Alfa Laval Integrates 3 Businesses

Alfa Laval (India) is changing tack. It has integrated its three core businesses -- heat exchangers, separation equipment and flow equipment (pumps and valves) --in a bid to focus on customer needs and step up sales.

The new strategy an outcome of a similar change in plan at its Swedish parent, Alfa Laval AB -- was put in place with the recent merger of LKM, the sanitary flow equipment company, with Alfa Laval India. The Pune-headquartered company has three factories in India and these used to operate as separate divisions and made flow equipment, separators (used in an array of industries, including the pharmaceuticals and brewery industries) and thermal equipment.

 

According to company officials, the integration will save costs because the three divisions will now have a common purchasing department, information technology department, sales function, human resource development department and a common operations head. All these will be centralised in Pune.

The synthesis is also expected to help the company offer integrated product solutions to the customer -- a strategy Alfa Laval AB adopted a year ago. "In the past, we attacked the market independently for our core products," Alfa Laval AB president and CEO Sigge Haraldsson said. "We were selling individual products, with different sales people often addressing the same customers," he said.

"We changed this about a year ago. We reorganised the organisation into 10 customer segments. Each customer segment addresses specific customers -- one addresses the needs of the brewery industry, another the oil and gas industry, the third the environment industry, the fourth the life sciences industry and so on. We sell all our core products to each customer group of customers. In addition, we now combine our products and sell smaller systems as well," he said.

Citing an example to explain the new strategy, Haraldsson, who is on a four-day visit to India, along with Peter Leifland, executive vice-president of Alfa Laval AB, said that that there are three sides to a brewery -- the brew house, the brewery process and the bottling. "We're not involved in the bottling or the brew house but are involved in the brewing process. Earlier, we'd sell single components. Now we sell a piece of the brewing process. We're doing the same thing in India. Alfa Laval sets up 60 to 70 per cent of the breweries in India," he added.

The latest changes at Alfa Laval (India) have to be seen in this light, company officials added.

...bucking the trend

At a time when engineering companies in the Pune belt are buffeted by the economic slump, Alfa Laval (India) is bucking the trend. Sales are up at Rs 127 crore in the first six months of 2001 against Rs 120 crore in 2000, profit before taxation and non-recurring income too is up at Rs 25.26 crore against Rs 16.94 crore and the company's order book is bulging (Rs 200 crore in August this year).

So how does an engineering company beat a slump? For that to happen, says Alfa Laval (India) managing director Satish Tandon, it has to have a wide product portfolio, should export to reduce the dependence on the domestic market and cut costs. It also helps if the company is the Indian arm of an engineering multinational that buys products from here.

Tandon says that only engineering companies that don't have a long-term commitment to India -- read: companies that import, assemble and sell here -- are in bad shape.

"We've a wide customer base and that's important. We have a variety of products and so our business is not that cyclical as you might imagine," notes Peter Leifland, executive vice-president of Alfa Laval AB, who along with Alfa Laval president and CEO Sigge Haraldsson, is on a four-day visit to India.

Some 60 per cent of Alfa Laval's (India) exports of almost Rs 50 crore last year went to Alfa Laval AB group companies. That percentage is likely to increase further. For Alfa Laval (India) is poised to emerge as a major sourcing base for the Swedish engineering equipment multinational. The Swedish giant has closed four manufacturing plants in countries such as the US, Canada and Spain and shifted part of their production to the three Alfa Laval factories in Maharashtra. "We have a long term commitment to India. We'll be putting more of our group manufacturing into India," Haraldsson promised.

The remaining 40 per cent was exported directly to Bangladesh, Sudan, East Africa, Sri Lanka, and Nepal, to name a few countries.

Also, the Indian company cut its payroll strength from 966 in 1997 to about 767 now, in line with Alfa Laval AB's staff reduction from about 12,700 to 9,500 worldwide.