Most manufacturers with unique capabilities understand and appreciate the value that they can potentially bring to their marketplaces. However, converting that potential into revenue requires targeting the sales effort at the place in the value chain where it is most likely to be positively received. Finding the appropriate link in the value chain is not always a straightforward process and many companies spend years focusing resources on the wrong stakeholders. This was the case at MCM portfolio company RMB Products.
RMB is a manufacturer of thermoplastic parts serving the aerospace, chemical, semiconductor, and pharmaceutical industries. Its capabilities include rotational molding, 3D printing, and fabrication of highly engineered thermoplastics, including fluoropolymers. Its principal products for aerospace are ductwork components that make up part of the air delivery systems for passenger and instrument cooling. Over the past 30 years, the company has benefitted from the aerospace industry’s increasing replacement of metal and thermoset composite components with lower cost thermoplastic alternatives.
RMB felt that use of its components in ductwork subassemblies could provide a significant cost reduction to OEM aircraft manufacturers without any significant weight penalty. Despite having a production cost advantage over other molders, the company was gaining little traction within the commercial aircraft market. Because OEMs must approve any change in component design, RMB’s initial attempt at gaining share involved making unsolicited offers to major OEMs. The strategy failed and during their discussions with OEM engineering teams, RMB came to realize that the OEMs did not want to become responsible for sourcing components separately; they only wanted to buy complete subassemblies. However, OEMs did want to be informed of technical advancements and opportunities to improve aircraft. If RMB wanted wider adoption of their thermoplastic components in commercial aerospace, those discussions needed to be held elsewhere along the value chain.
Therefore, RMB adopted a two-tier approach and interfaced with the value chain at two points. Communication with OEMs continued but was strictly limited to technical discussions, where the goal was to educate the engineering group on the advantages of converting to molded thermoplastic components. Commercial discussions were held with the Tier 1 manufacturers, who purchased and integrated the components into the subassemblies. These discussions centered around the cost savings RMB could offer over other molders. Upon adopting RMB’s components into their subassemblies, the Tier 1 players were able to decide how to split the cost savings between themselves and their OEM customer.
The strategy resulted in both parties in the value chain, OEMs and Tier 1s, being motivated to make the switch to RMB’s molded components. The cost savings generated were enough to cover the customer’s engineering changeover costs. Additional tooling costs were picked up by RMB and amortized over the life of long term agreements that permitted the company to better schedule production and improve on-time delivery. As a result of the company’s new marketing approach to the commercial aerospace supply chain, revenues from that end market segment have more than tripled.