Distribution channel for Lubricants

Today I thought to write about distribution channel of lubricant and its evolution. Yes, you are right, its nothing great to write about that, but I am just noting it down to understand from where we started and where we have come & why those changes were required. This will help us to discuss and find new way of distribution channel.

Typical Distribution channel for lubricant product in India. –

The old and still prevailing distribution channel for  lubricant products is shown in flow chart shown bellow.Dist.channelGenerally, goods flow from manufacturer to their own depot or carrying & Forwarding Agents (CFA) in different geographical location. From there it is sold to direct customers such as big industries or government institutes or to the distributors. Distributors sell it to either retailers, service station or end users (mid size fleet owners or industries). These retailers or services station sell products to end users generally individuals. Here, mechanics plays his role as influencer in some cases. He recommend products to his customer who purchases it from retailers.

This is a time proven distribution channel. Even today most mid size and small companies are following same pattern of distribution channel. But with increasing competition price war has increased and thus many companies and channel partners started to cut this channel.  Many companies increased there business through direct channels, few distributors started selling to even small mechanics and gave them more share of profit instead of being just influencers. And more elaborated channel looks like…

adv.dist.channel

as you can see the distribution network became more complex and efforts were made to cut length of chain. This happened around 2002-2005, where yet many companies were entering in market, market was expanding. For some new comers , cutting channel was essential as they were not getting entry at distributor of retail level. At the same time, few MNCs operated direct distribution channel and were selling to retailers in metros like Mumbai, Pune. This new move has increased market share of new comers and old giants were worried as they were not growing if not shrinking. End users hesitantly started trying new products from competitively new companies.

In this scenario, leaders were pushed to think about new techniques to retain there leading position. And thus, companies like  castrol came out with rural sub-distributors, followed by Gulf Oil. These companies tied-up mostly with leading retail out let in smaller town and gave them small areas to distribute their products. It was a success and gave good growth for few years at least.

At the secondary level, distributor has to start direct supply to mid size mechanics to by pass leading retailers who were not co operative to new comers or struggling companies. At present a big portion of 2-wheeler and car mechanics specially in urban market has started buying directly from distributors. Thus, focused was to cut distribution channel not only to fight price war but also to cross hurdles in distribution channel.

New distribution Channel that Failed…….

For industries like FMCG there were a huge change as malls came up in first decade of 21st century. Almost all urban FMCG distributor faced problem as number of small retailers were shutdown because of huge discounting from new big malls. Few lubricant companies has also tried to use this retail revolution, but none of them can do remarkable business despite giving huge discounts to this modern trade partners. The reason I feel was that Indian customer is unaware of DIY (do it your self) concept and till date enjoys services from mechanics or retailers.

Second revolution was online marketers. Traditional distributors & retailers in Garment, white goods, footwear industries were badly effected by this online trend but yet again, Lubricants could not be sold by this channel. Number of lubricants  are available on leading online stores like Amazon & flip kart but not getting reasonable volumes.  But this internet revolutions made B2b business more competitive as industrial users get more competitive suppliers through websites like IndiaMart and Tradeindia. For the companies offering specialty products are now able to advertise their product through social media marketing to their target customers, which otherwise were out of their reach.

I think this is enough for now… I am waiting for your comments and discussions and we will continue to find out ways and means to increase distribution & sales in coming years…

you can also mail me at ajit_guruji@yahoo.com.

Advertisements

Distribution channel for Lubricants

Today I thought to write about distribution channel of lubricant and its evolution. Yes, you are right, its nothing great to write about that, but I am just noting it down to understand from where we started and where we have come & why those changes were required. This will help us to discuss and find new way of distribution channel.

Typical Distribution channel for lubricant product in India. –

The old and still prevailing distribution channel for  lubricant products is shown in flow chart shown bellow.Dist.channelGenerally, goods flow from manufacturer to their own depot or carrying & Forwarding Agents (CFA) in different geographical location. From there it is sold to direct customers such as big industries or government institutes or to the distributors. Distributors sell it to either retailers, service station or end users (mid size fleet owners or industries). These retailers or services station sell products to end users generally individuals. Here, mechanics plays his role as influencer in some cases. He recommend products to his customer who purchases it from retailers.

This is a time proven distribution channel. Even today most mid size and small companies are following same pattern of distribution channel. But with increasing competition price war has increased and thus many companies and channel partners started to cut this channel.  Many companies increased there business through direct channels, few distributors started selling to even small mechanics and gave them more share of profit instead of being just influencers. And more elaborated channel looks like…

adv.dist.channel

as you can see the distribution network became more complex and efforts were made to cut length of chain. This happened around 2002-2005, where yet many companies were entering in market, market was expanding. For some new comers , cutting channel was essential as they were not getting entry at distributor of retail level. At the same time, few MNCs operated direct distribution channel and were selling to retailers in metros like Mumbai, Pune. This new move has increased market share of new comers and old giants were worried as they were not growing if not shrinking. End users hesitantly started trying new products from competitively new companies.

In this scenario, leaders were pushed to think about new techniques to retain there leading position. And thus, companies like  castrol came out with rural sub-distributors, followed by Gulf Oil. These companies tied-up mostly with leading retail out let in smaller town and gave them small areas to distribute their products. It was a success and gave good growth for few years at least.

At the secondary level, distributor has to start direct supply to mid size mechanics to by pass leading retailers who were not co operative to new comers or struggling companies. At present a big portion of 2-wheeler and car mechanics specially in urban market has started buying directly from distributors. Thus, focused was to cut distribution channel not only to fight price war but also to cross hurdles in distribution channel.

New distribution Channel that Failed…….

For industries like FMCG there were a huge change as malls came up in first decade of 21st century. Almost all urban FMCG distributor faced problem as number of small retailers were shutdown because of huge discounting from new big malls. Few lubricant companies has also tried to use this retail revolution, but none of them can do remarkable business despite giving huge discounts to this modern trade partners. The reason I feel was that Indian customer is unaware of DIY (do it your self) concept and till date enjoys services from mechanics or retailers.

Second revolution was online marketers. Traditional distributors & retailers in Garment, white goods, footwear industries were badly effected by this online trend but yet again, Lubricants could not be sold by this channel. Number of lubricants  are available on leading online stores like Amazon & flip kart but not getting reasonable volumes.  But this internet revolutions made B2b business more competitive as industrial users get more competitive suppliers through websites like IndiaMart and Tradeindia. For the companies offering specialty products are now able to advertise their product through social media marketing to their target customers, which otherwise were out of their reach.

I think this is enough for now… I am waiting for your comments and discussions and we will continue to find out ways and means to increase distribution & sales in coming years…

you can also mail me at ajit_guruji@yahoo.com.

Water in Oil – common but harmful

After a long time from my previous blog, I thought that in these rainy days, common problem is number of lubricants being mixed with water. Water is life, but a life destroyer in case of oil. Water or moisture enters in oil by different ways in different lubricants during operation. Few operations prone to develop moisture in oil where as in some cases water enters in oil accidentally. But in any of these circumstances, water is detrimental to any lubricant. Studies have shown that moisture in oil reduces life of a bearing by 10 to 100 times.

SOURCE OF WATER IN LUBRICANTS

  1. Condensation -Water can contaminate a system by condensation when moist air enters the component and a change in temperature causes the water to condense and drop into the oil. However, level of moisture by this means is too low(< 0.5%).
  2. Breathers – hot oil is prone to catch moisture from air through breathers. This type of cases occurs when there is high level of moisture in atmosphere(in monsoon season).
  3. Heat exchanger – cooling systems , heat exchangers to cool lubricant are major source of water in oil. Minor leakages allow cooling water to enter in oil.Such systems are common in hydraulic oils.
  4. Water jackets – some times whole lubricant sump has water jackets to cool oil (typically seen in quenching oils), leakages in such jackets are reason of water seepage in oil.
  5. Accidental reasons – water enters in oil while fighting fire in /around oil. while topping of oil in water jackets or tanks that cools oil.
  6. Miss-handling – we have seen that rainy water enters in big oil sumps due to carelessness of operators. In rare cases I have seen that while installing new tanks no body notices that there is some part of water in empty tank and fill it with fresh oil.

What is the real Harm?

Water in oil in any proportion is harmful to oil as well as machine. Water is poor lubricant and destroys oil film on moving parts and that increases wearing of such parts. In presence of water, oil gets oxidized very quickly while operating under high temperature and pressure. Water also attracts some of additives present in hydraulic oils that further degrades lubricants. Generally, oil prevents corrosion bearings and other parts of machine but water in oil does the exact opposite.

Three Forms of Water

1.Dissolved water refers to water that has been chemically absorbed into the oil. While dissolved water possesses no direct threat to the component being lubricated, its presence can serve as a catalyst to oxidation. Dissolved water is normally not visible in the oil.
2. Emulsified water is water that maintains its chemical integrity, but is held in suspension in the oil by additives and contaminants. Emulsified water will severely alter the load handling ability of the oil. When temperature and pressure are applied to a contaminated fluid, the oxidation process is significantly accelerated, leading to premature degradation. Internal corrosion and rust will also result in all areas of the system. When the oil has emulsified water, it will take on a
hazy or milky appearance.
3. Free water describes water that is present in the oil, but not held in suspension. Since oil and water don’t mix, the oil’s base stock will be constantly trying to separate from water. Without additives or contaminants to bond with the water, it will separate rapidly and settle to the bottom of the oil. Free water will be visible in the oil as a separate phase at the bottom of the oil reservoir.

TOLERANCE LIMIT OF WATER IN OIL

While different machine manufacturers set different tolerance limit of water in oil, most common limit is 500 ppm (0.05%). There systems for which the same limit is as low as 30 ppm mainly because of presence of some sensitive valves, sensors etc.

TEST TO KNOW MOISTURE LEVEL

Crackle test is most common test to know presence of moisture/water in oil. Though this test is very primary and not scientific as it doesn’t inform exact level of moisture, it is very simple to know if moisture is present in oil. In crackle test few drops of oil is put on hot plate. This sample will have bubbles or pops up if moisture is present in it. If crackle test is positive another test carried out with help of Karl Fischer to know exact amount of moisture/water in oil.

CONTROLLING WATER LEVEL

In systems which are prone to moisture, lubricant must have demulsifier in it. Turbine oil, vacuum oils must have such additives. Circulating systems prone to water influx, such as those found in rolling mills and power generation plants, can simply drain
the water from the reservoir to control contamination, provided the oil exhibits good
demulsibility. However, once water enters in to oil certain steps must be taken to remove it. Simple filtration systems, vacuum dehydration or centrifuge systems are effective way to remove water from oil.

Your remarks and suggestions are welcome by mail (ajit_guruji@yahoo.com) or in the comments. At the same time we can help you if you are facing such problem at your works.