Ingersoll Rand Case

8/9/2019 Ingersoll Rand Case

1/10

Managing MultipleChannels

Ingersoll Rand Case Analysis


2/10

Ingersoll-Rand 3 Business Groups

Stationary Air Compressor Division (SACD): a usiness unit o! Stan

Machinery Group "er!orman#e and $perations:

Company level sales% &': *+,- Billion

Manu!a#turing: &- Countries

Sales o.#es: /0 Countries selling in total to &+0 #ountries

Share o! I1R2s Stationary Air Compressor Maret: 304

$ther "layers 5 &01&+4 Mt 6oy (Centri!ugals)

Sullair (Rotary)

Atlas Cop#o (Stationary)


3/10

Dire#t Sales 7or#e Distriutors Air Centres Manu

What they Sell: All Centri!ugals Re#ips +0 hp and aove

Rotaries /0 hp andaove

8e#h, support and servi#e

Buying behaviour:Products that requires highdegree of technical expertiseand coordinated sales eort

Cost to Company:

&&4 o! 8otal Sales Sales Representatives

9ere paid a #ommissiono! &134

Misc M# sold !or less than

*000 9as note#onomi#al

Serve large #ompanies

re;uiring large#ompressors

What they Sell: Re#ips elo9 +0 hp Rotaries under /0 hp

8e#hni#al and servi#esupport

Buying behaviour:Large customers that hadrelatively sophisticatedbuying behaviour.

Cost to Company: +&4 o! Sales

Invoi#ed at +04 o< listpri#e

Misc

Distriuted #ompetitor2sprodu#ts also

=04 o! revenues andpro>ts derived !romIngersoll1Rand produ#ts

What they Sell: Re#ips elo9 +0 hp Rotaries under /0 hp

Distriuted Ingersoll1Randprodu#ts only

Buying behaviour:Buyer behaviour is lesscomplex and specicationsless demanding.!arget" Small and mediummachines.

Cost to Company: &'4 o! Sales

Invoi#ed at +04 o< listpri#e

Misc Better mgmt, thru

#entrali?ed order entryand inventory trans!er!a#ility

What t Re# DI@

you

BuyingPeople compre%Mainlyplumbe

Cost to "aid

Sale

Misc te on

Ingersoll-Rands istributionChannels


4/10

Centac !"" +00 hp #entri!ugal #ompressor Spare parts re;uirement very lo9 (+ 4 o! initial #ost per year) $perates at very high speeds 5 0000 rpm "rovides oil1!reeE air unlie re#ips and rotaries Inade;uate repair #arried ris o! serious damage

#arameters irect Sales $orceIndependentistributors

#roduct &ypeRe#ips = +0 hp%

rotaries = /0 hp all#entri!ugals

Re#ips H +0 hp rotaries H /0 hp

Sales revenuegenerated '()

34 304

Cost to company &&4 +&4

*+perience ,ithCentriugals

ighly #ompetentte#hni#al selling

Jo prior eperien#e9ith #entri!ugals

.ptions %vailable: Distriutors Air #entres Dire#t Sales !or#e

$actors to be considdeciding on the distCentac !"":

A medium range

in +1300 hp ra $verall maret : o9 Spare "art r igh 8e#hni#al S

Re;uirement


5/10

#roduct Comparison

CostsRotaries Centriugal

/nit 0 (Cost

Cost or!"" hp

/nit 0 (Cost

Cost or!"" hp

Cost o! #ompressor per " +00 /0%000 ++ /%000

stimated i!e 1K years&01&+years

Maimum stimated i!e (inyears)

K &+

Installation #ost as a 4 o!initial #ost

&04 /%000 &+4 %/00

Spare parts andmaintenan#e #ost per year

+,4 &%000 +4 '00

nergy #osts at K #entsLand 300 days operation in ayear per hp

/-0 -//%000 /3&%0//%00

0

8otal Cost o! o9nership -'%000&%0'%30

0

%vg1 Cost o o,nership

per year 3456!3 375!89


6/10

Channel Comparison

irect Sales $orce Independent istributors %

"R$S

&, Minimal sales #ost+, Better servi#e #apaility3, Jegligile training re;uired/, Addition to shrining produ#tline

&, In#rease in revenue and pro>tso! distriutor+, stalished net9or 1 leverage3, 7o#used attention to Centa#1+00/, asy a##essiility andservi#eaility, Competitor2s Atlas Cop#o2sprodu#t N series is #urrently eingsold through distriutors

&, In#reased+, igher pro#ompared to3, Attention

C$JS

&, "artial attention to Centa#1+00+, oss o! rotary sales3, More time to deliver and servi#e/, "re!er large orders%une#onomi#al !or H*000unit, Di.#ult to tap ne9 #ustomers

&, o9 pro>t margins !or I1R+, Intensive te#hni#al trainingre;uired3, a# o! attention to other#ompressors/, ess I1R #ontrol over distriution, Ris o! over1dependen#e on

dealer #hannel

&, $nly &' a+, ess pene#ompared to3, Intensive re;uired


7/10

Recommended Channel's)irect sales orce option not easible ess penetration DS7 "er!orman#e de#lining over the years Sales o! Centri!ugal has remained #onstant !rom

&'+,(this segment is #atered only y DS7) May #reate diversions !or sales people as they

handle ey a##ounts

Independent istributorsigh penetration, (8arget Oalue: // million)"oor servi#e$perating #ost are very high at +&4

Cost to Company amounts to &, million (+&4operating #ost P &4 on gross margin)

%ir Centers o9 "enetration Superior servi#e $perating Cost is &'4 igh $verheads +04 #ommission to Sales Rep 8otal Cost to Company is around &K,&- million

Air Centres should distriution #hannelis ne9 and servi#e #riti#al,

Air #entres #an a#t amedium !or distriuout at a ater stage

Better penetration in marA8AS has already #aptur

Better R$I !or independen

8he distriution 9ould eassignment

Advantageous 9hen ranghp segment as distriutorserve lo9 and mid hp ran

$ne time training #osts 9servi#eaility !or !uture pr


8/10

Benets to ealers v0s Sales$orcec

irect Sales $orce Independent istributors

&, Minimal sales #ost+, Better servi#e #apaility3, Jegligile training re;uired/, Addition to shrining produ#tline

&, In#rease in revenue and pro>ts

o! distriutor+, stalished net9or 1 leverage3, 7o#used attention to Centa#1+00/, asy a##essiility andservi#eaility, Competitor2s Atlas Cop#o2sprodu#t N series is #urrently eingsold through distriutors


9/10

I-Rs Multi-Channel Strategy Qne#onomi#al to sell ma#hines 9orth elo9 *%000 through a dire#t sales !or#

Compleity due to the di


10/10

Managing multiple #hannels

Challenges:

Channels #ompeting 9ith ea#h other at times to #osale

Solution: 7ull partner program (too early to udge e

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Ingersoll Rand Case