Fan suppliers: Offer complete solutions or stand-alone products?
A recent IHS research study sheds light on the global fan and blower market, where suppliers are aiming to become a complete solution provider. As this trend's impact on consumers is emerging, problems and questions arise.
American manufacturers of motor-driven equipment tend to sell stand-alone products more frequently than European suppliers. While many industry experts believe that this trend will continue, IHS has discovered that suppliers to the U.S. market are beginning to offer more complete solutions.
According to a recent study by IHS on the global fan and blower market, fan suppliers are becoming especially keen on the prospect of becoming complete solution providers. An analysis of commercial and industrial fans and blowers sold in both regions revealed that 13% of all units sold in the Americas were stand-alone, compared with only 9% in Europe. While this is a slight disparity, the difference is much lower than in previous years. This is perhaps a hint that the two markets are steadily becoming more similar. It is worth noting that the Americas (and subsequently the 13% of total units sold) includes North and South America. IHS estimates that stand-alone fan and blower shipments in the U.S. account for 11% of sales.
One example of a complete solution approach is a fan supplier selling a fan attached to a motor and/or drive, whereas a stand-alone product would be just the bare shaft fan (no ancillary equipment). In the past decade, European suppliers have adopted the complete solution approach at a faster rate than American suppliers. Direct-driven fans, which are sold with the impeller coupled to an electric motor along a common axis of rotation, are less common in the Americas than in Europe because of a higher customer preference for belt-driven fans in Europe. Suppliers in North and South America reported that 32% of sales were direct-drive fans, and the remaining 55% were belt-driven. In Europe, there was a dramatic difference, as it was reported that 79% of units were direct-driven compared with only 12% being belt-driven.
Marketing to a modern consumer base:
Today's industrial customers are increasingly seeking suppliers that can provide them with solutions rather than products. The industrial automation sector has been trending towards providing complete solutions for quite some time, but the benefits of complete solutions has only recently become increasingly recognized by customers. In a market that has historically focused on the initial cost of a product rather than its lifetime cost, fan manufacturers need to be aware of the shift in customer demand. Customers don't want just a single component (such as a fan); they want a partnership with a company that can provide multiple compatible products in a complete solution for a number of reasons (further described below). It is important for suppliers to understand that this type of partnership is mutually beneficial and thereby has high earnings potential.
From the customers' perspective, the price per product is often reduced when included as part of a solution, and more efficient solutions will of course lower operating costs. Increased convenience for the customer is included in the transition as well; partnering with a supplier gives a customer a single point of contact to handle all issues. This is much easier than tracking down numerous contacts at different companies to find the personnel responsible for maintenance of a faulty system. Many European customers are just as focused on initial costs as customers in other regions like Asia Pacific and the Americas. This is because of the lack of highly skilled engineers in many of the small and medium-sized enterprises in all regions to provide service on components. During the economic downturn, many trained specialists were laid off; this led to an opportunity for fan manufacturers to become the go-to experts in their field. This is why suppliers are finding it increasingly important to separate from their competition by offering more than just a superior component. Even the most efficient fan, if utilized in the wrong way, will do the customer little to no good.
From the suppliers' perspective, they gain an opportunity to upsell their offerings and target customers' other locations. On the other hand, the supplier completely integrates their components into the customers' operations, thus making it much more difficult to be replaced. Customers also may find difficulty locating a complete solution provider that meets all of their requirements. This grants a supplier some flexibility with its pricing schemes; some substitute lower margins on product sales for higher service fees; others prefer the opposite, or some combination of the two. The key takeaway is that suppliers will have to strive to have that flexibility in order to remain competitive.
Finally, and most importantly, becoming a solution provider provides invaluable insight into customers' operations and allows the provider to better understand when and how its products are being applied. Quite often, suppliers have limited insight into the end use for their products, but gaining that knowledge is crucial to better meeting customer requirements. As an example, a vendor may sell an extremely efficient motor, but if it is not utilized properly then the customer will not gain much of a benefit. Though it is not the supplier's responsibility to ensure proper use of its products, complete solution suppliers have an opportunity to really impress the consumer by making the extra effort to provide a realistic solution and support that will lower operating costs and improve system efficiency.
Some suppliers are still reluctant to take this approach. Fan manufacturers' main arguments include a lack of demand from their current customer base, the minimal profit margin on ancillary components, and the hesitation to take on the burden of responsibility for maintenance issues. This reluctance, namely the allocation of responsibility, is the main contributor to the differences between the American and the European markets. In the U.S., for instance, it is widely believed that if the assembler of motor-driven complete solutions was held accountable for standards compliance, then the customers of fan manufacturers would be further enticed to purchase complete solutions rather than basic stand-alone fans and/or motors. The fan and blower market is a prime example, but the same can be said of other equipment being considered for legislative measures (namely pumps and compressors).
Providing solution efficiency
Based on feedback from fan and blower suppliers around the world, the companies that have started to achieve the greatest success in recent years are not waiting for legislative requirements to go into effect before taking the extra step toward improving complete solution efficiency. This is expected to continue in the future as various regions begin to adopt a larger focus on efficiency regulations and standards compliance. Many customers will still opt to prioritize their purchases based on initial cost, but fan suppliers are increasingly succeeding at engaging their customers and end-users in order to educate them on the benefits of complete solutions.
In such a rapidly changing economy, it is important to be able to meet the challenges of today's industrial environment. However, the truly successful companies are those suppliers that are thinking of the changes and innovations that will define the market 10 years from now and how to be competitive at that time. As previously mentioned, different regions are adopting new energy efficiency standards that will inevitably change the market drastically. This undoubtedly makes it crucial for suppliers to reach out and gain a better understanding of their customers' application-specific needs and develop solutions to meet those needs rather than selling stand-alone products.
IHS is the leading source of information, insight and analytics in critical areas that shape today's business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005.
Edited by Jessica DuBois-Maahs, associate content manager, CFE Media, jdmaahs(at)cfemedia.com
Case Study Database
Click here to visit the Case Study Database and upload your case study.