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Industrial Market, Regional Sales and Service

Industrial Market, Regional Sales and Service. SKF Capital Markets Day ● 10 September 2014. Speakers. Vartan Vartanian President, Regional Sales and Service Christian Gill Director, Service Technologies & Industrial Solutions

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Industrial Market, Regional Sales and Service

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  1. Industrial Market, Regional Sales and Service SKF Capital Markets Day ● 10 September 2014

  2. Speakers • Vartan VartanianPresident, Regional Sales and Service • Christian GillDirector, Service Technologies &Industrial Solutions • Thomas FrostDirector, Industrial Seals and Marine business unit CMD 2014

  3. 1. Who we are Presented by VartanVartanian • Who we are • Our business • Service Technologies and Industrial Solutions • Marine Business Unit • Key Business Message

  4. Regional Sales and Service Ourvalue proposition: We realize full life cycle value for industrial systems to increase customers’ profitability and productivity. • Our offer: • Development and delivery of advanced services, technologies and engineering products • Industry-leading innovative solutions • Global reach through our regional structure and authorized channel partner network CMD 2014

  5. RSS sales share and proportion by geography in 2013 Net Sales SEKm: 24,217 Operating margin: 12.1% Number of employees: 7,426 39% of SKF Group’s total Net Sales CMD 2014

  6. Regional Sales and Service Business Structure Focused Industries Pulp & Paper, Metals, Mining, Food & Beverage Marine Business Unit Service Technologies andIndustrial Solutions Industrial Seals and Technology Channel Management 7 Sales Areas CMD 2014

  7. What we focus on • Improvement of customers’ productivity and sustainability within focused industries such as Food and Beverage; Marine; Metals; Pulp and Paper; and Mining • Well defined global network (ease of access) • Strong global distribution business • State-of-the-art supply chain management • Leverage of SKF technology platform offers,and Life Cycle Management to drive growth • Global service delivery infrastructure with 28 SKF Solution Factory locations • Advanced innovation in condition monitoring and industrial seals • Operational excellence to drive profitabilityand reduce total cost • Delivery of proven value Profitable growth

  8. Regional Sales and Service - global businesscoverage Europe North 600 Distributor branches Powertransmission Product service division Europe West 900 Distributor branches North America 2 500 Distributor branches System/product development China 250 Distributor branches CEEMEA 800 Distributor branches Warehouses Remote diagnostic servicecenters Asia Pacific 500 Distributor branches SKF Solution Factory Condition monitoring design & production centers Seals factories Latin America 350 Distributor branches Distributor branches Marine Customized Seals Maintenance products

  9. 2. Our business Presented by VartanVartanian • Who we are • Our business • Service Technologies and Industrial Solutions • Marine Business Unit • Key Business Message

  10. Focused Industries CMD 2014 Slide 10

  11. A multi platform based portfolio for the food and beverage industry Cooling Preparation Heating Packaging CMD 2014

  12. Food and Beverage: Market development and strategic programs • Industry overview and trends • Macro F&B Economic Index showing constant growth (Dow Jones), increasing urbanization trend (UN) • Global food industry grew by 2.6% in 2013, estimated to increase by 24.5% from 2013 to 2018 (Marketline, 2014) • Increasing regulations for ensuring Food Safety • Achieve market leadership in targeted countries • Make SKF the preferred partner through sellingadded value to end users and through asset life cycle management for OEMs • Position SKF as the Food and Beverage specialist • Establish knowledge partnerships with Strategic Accounts and SKF Distributors • Raise market awareness about SKF full capabilities for Food and Beverage Industry F & B strategic programs • Leverage and develop SKF portfolio to Food and Beverage • Provide a cross-platform portfolio to meet industry needs and requirements CMD 2014

  13. SKF Capital Markets Day

  14. Metals: Market development and strategic programs • Industry overview and trends • Moderate steel growth globally (MEPS 2014) • Low metal prices without sign of short term recovery (Bloomberg 2014) • Asia engine of growth but many mills make losses or are marginal in profit, especially in China (Taipei Times 2014) • OEM market is down and bigger investments are not expected; upgrades and service activities are focused (SMS Group press release 2014) • Increase market share in rolling mill business • Strategic accounts driving the offer implementation through SKF knowledge leadership • Retain and expand business in continuous casting • Improve service life in casters in combination of reduction on environmental impact in operation Metals strategic programs • Replicate SKF solutions and grow service sales • Drive business with existing solutions and use synergies of existing solutions from other segments CMD 2014

  15. SKF Capital Markets Day

  16. Pulp and Paper: Market development and strategic programs Industry overview and trends Market pulp prices will remain stable (RISI*) Near-future demand for pulp to be supplied from LAM(Pulp & Paper Magazine 2014) Continued growth in packaging & tissue grades globally (RISI) Outsourcing trend in NAM/LAM/Europe for maintenance activities (e.g. Voith 2013) Shift in OEM manufacturing to China (Metso 2013) • Focus on growth part of industry • Grow our business in China (paper machines), Asia and Latin America (pulp) • Focus on growth of non-bearing platforms • Growth in services in NAM (largest P&P market in the world) and Europe • Differentiate our Condition Based Maintenance and Asset Reliability Consulting capabilities and expand our knowledge • Growth in seals P & P strategic programs • Focus on bearings and units • Increase and share knowledge across our application engineering network • Differentiate the value of our bearing technology * ‘RISI is the leading provider of information for the global pulp and paper industry’ CMD 2014

  17. SKF Capital Markets Day

  18. Mining: Market development and strategic programs Industry overview and trends Mining markets showing economic weakness and cut backs in spending (Mining Journal 2014) Key OEMs see dramatic drop in order books (Mining Journal 2014) Iron ore and copper prices remain low due to drop in China demand and over capacity as new mines begin production (Daily Telegraph 2014) Companies with strong emerging market business will continue to outperform (PwC 2014) Trend for Remote Operations/Autonomous mining in production (e.g. mining.com 2013) • Secure long term relationships with OEMs and End users • Increase SKF sales in Corporate and Strategic Accounts • Solution provider to OEM and End user • Focus and increase Service portfolio MMPC strategic programs • Preferred Distributor partner • Develop programs to support DD sales • Preferred knowledge influencer of engineering, procurement, • and construction management (EPCM) consultancies • Increase SKF’s recognition as knowledge partner for EPCM CMD 2014

  19. Taking a full life cycle approach Deliver SKF equipped solutions OEM examples End user examples Optimizing the life cycle Equip with SKF knowledge CMD 2014

  20. SKF Life Cycle Management example from a leading company in the cement industry • An end-user customer approached SKF with a vibration problem in the foundations of a horizontal grinding mill • SKF proposed ODS (Operational Deflection Shapes), Application Engineering and FEM analysis • OEM of grinding mill got involved ->SKF was hired by both to find a solution • SKF detected the problem (flexing due to gear wear and wrong bearing housings) and proposed a solution with new bearings and housings • OEM of grinding milladopted the solution for their new designs -> Business with OEM of grinding mill increased significantly • SKF is now involved in baseline analysis for new equipment at end-user customer CMD 2014

  21. Deliveringvalueconsistentlytocustomer’s asset lifecycle SKF Sales, CustomerService, SKF Distributor Evaluationofvalue Customer Documented Solutions Programme Industries Technology Valuecalculation SKF Solution Factory CMD 2014

  22. Value delivered and verified to our customers SKF Documented Solutions Program (DSP) • Total verified customer savings:> SEK 27 billion • Verified savings in 2013:> SEK 4 billion • Coming from >25 industrial segments • Multiple languages • > 50 currencies can be converted CMD 2014

  23. A challenging business environment Voice of our customers • Competition • Currencies • Emerging markets • Crisis countries • Excess capacity • Slow growth • Price pressure • … CMD 2014

  24. Industrial Distribution CMD 2014

  25. Footprint: SKF Industrial Distributors global network Europe North 600 Distributors branches North America 2,500 Distributors branches CEEMEA 800 Distributors branches Europe West 900 Distributors branches North Asia 250 Distributors branches LAM 350 Distributors branches S&SAP 500 Distributors branches ~ 5,900 Distributors branches* ~ 320 Certified Network locations * Numbers are Industrial Distributors branches, not including CRE and IPS (sub-distributors) SKF Capital Markets Day

  26. Voices of our top distributors – May 2014 “Key area of improvement is delivering good service levels, help us to reduce the 300 days of inventory” – LAM Distributor “Logistics is the priority in next years” – EUROPEAN Distributor ”Logistics and stock are the priorities” – USA Distributor “Speed to serve and offer solution to customer is the key ”– USA Distributor “Relationship and stock on time are the two more important areas in Asia” - SSEAP Distributor “Customers need to be developed step by step and we must quantify the value what we are doing for them to make it happen. All is about educate our people and mindset change”- EUROPEAN Distributor “Evolution towards more partnership relation has to be supported by education and building strategic competences”- Chinese Distributor “To cultivate customer is possible but it requires a lot of time and dedication. Magic is in knowing what questions to ask and ask them right. It is about education” - EUROPEAN Distributor Supply Chain efficiency Partnership / Relationship Education CMD 2014

  27. Industrial Distribution strategic areas • Channel Management: • Increase level of mutual engagement and joint activities toward final customers • Education: • Equip SKF and distributors' employees with arguments to defend SKF value proposition • Supply Chain efficiency: • Cost savings in supply chain and inventory level optimization • Differentiation: • Certified programs and SKF Solution Factory CMD 2014

  28. SKF Distributor College • Quick facts * : • Number of certificates 231,487 • Number of users 18,643 • 44 courses available • 21 languages • Frequently new and updated courses:Released during 2014 • Inventory management • Bearings for high temperature applications Certificate number 230 000 was issued to Jennifer Caroline Reyes Rodríguez from SKF Authorized Distributor RODAMIENTOS Y ACCESORIOS, S.A; Mexico Course and date: Self-aligning ball bearings - 22 Aug. 2014 *Numbers from end of August CMD 2014

  29. Improved service levels with Vendor Managed Inventory (VMI) • Vendor Managed Inventory (VMI): • High service levels, faster delivery and higher quality of inventory management for our distributors • Benefits for SKF: • better visibility to inventory levels • more effective forecasting and manufacturing • more sales effectiveness • Increased sales and improved customer loyalty for the distributors • To date SKF has been successful in implementing VMI with major distributors in Northern and Eastern Europe. With VMI these distributors achieve a service level to end-customers of 98%. CMD 2014

  30. Service Technologies and Industrial Solutions as business essentials Global technical support Global field support System and product development Remote diagnostic serviceswith global databases SKF Solution Factory network Condition Monitoring and Maintenance products CMD 2014

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