Bosch-Rexroth president comments on a sales strategy for the 21st Century

August 10, 2006
Bosch Rexroth
News

Summary

Coming off a century most remarkable for its pitched competitive battles, many business experts are predicting that this century will be more distinguished for its cooperative efforts. For years, Bosch Rexroth has been following a collaborative approach with customers and suppliers. Now they are extending that model to their distribution partners.

"Collaboration is Stronger than Competition"By Wolfgang Dangel, President and CEOAugust 10, 2006Coming off a century most remarkable for its pitched competitive battles, many business experts are predicting that this century will be more distinguished for its cooperative efforts. For years, we at Bosch Rexroth have been following a collaborative approach with customers and suppliers. Now we are extending that model to our distribution partners.Manufacturers haven't always had the best relationships with the distribution channels that sell their products to end users and to others who apply them in real situations.In some ways, that's not surprising: there certainly is creative tension. Manufacturers, on the one hand, always want their channel partners to buy more. Meanwhile, distributors clearly understand that large inventories are expensive to maintain, especially for extensive product lines that have a multitude of options, but relatively few sales of any individual part number. And they ask what their manufacturers are doing to help them move products.For Bosch Rexroth, there were several important reasons why we are bucking the trend and seeking closer relationships with our channel partners. First, with the breadth of our product line, drive and control products across almost every industry, we cannot reach all of our potential customers without their assistance.Secondly, our most advanced products often need to be customized or engineered to achieve their full potential for providing sustainable competitive advantage. Thus our distributors have the opportunity to offer tremendous value to the customer. That's why our first question to distributors is not, “How many sales engineers do you have?” but “How many applications engineers do you have?”As a result, though we may not have as many distributors as some of our competitors, we are fortunate to have the best, most technically astute distribution partners in the industry. And I consider them to be an extension of our company, an integral part of the Bosch Rexroth family. I believe this level of cooperation and collaboration is unprecedented in our industry. We exchange information with our channel partners that many companies will not share even with their own employees, let alone another business. Some examples include:

Sharing of confidential information about margins, profits, investments, and plans for the future.

Access to internal inventory, order entry, order status, and collaboration software.

Close cooperation in applications engineering. The last item is of particular importance, since applications engineering expertise is one of our core competencies and one of our clear advantages in the marketplace. In essence, we are giving our distributor partners a share of the brand positioning we have built for ourselves over the past several decades. The benefit to customers is significant: they get a technically-advanced consultant within driving distance, who can access a world-class product development and manufacturing organization. The result? Solutions with engineering sophistication well beyond the reach of most of our competitors.With the equivalent of a factory employee around the corner, they get much better customer service. Not only can our distributors help analyze the situation, they can provide the products and, in some cases, be there in minutes.For distributors, the benefits are equally significant: we have clear understanding about how both partners add value for the customer. And while the industry has been in the midst of a rather lackluster recovery, our sales through U.S. distributors have doubled since 2002. And I expect more of the same: in order for us to achieve our rather ambitious sales goals ($2.5 billion in North America by 2014), sales through distribution will have to triple. In the collaboration model Bosch Rexroth routinely hosts its distributors for tours of the corporate manufacturing and research facilities in Europe, introducing key distributors to top management. There are regular quarterly meetings for a council of leading distributors where they have direct access to company management. And we encourage them to stay in touch with the senior-level executives they meet to continually discuss ideas. We believe that we have achieved significant sales increases, gained market share, and had higher Bosch Rexroth content on machines as a result of these cooperative efforts. The secret is that we have attempted to foster a collaborative relationship with and between distributors. Specifically, we've granted them exclusivity in their territories, so that they don't have to worry about competing with us or with another distributor. And that depth and degree of collaboration, information sharing, mutual trust is unique: no other drive, motion, and control competitor is willing to provide these assurances to their channels and give them such a clear way to add value to their customers. In fact, some of our competitors have a business model with competitive distribution creating an almost adversarial relationship with and between distributors, preventing any significant information sharing. We are totally committed to our partnership. So our distributors are partnering with a company known worldwide for its collaborative relationships with distributors, customers, and suppliers. It’s who we are. And, I believe it's the best strategy for doing business as a technical leader in the 21st century. (SIDEBAR #1) One Distributor’s ViewDALLAS, TX - Mike Rowlett, CEO and president of Womack Machine Supply Co., has seen a lot of adversarial relationships between manufacturing companies and their distribution partners in his years in the drive, motion, and control industry. “There were times,” he said recently, where distributors became protective, even defensive, and you almost had to battle with the manufacturers for the right to sell the product.”That's why he's so excited about the unprecedented partnership between Bosch Rexroth and his company, a major supplier of fluid power, electrical control and industrial automation components in the south-central United States. “They are looking at distribution as a real partner, instead of as an adversary,” he noted. “They have opened their arms and even allowed us to participate in the creation of policy.”Other companies, he pointed out, may respond when there’s a problem, but only unilaterally, without considering the needs of distribution or even customers. The classic illustration of Bosch Rexroth’s approach, he said, was PitStop, the company’s information portal on the web. “We told German management all the things that could be improved, and they had the foresight and integrity to see what needed to be done and invited us to help them fix it.” He credited Bosch Rexroth president and CEO Wolfgang Dangel with providing the senior management direction that cemented the stronger relationship between the company and its channel partners. That relationship includes information sharing, sales, margins, customer lists, customer needs or purchase history, for instance, on a scale hardly imaginable before, or with other manufacturers. "We would absolutely never do that before," Rowlett explained, adding that in his business, customer information is absolutely critical. “That would have been like having a fox in the hen house.”The result, he said, is that manufacturers and channel are working together to solve customer problems and meet their needs.“The time we used to waste fighting our suppliers we can now use to fight our competitors,” Rowlett explained. “As a result, we give the customer a better, fuller package. It’s a breath of fresh air.”(SIDEBAR #2) Distributor Says Trust Makes All the DifferenceBENSALEM, PA - Every few years, said Joe Loughran, president of the fluid power and automation distributorship Airline Hydraulics, someone comes out with another book about trends in the industry and talks about the distrust that exists between manufacturers and distributors. Apparently, those books aren’t being followed very closely by Loughran’s company or by Bosch Rexroth Corporation, a drive and control automation technology manufacturer in Hoffman Estates, IL."It’s a very unique relationship that Bosch Rexroth has with its distributors,” Loughran said. “There’s a spirit of trust, honesty, and openness on both sides. And that is so unusual.”Loughran says based on that level of trust, his company has recently made some significant investments, including two acquisitions. Plus he’s hired several more people to service the Bosch Rexroth business."I don’t want to let them down,” Loughran explained, referring to Bosch Rexroth. "When you know you’re going to be treated fairly, you’re willing to stretch the rules a little. Because you know they’re going to help you do whatever it takes for both of us to succeed.”As a result, he said, his company is willing to make the investments in expanding the Bosch Rexroth business. The secret, he noted, is the exclusive relationship the company has with its channel partners."I don’t have the intra-brand competition that makes things so inefficient,” said Loughran. “We’ve replaced that inefficiency with mutual trust, and now both horses are pulling in the same direction.”Bosch Rexroth and its distributors, he said, are totally in sync.”What can be better than a distributor and a manufacturer really working together for the same things,” he asked. “That’s the way you’re going to win in the marketplace.”About the AuthorWolfgang Dangel was appointed president and chief executive officer of Bosch Rexroth Corporation in April 2003. Prior to his appointment, Dangel was executive vice president and chief financial officer for Bosch Rexroth from 2001 to 2003. He has also served Bosch Rexroth in key overseas positions: as managing director of Mannesmann Rexroth China Ltd. (1996-2000) and as head of controlling for Mannesmann Demag, Johannesburg, South Africa (1991-95). Dangel holds a Master’s of Business Administration and a bachelor’s degree in finance, both from the University of Munich (Germany).Bosch Rexroth AG, part of the Bosch Group, achieved sales of approximately $5.7 billion (4.6 billion Euro) in 2005 with over 28,200 employees. Under the brand name of Rexroth the company offers all drive and control technologies, from mechanics, hydraulics and pneumatics to electronics and associated service. Over 500,000 customers worldwide utilize Rexroth’s unique technological know-how to implement their innovative and future-oriented systems and machine concepts. The global player, represented in over 80 countries, is an extensive supplier of components and systems for industrial and factory automation and mobile applications. Learn More

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