I have been selling components and systems to original equipment manufacturers for many years. In my new role as Sales Director for Asia America Corporation, I have been looking for opportunities to pair our strengths with market demands. One item that we have taken note of is our ability to produce custom bearings for manufacturers. This can enable the OEM to lower their cost for production, but more important, capture more of what has become a highly-profitable aftermarket parts business.
The recent economic downturn has forced many equipment manufacturers to adjust their business model. Since the market to sell new machines has been depressed in the last few years, manufacturers have taken a stronger look at developing aftermarket parts sales and services. After all, if a manufacturer has been producing machines for many years, their installed base of potential aftermarket business could be very large.
The shift in thinking has changed so much that OEM’s have altered the way they look at their total business model to include aftermarket parts sales into their initial design parameters. We see more companies designing machines for planned-obsolescence.
As an example, an OEM may want to develop a machine with sub-systems and wear-parts to last for only 5,000 hours.
There may be several reasons for this:
- The machine price point is at a level that most consumers have the financial ability to purchase new machines on a regular basis.
- The market for this machine demands the latest-and-greatest technology. That technology typically gets updated on their machines with every new model year.
- The first-tier customer for these machines typically sells, or auctions, the machine after 5,000 hours.
- By designing the replaceable components to last 5,000 hours, the OEM will enjoy the higher margin aftermarket parts sales from the second-tier customer that purchased the used machine.
If you are trying to sell components, or systems, to this OEM with a design life that is noticeably longer than 5,000 hours, you may think that you have a good selling point, but in reality, it contradicts the OEM’s design goals.
But what about machines that have a very high initial purchase price? That market is just as attractive. For machines that have a very large initial price tag, the customer is motivated to maintain and protect their investment. Preventative maintenance with factory approved components and services are usually the best way to get the longest life out of the machine. This creates another sales funnel for aftermarket parts and services for the OEM.
Just like the automotive aftermarket, there are several companies that make their profit by selling parts for the off-highway aftermarket. This threatens the OEM’s business in this area. It doesn’t take much for a service technician to find a replacement part that is not an OEM component.
Some of the most susceptible components to be replaced are bearings. Many off-highway machines will have several types of bearings. Most of these bearings are large, expensive, and will wear from usage. This is a lucrative wear-part on these machines.
Unfortunately, many bearing manufacturers have their name and part number stamped on each bearing. This makes it easy for a service technician to call their local bearing distributor for a replacement, rather than the original machine manufacturer.
This is one of the many areas that Asia America Corporation can offer a solution. With our high-quality bearing partners, we can offer bearings that meet the equipment manufacturer’s specifications, stamped with their company name and specific part number. By manufacturing a bearing, tailored specifically for the OEM’s machine, with their part number, the manufacturer will be the primary source for bearings on their machine, increasing their aftermarket sales revenue.