Liugong: Getting through the Difficulties with Dealers

Company Profile
 
Guangxi Liugong Machinery Co., Ltd. (stock code: 000528, hereinafter referred to as Liugong) is the first listed company in Guangxi and also the first one in the construction machinery industry, and is honored as “the pacesetter enterprise in China’s construction machinery industry”. The company has 9 manufacturing facilities in China, and two overseas R & D and manufacturing facilities in India and Poland. Its main product lines include wheel loaders, hydraulic excavators, cranes, road machinery (road rollers, motor graders, pavers, milling machine, etc.), small machinery (skid loaders, backhoe loader, etc.), forklifts, bulldozer, and mining truck.
 
Among others, Liugong has the largest share in the domestic markets of loaders, and is known as the leading brand in the loader industry. Liugong has also become the most representative excavator brand in China. By the end of 2012, the company has employed about 13,325 people.
 
Challenge
 
In 2012, the whole machinery industry experienced a “harsh winter” since the slowdown in demand, the clients’ weakening payment capacity and the falling sales in the industry. Liugong’s downstream dealers were directly affected by such economic downturn, and they faced with numerous difficulties such as poor sales and collections, stockpiled products, and declined revenue.
 
Liugong believes that dealers are important partners, and they depend on each others like fish and water. How to help dealers to change business mode, improve their management, deal with the challenges in the market together, and build a robust, professional and efficient marketing system has become an important problem that the company has to solve.
 
Solution
 
Applying advanced management information system
 
In combination with business features and development requirements, we have developed the management systems tailored to the dealers, which have drawn on the essence condensed in the management rules of our company and dealers, and integrated various business procedures such as customer management and spare parts inventory.
 
Enhancing capability through various projects
 
In connection with the dealers’ requirements for promoting their capability, we have summarized and refined out 12 competencies in marketing, operational management and aftermarket projects, which may support their future development, and carried these projects forward in the form of team coaching.
 
Easing the difficulties in five aspects: cash, cost, inventory, management and talent
 
We have taken a variety of measures to help dealers alleviate their difficulties in cash, cost, inventory, management and talents. In terms of talents, we provide them with professional trainings on various business modules, and offer their decision-makers some chances for high-level training. In the management, we optimize their operation and management systems and process, and disseminate the advanced management concepts and methods to them. In inventory management, we make an overall plan on the allocation of prototype machines, accelerate the inventory turnover, and help dealers build their channels for selling used machines, and optimize their inventory in the kinds and quantity of spare parts. In terms of cost of products and spare parts, we give price discounts or interest-free support to our dealers. In order to address their cash problems, we have increased their credit moderately, and given the process reward to them in real time.
 
Achievement
 
Managing dealers in a more standardized way
 
By the end of 2012, 55 Liugong’s dealers applied and operated the management information system, by which they have realized standardized management and corrected their own shortcomings in the management immediately, and thereby improved staff efficiency, reduced operational cost and increased their profits.
 
Enhancing dealers’ ability to fend off risks
 
The dealers have optimized their talent structure to stabilize their backbone personnel, and accelerated the sales of prototype machines to alleviate Liugong’s inventory pressure. They have also actively participated in competition and expanded their sales by making use of their advantages in cost. They have speeded up inventory turnover, reducing inventory level and improving cash flow. Besides, they have enhanced their comprehensive competitiveness and their capacity to tackle challenges through improving their risk management and control capacity, product sales capacity and service assurance capacity.
 
Achieving higher economic effect
 
After speeding up cash flow, dealers returned the payment for goods to the company more punctually. We have built good cooperative relationship with them and promoted each other in business to improve the overall competitiveness of the industry chain and achieve win-win cooperation.
 
Prospect
 
As the pacesetter in China’s engineering machinery industry, we still need rely on our strong capability of technical innovation and rich experience in the application of products, and spare no effort to create value with our business partners to meet the challenges and opportunities in the development of the industry. How to help dealers to grow up, promote the development of national industry, and make contribution to the sustainable development of construction machinery industry in China and even in the world is a realistic subject that we have to face in the future.