of control valves and designs control automation solutions for the industrial market (see Figure 3).
Next step: software
The evolution from supplying products to providing integration and maintenance services is often closely aligned to the hardware a distributor offers, as certain products require much more in the way of services than others. Some distributors, however, are taking the next step in delivering expanded software and web services, independent of their hardware products.
For example, Northwest Instruments and Controls also offers web hosting for its customers. Burton explained, “We provide SCADA systems, so we’re obviously set up to host SCADA solutions. We realized our middle tier to small well site owners didn’t have the sophisticated infrastructure required to support their own SCADA system, but we knew they could greatly benefit if we provided it as a service.”
Northwest Instruments and Controls through its system integration company Burton Automation Inc. created a hosted SCADA solution that enables its customers to easily access advanced SCADA functionality from their computers. Customers access the password-protected website where they view their data in a user-friendly format to check how the well is operating and how their equipment is running.
They also get e-mail notifications for alarms and events such as a tank approaching full, letting them know they need to send someone out to the site or schedule a pickup. In addition, customized reporting features help users by providing trending capabilities to determine where operations can be improved. They’re billed monthly for the service, which is much more economical than purchasing and maintaining a SCADA system for a few well sites, particularly as no internal IT expertise is required to access the SCADA data.
Manufacturers help distributors
Many manufacturers have recognized the growing demand for distributors that provide services and have created special certification and instruction programs in these areas. These certification programs often require the distributor’s personnel to spend several weeks at the manufacturer’s facility as part of their training. Many certification programs are also customized for the services distributors will offer.
In many cases, the courses and instruction follow ISO 9000 standards to ensure quality management, and provide specific guidance and tools for ensuring products and services meet a customer’s requirements. Training usually includes diagnostics and troubleshooting for each type of the manufacturer’s products, for which the distributor will provide services. The programs typically certify the person, not the company itself, so distributors often send several employees to the training courses.
Distributor or systems integrator?
At first glance it may seem like there’s little difference between a distributor offering services and a system integrator. Certainly, the lines have become less clear, but the business model is very different. Systems integrators begin by offering a complete system design, and then source products. An integrator must make a profit on its services, as in many cases its end customer will buy the products associated with the project from a distributor or directly from the manufacturer.
However, many times an end user simply wants one product that needs to be integrated into an existing system. Distributors who offer services address this demand because their sales approach usually starts with products and only expands to services as the customer requires. When demand exists, service-oriented distributors can easily scale up to add integration and other services when requested.
Obviously, there will still be a need for system integrators and traditional distributors in the market, and in many cases these two types of firms will work together to provide the optimal mix of products and services for larger projects.
But there’s also an increasing need for distributors who can provide services, particularly for smaller projects, and for projects that have substantial product content relative to required services. This demand will continue to grow as more end users seek external providers to supply integration solutions, maintenance, and other services.
Ask your distributor
Many distributors are offering a range of services to assist their customers as detailed above and as listed in Table 1. But before an end user can take advantage of these services, certain facts need to be ascertained concerning the distributor’s experience, capabilities, and expertise.
The Table 2 checklist summarizes what someone needs to know about a distributor before engaging them on a project. First and foremost is product knowledge, which shouldn’t be assumed just because the distributor has a particular vendor on its line card.
Most distributors represent a host of manufacturers, with varying levels of expertise for different product lines from each vendor. Certifications from the vendor are one way to gauge product knowledge, and simply asking pointed technical questions is another.
The distributor should have some experience with your plant and its processes, as this domain expertise will be required for project planning, execution, and support. If the distributor has been a long-term partner with your company, this is a plus in terms of both domain expertise and staying power.
Unlike systems integrators and engineering firms, the primary business of distributors isn’t providing personnel to projects, so make sure that the distributor knows how to run and staff a project. One way to ascertain this is to ask for project planning documents up front, such as a schedule and an org chart.
If your project contains any on-site work, then make sure the distributor has the required licenses, and determine upfront who will obtain the necessary permits. The distributor should also be aware of site safety procedures. If all of the items on this checklist are satisfied, then a distributor can be the best partner for your project.
Many industrial manufacturers are focusing more on their core competencies, while contracting secondary needs to companies that specialize in those areas. By doing so, they allocate their resources to areas that provide maximum competitive advantage. Their need for skilled workers will still be there, but those workers may become part of a supporting company that specializes in certain systems or industries, ideally increasing efficiency and productivity.
- Neal Cronin has been with Yokogawa for 15 years. He has been in technical sales and management for more than 31 years. Cronin holds a B.S. in Chemistry from St. John’s University in Collegeville, Minn. and an M.B.A. in finance from St. Thomas University in St. Paul. Edited by Mark T. Hoske, content manager, CFE Media, Control Engineering and Plant Engineering, mhoske(at)cfemedia.com.
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Annual Salary Survey
In a year when manufacturing continued to lead the economic rebound, it makes sense that plant manager bonuses rebounded. Plant Engineering’s annual Salary Survey shows both wages and bonuses rose in 2012 after a retreat the year before.
Average salary across all job titles for plant floor management rose 3.5% to $95,446, and bonus compensation jumped to $15,162, a 4.2% increase from the 2010 level and double the 2011 total, which showed a sharp drop in bonus.