By BLM Group
Over the past few years, the steel industry has faced significant demand fluctuations while maintaining consistent production levels. This situation has prompted producersto leverage their bargaining power to gain greater control over the distribution network.
Distributors, especially those of intermediate size, thus found themselves squeezed between large groups that include steel production within them and small groups that manage to be competitive by working locally and operating in limited market niches.
To preserve their independence from manufacturing, distributors have begun to focus on adding value to their products, offering a wide range of services from design assistance to adding machining to provide the end customer with finished, ready-to-use products.
Many distribution groups for tube, sheet metal, and other steel products have thus chosen to expand their fleet of machines to increase margins on product sold and secure future opportunities.
How to achieve this transformation
Distribution companies have two main strategic options:
- specialize in depth on specific market segments;
- broaden the range of services while maintaining the broadest scope of action so that they can then focus on the desired segment once they have retained customers.
One way to approach this first strategic choice is to divide one’s customer database into segments and carefully analyze order history.
Based on this information, it then becomes possible to initiate a dialogue with customers to understand their needs: is there additional processing they wish to perform on the purchased material? Are they able to handle them by themselves or are they dependent on external suppliers? Do they need consulting in design or production?
Having traced a complete overview of the downstream supply chain, it is then possible to define the best strategy for focusing future investments.
Optimizing spending capacity is essential, to avoid wasting resources and to ensure effective coverage of the entire desired scope of action by purchasing the necessary machinery, hiring new resources or expanding the services offered.
