NEWS RELEASE May 2019
Bottoms Up Collaboration Around Each Major Flow and Treat Prospect
Flow and treat companies have successfully implemented a strategy of independent action by each subsidiary or division. However, even the most successful can benefit from a Most Profitable Market program which identifies the potential profits to be made from each major prospect and allows bottoms up collaboration among divisions to pursue these targets. IDEX is one of the most successful corporations to pursue the independence strategy. If it can benefit from the new approach so can all the other suppliers.
IDEX fluid and metering technologies division has sales approaching $1 billion and a 30% EBITA. However, its market share in pumps, valves, and flow control is small compared to some competitors. So one question is whether it can build market share and still maintain the high EBITA. Each division operates independently with very little joint activity. However, there are changes in purchasing patterns which need to be considered. With remote monitoring and data analytics the corporate office can evaluate each valve, pump, and instrument in each plant and make purchasing decisions based on prolific cost of ownership information.
In addition large system suppliers such as Mitsubishi Heavy Industries (MHI) are furnishing complete systems and then remotely operating them. The MHI subsidiary MHPS can be injecting magnesium oxide into its furnaces using OBL pumps and injecting ammonia into its catalytic reduction systems using Corken pumps and compressors. It might be using Liquid Controls flow measurement and Pulsafeeder metering pumps. It could be pumping slurries with Warren Rupp diaphragm pumps. MHI could be monitoring all these components from its center in the Philippines or the one in Florida.
Once the customers and system suppliers have this comprehensive performance information, flow and treat companies will find that they need to match this knowledge with their own. It then becomes desirable for each division to collaborate. In order not to reduce the independent activity of each division, the collaboration can be bottoms up. The local sales people can share or not share information with their peers in the other divisions. Each will have a specific sales target for each major purchaser.
Most IDEX divisions differ in terms of the specific products which they produce. There is also some regional difference. Richter has great insights into the European chemical industry given its history and location. There are more than 16 distinct operations in IDEX Fluid and Metering Technologies.
|1||ADS||Flow Control Software||Municipal Wastewater|
|2||AEGIS||Hazardous Service Valves||Chemical|
|3||Alfa Valvole||Severe Service Valves||Energy, Chemical|
|4||Banjo||Electric Valves, Pumps||Agriculture, Industry|
|5||Corken||Compressors, Pumps||Energy, Chemical|
|8||Liquid Controls||Precision Measurement||Fuels and Liquids|
|9||OBL||Metering Pumps||Fossil Power, Beverage|
|10||Pulsafeeder||Metering Pumps||Municipal, Industrial|
|11||Richter||PFA Lined Centrifugal Pumps, Valves||Chemical, Fertilizer|
|12||S.A.M.P.I||Measurement||Oil and Gas Terminals|
|13||Trebor||PFA AAOD Pumps||Chemical|
|14||Viking Pump||Rotary Pumps||Food, Fuels, Chemicals|
|15||Warren Rupp||Diaphragm Pumps||Mining, Industry|
|16||Wright Flow Control||Rotary Lobe Pump||Beverage, Chemical|
Japan has a number of large end users for flow control instrumentation, pumps, and valves. Some of the world’s largest OEMs are Japanese based. The following chart shows the Total Available Market (TAM) for instrumentation, pumps, and valves for some of the major Japanese purchasers. It also shows the Serviceable Available Market (SAM)for each IDEX entity. The chart does not contain the actual forecasts but does show enough detail to illustrate the following points. They are:
- The major OEMS are large prospects for many products.
- Most of the companies are purchasing enough IDEX products to warrant a targeted marketing effort.
- The potential is spread among multiple divisions.
- Single purchase orders to OEMS are likely to include multiple products such as made by IDEX.
- The potential is large enough to warrant better understanding of the specific processes and product requirements.
- This understanding can lead to better products and even higher margins.
- The IDEX market share in Asia is low. So a focused approach on specific targets is a good way to build share.
|Japanese Annual Instrumentation, Pump, and Valve Purchases by Selected Companies*|
|Serviceable Available Market $ 1000s for Each Numbered Division||
|Oji Paper Company||Pulp & Paper||84||30||50||300||40||250||670|
|Nippon Paper||Pulp & Paper||60||20||50||200||30||200||500|
|JXTG Holdings||Oil & Gas, refining||363||50||10||200||300||700||300||400||500||2460|
|Idemitsu Kosan||Oil & Gas||153||30||10||10||50||150||200||100||300||150||1000|
|Total $ 1000||2748||120||360||295||70||190||60||20||1340||1800||5350||800||560||390||2110||3700||350||17515|
* not actual forecasts but just representative values for demonstration
The TAM is $2.7 billion. The IDEX SAM is $17.5 million. This is a share well under 1%. Many of the end users and all the EPCs are utilizing some flow control products in countries other than Japan. Sumitomo purchased the Foster Wheeler coal fired boiler operations in the U.S. It is also building wastewater treatment plants in many countries. MHI operates worldwide. It has had success in the Indian coal fired power market. Toray has multiple plants in the U.S. These companies prefer to deal with international suppliers who can address their global needs. A bottoms up collaborative program which can provide global service for each of these major purchasers will be an advantage.
The Most Profitable Market program to identify each major purchaser is explained at www.mcilvainecompany.com
N028 Industrial Valves: World Market explains the program for Valve Suppliers.