Battling Flat Industrial Market Conditions

Oct. 26, 2015
Flat power-transmission numbers make for more work, value-adds as suppliers await uptick in certain industrial sectors.

Business has been stagnant for distributors in the power-transmission equipment market, with customers becoming more conservative in both their day-to-day operations and long-term planning.

“Business is flat, basically,” says Greg Dormaier, owner of Western Belting Co. in Denver. “I just called one of our Baldor guys to get a flavor for what he is seeing on the West Coast, and his word was ‘flat.’ That’s kind of what we’re seeing.”

John Ruth, president of power-transmission distributor BDI, agrees.

“Power transmission growth was high single digits in 2014 and early 2015, but softer thereafter. Customers are becoming more conservative as the year progresses.”
- John Ruth, BDI

“Power-transmission growth was high single digits in 2014 and early 2015, but softer thereafter,” he explains. “Customers are becoming more conservative as the year progresses.”

Companies such as Western Belting and BDI have succeeded by focusing on the traditionally stable industries for power transmission.

Growth is strongest in fluid power and pneumatics,” says Ruth. “The automotive, food processing, and material-handling industries are BDI’s largest PT market segments and are all growing.”

“We used to do a lot of OEM business and we have kind of weaned our business back to end-user customers,” adds Dormaier. “We’ve gone after the things that don’t slow down—the hospitals, the HVAC business.”

Food and beverage is another steady PT customer base for Western Belting.

“People are going to eat. People are going to drink. We’re lucky here in Colorado. I think we’re going to have about 350 microbreweries up and running,” says Dormaier. “There’s just a ton of new ones.”

And there is one other somewhat unique customer base that has emerged in Colorado—legalized marijuana.

“Of course, our marijuana industry doesn’t hurt us either,” says Dormaier, adding that Western Belting doesn’t sell directly to those customers.

“They come in and they are all over the place. They are buying a lot of commercial buildings, so the price of the buildings has gone up,” he says. “The net effect is, when they need to put in air-conditioning units, special irrigation, and that type of stuff, there is a trickle-down. But we don’t sell directly to the [marijuana] marketplace. We sell to resellers.”

The declining oil and gas markets are key contributors to today’s flat PT business. Even distributors who don’t work directly with oil companies are feeling the effects.

“Oil and gas are such a significant part of the U.S. economy that virtually no one is immune to the downturn, and BDI is no exception,” explains Ruth. 

Dormaier agrees, “It still affects us from a secondary standpoint—rental companies and everything else that we deal with. We saw quite an influx when they really started a lot more activity in the last three years. A lot of competition came in that follows the drilling rigs. Five new hose companies came into the marketplace [for example]. And now we see them doing layoffs, and I don’t know how long they’ll be able to maintain their presence in the Colorado market.”

Uncertainty lingers over when, or if, oil drilling will resume to the high levels from not so long ago.

“In talking to guys in that marketplace, they feel that they have kind of bottomed out and that it is not growing,” explains Dormaier. “They don’t see it coming back, so it is pretty stagnant. And that kind of affects everything from North Dakota all the way straight down to the Texas marketplace.”

Relationships Rule

To stay successful, a distributor needs mutually beneficial relationships with its manufacturer partners. In Western Belting’s case, one such partner is Gates Rubber.

“A lot of things drive our technical developments. Certainly, the voice of the customer, including our distributors, are a key part of that.” - Mike Haen, Gates Rubber  

At Gates, Mike Haen, vice president of marketing/industrial markets, says he appreciates working with a distributor like Western Belting.

“They are really an extension of our sales force,” says Haen, adding that Gates’ sales force can’t be everywhere, making Western Belting an all-the-more valuable ally.

“We are limited in the interactions we can have with end-users,” says Haen. “So we need our distributors to carry our message and convey the brand and the quality behind our products.”

Gates and Western Belting also team up on new product training, depending on the product and the customer.

“As they are an extension of our sales force, they are also an extension of our training force,” says Haen. “Our sales team will work with distributors to help train them, particularly as they bring on new people. And we want those distributors to be training end-users out in the field. So it is really both. They will team up on large opportunities or key opportunities and work hand-in-hand.”

“We’ve gone after the things that don’t slow down—the hospitals, the HVAC business.” -
Greg Dormaier,
Western Belting Co.

Dormaier explains that Gates has brought some new products to Western Belting and its marketplace, referring to, among others, Gates’ Predator line of belts.

When these new products are developed—or just being improved upon—Gates will factor in distributor feedback, according to Haen.

“A lot of things drive our technical developments. Certainly, the voice of the customer, including our distributors, are a key part of that,” says Haen. “Distributors are something we are always reaching out to. We have some meetings and mechanisms to solicit that feedback and make sure we are getting the voice of our distributors from either a product-development perspective or just a general business perspective.”

One innovation in particular centers on improved speed drives.

 “They first came into the marketplace in the early ‘80s. Very expensive, very large,” explains Dormaier. “Every year, the footprint gets smaller on the variable-speed control. The pricing goes down. It has really made it economical for an OEM or an end-user to just put that box on the wall to vary speed and also to do a variety of different programming things.”

Dormaier also praised Gates’ Poly Chain line. While not a new product, it has been improved over the years to the point where the energy savings is attractive for end users.

“The big selling point is energy savings. When you have a V-belt drive running, the V-belts constantly slip. As they start to wear, you lose the efficiency,” explains Dormaier. “After a V-belt drive has been in place for about a year, it is probably about 85% efficient. With this Poly Chain drive … it will be 98% efficient. Showing the payback and showing them the energy savings, which is significant, is a great sales tool.”

Although such innovations have considerable strength and durability, they don’t have to be replaced nearly as often. But Haen says manufacturers must respond to market demands, maintain quality, and constantly improve products nonetheless.

“I think, ultimately, you have to drive quality. You can sit there and stick your head in the sand and hope that the rest of the world just stands still,” says Haen. “But we have to push on innovation. Once again, it is market-driven. What are we seeing? We’re seeing cracking on belts at a high temperature. So we addressed that.”

As did Dormaier, Haen points to the Poly Chain as an example.

“Our new Poly Chain full product [was] market-driven,” he says. “Those are the types of things that you have to innovate or you’re not going to continue to be relevant in the market.”

Voice your opinion!

To join the conversation, and become an exclusive member of Supply Chain Connect, create an account today!