Rci Master Distributors

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RCI Master Distributor
Evolution of Supplier Relationships

9/16/2012
Group 3

PHILIP CORRADINI (IE/15/009)
KAMALIKA GANGOLY (PGP/15/019)
S. SIDDHARTH (PGP/15/048)
DEVINA BHASKAR (PGP/15/082)
APOORVA GOYAL (PGP/15/130)
MADHURI MUKHERJEE (PGP/15/155)
AMARENDRA (PGP/15/202)
DHANANJAY JANARTHANAN (PGP/15/216)
GAUTAM S (PGP/15/277)
S. HARIPRASAD (PGP/15/314)

HISTORY OF RCI
1946 – Mark Schwartz founded a motor repair business and secured a GE franchise for component parts. He was instrumental in bringing about a service innovation by exchanging fully working motors with customers who came in for repairs of their broken down motors. He then repaired them and replenished his motor inventory. 1962- GE’s General Purpose Control operation developed a new contactor for its air-conditioning and refrigeration business. Mark Schwartz attained the rights to exclusively distribute these contactors to the aftermarket through air-conditioning and refrigeration wholesalers. 1963 – RCI had demonstrated to GE that they could get GE’s products to market, with the parts moving from master distributors to wholesalers and ultimately service repair persons. RCI also worked in the direction of providing new innovations in terms of packing and product innovations as well. Mark Swartz worked with GE engineers and through this inputs in developing innovations, RCI continued to distribute these models exclusively. 1974 – Danny Swartz takes more responsibility and starts taking all the day-to-day business decisions. Some of the key values which RCI followed were

* Working by developing a relationship of trust and faith with suppliers. They did not have any formally drawn contracts. * Demonstrating to the suppliers how difficult distribution was and how RCI’s competencies could not be replicated. CURRENT SYSTEM

The current position of RCI was as follows:
RCI distributed over 6000 electrical and related products earning revenue of $ 35.8 million and with operating profits of $ 3 million. RCI plays the role of a master distributor i.e. it sells to air-conditioning and refrigeration wholesalers who in turn sell to air conditioning and refrigeration contractors and repair houses. Their role is essentially restricted to the aftermarket channel for repair parts. RCI’S SALES PROCESS

RCI uses a network of independent manufacturer’s reps. who were 45 in numbers and from 14 companies. The average commission received by them was 3.5% and usually do not carry competing lines. RCI operated five warehouses which were electronically linked and operated on real-time inventory basis. RCI’s strength was in commercial refrigeration and air-conditioning business where price was secondary in some cases and reliability was more revered. Manufacturers of Electronic Components

Ex: GE, Texas Instrument, Honeywell, Emerson
W. W. Grainger
Wholesale/ Distributor
330 Outlets
Master Distributors
e.g., RCI, Steveco, Brownell, GEM
Appliance Equipment Manufacturers
e.g., GE, Amana, Trane
Air-conditioning, Refrigeration and Appliance Wholesalers
(approx 1250 with 4000 branches)
Repair and Service Houses (approx. 10,000)
Appliance Retail Dealers
Consumers

Overview of Industry Channel Structure

Conflicts with GE
GE Appliance and control: Loss of exclusivity
In 1976, RCI first lost its exclusivity for cold controls to GEM which started selling 10 times the volume of cold controls as compared to RCI.GE Appliance and control was not very confident with Mark Schwartz who had only 3 years of distribution business experience. GEM’s success led to gradual loss of exclusivity of PCI over other products. GE appliance and control used ‘Coercive power’ against RCI because the latter was not able to increase the sales volume as desired by the former. Listed below are the outcomes of GE Motors’s distribution channel study:- a. Master distributors were gradually becoming inefficient and ineffective in managing inventories, product knowledge and...
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