Increasing Flow Control and Treatment Product Gross Margins

The best way to raise prices without losing business is to provide a product which justifies a higher initial price. To accomplish this you need to:

·       Develop a superior product

·       Convince the customer as to the value

Develop a Superior Product

McIlvaine is currently preparing a Decision Guide on choke valves for oil and gas applications. These are tough applications and require custom valves designed for severe service. This is only part of the story according to George Gorman of the Valve Institute. The success or failure of a valve rests not only on the valve merits but on how it is applied.  Subsea pipeline valve needs are different from sub-sea Christmas tree needs. Both are certainly different from the needs at the surface or on shore. The best valve choice requires detailed knowledge of the unit operations. When it comes to subsea valves his Institute is dedicated to providing insights on best choices with separate training courses on subsea pipeline and Christmas tree valves.

But what are the needs of the long-time valve practitioner?  Does he need an even more robust system?  Input from a number of both supplier and end user experts in the McIlvaine Insights discussions leads to the conclusion that considerable analysis and discussion is needed.  Muktiadi Rahardjo of Shell is the valve and sealing specialist at the Shell Pernis refinery and, based on this experience, recommends better communication relative to valve issues.  He cited a lack of application knowledge on the part of some vendors and the inability to utilize the wisdom existing within the end user community.

If you rank the impact of a product on the process, the valve is at the bottom of the rankings. The product using the valve, e.g. a pump system, will be more important by virtue of the fact that it typically would include a pump and at least three valves.  The scrubber company product which includes the valves, pumps, fans, nozzles and scrubbing tower is obviously of most impact on the process. So, if we agree that process knowledge is necessary to provide the best valves, then it follows that even more process knowledge is needed for suppliers of the sub processes What can we conclude from all of this?

·       IN ORDER TO DEVELOP A SUPERIOR PRODUCT YOU HAVE TO UNDERSTAND THE PROCESS WHERE THE PRODUCT WILL BE APPLIED.

·       TO CONTINUE TO PROVIDE THE SUPERIOR PRODUCT YOU HAVE TO KEEP UP WITH PROCESS CHANGES AND NEW REGULATORY AND OTHER CUSTOMER NEEDS.

·       FOCUS YOUR PRODUCT DEVELOPMENT EFFORTS BY PRIORITIZING CUSTOMER NEEDS IN SUCH A WAY TO MAXIMIZE MARGINS AND PROFITABILITY.

Convince the customer that you have the best product

The best product is defined here as the product with the lowest total cost of ownership.  This definition is couched in the broadest terms.  It has to take into account the severity of the service but also the criticality.  A peaking gas turbine which cycles a few times per year and can be easily accessed for maintenance is in a non-critical application compared to the base-loaded turbine which is in operation 24/7 and cycles hundreds of times per year.

It is easy to pick the lowest cost product but much more difficult when you have to assess the lifetime cost based on both severity and criticality.  The first step in creating a convincing program is to understand how decisions will be and could be made.

·       Decision making is a series of classifications. Whether it is the initial bidders list, the criteria in the specifications or the ultimate selection the decision maker is moving from one set of classifications to the next.

·       The elements of the classifications are:  what, which, why and how.  In order to be successful you have to convince some people of just the “what” and “which” and others you also need to add the “why.”  The “how” is the big challenge which provides credibility to the other elements.

o   What are the classifications?  If you are going to remove SO₂, should you consider wet limestone, wet lime, dry sorbent injection, spray driers, or seawater scrubbing?

o   Which of the classifications are best? 

o   Why is one the best choice?

o   How does the product perform uniquely enough to justify the prediction that it will result in the lowest total cost of ownership?

·       The what, which and why can be communicated through normal sales channels.  The decision guides add clarity.  The problem is that the credibility depends on the “how.”  It is a lot easier to claim the highest efficiency or lowest maintenance cycle than it is to prove it.

McIlvaine recognizes the challenge of convincing customers that a product has the lowest total cost of ownership and has a whole program to address it: 4 Lane Knowledge Bridge to the End User

$23 Billion High Performance Pump Revenues Projected for 2017

Nearly half the industrial pumps which will be sold next year will classify as high performance.  According to the latest forecast in Pumps: World Markets sales of high performance pumps in 2017 will reach $23 billion.

The criteria for this category are both severe and critical service.  Those pumps which have to be engineered to withstand corrosion, abrasion, high temperature and pressure are classified as in “severe service.”  Those which must meet high purity and safety requirements such as found in the food and pharmaceutical industry are classified as in critical service. High performance pumps are further distinguished by being specially engineered and not being stocked commodity products.

These pumps are used in many different industries.  The oil and gas applications are the largest with predicted purchases next year in excess of $6 billion.  A relatively small percentage of municipal wastewater pumps are classified as high performance. But, since the wastewater pump market is so large, even a small percentage results in a $3 billion annual high performance pump market. The chemical and refining industries will also be major purchasers.  The power industry will be a bigger market in Asia than in other regions.  A number of new ultra-supercritical coal-fired power plants are under construction.  Each will have millions of dollars of high performance pumps.

International suppliers have a large share of the high performance pump market and a smaller share of the commodity pump market.  It will continue to be easier for an international company to penetrate a local market with its high performance products rather than its commodity products.

Greater profits can be reaped from high performance pump sales because of the higher gross margins.  On the average it is estimated that the gross margin from a high performance pump sale is 35 percent versus just 25 percent for a commodity pump.  So, despite the smaller market size of the high performance pump market, the gross profit will be higher.

Each industry can be segmented into five different uses:

In the power industry, combustion is the largest application due to the boiler feedwater requirements. In most other industries, the process use is the greatest.  The processes can be further segmented by function.

The processes which play a role in product creation can be further segmented by the type of change with which they are involved.

Pump suppliers should seek to understand as much as possible about the industries, processes and functions within those processes where their pumps might be used.  The pump designers can provide solutions and not just hardware if they can first understand the needs.  Sales and senior management need to understand the processes in order to better predict future market opportunities.

For more information on N019 Pumps World Market, click on:   http://home.mcilvainecompany.com/index.php/markets/2-uncategorised/116-n019

Utility E-Alert Tracks Billions of Dollars of New Coal-fired Power Plants on a Weekly Basis – May 27, 2016

Here are some headlines from the Utility E-Alert.

UTILITY E-ALERT

#1274 – May 27, 2016

Table of Contents

COAL – WORLD

• First 800 MW Supercritical Thermal Power Plant in Karnataka, India Commissioned
• EPH bids for Rybnik Coal-fired Power Plant in Poland
• Doosan Babcock wins Contract for Biomass Conversion of Coal-fired Power Plant in UK
• Egyptian Power Plant orders 27 KSB Pumps

The 41F Utility E-Alert is issued weekly and covers the coal-fired projects, regulations and other information important to the suppliers. It is $950/yr. but is included in the $3020 42EI Utility Tracking System which has data on every plant and project plus networking directories and many other features.

Click here to Register for the Webinars

FGD and Acid Gas Separation - Issue and options for SO₂ and other acid gas separation from coal fired power, cement, steel, and waste incineration plants.     
Click Here to Register

This free webinar will be held at 10:00 a.m. on June 16.  A collaborative format will be used to discuss decision guides on acid gas removal for coal fired power, cement, steel, waste to energy, and glass plants.  The decision guides already prepared on these subjects will be updated and quickly displayed during the meeting. Discussion will revolve around controversial issues. Subscribers to Power Plant Air Quality Decisions and Industrial Air Plants and Projects can access the guides at any time.  End users also have access upon request. Information on new developments is continually solicited.  For questions contact Bob McIlvaine at rmcilvaine@mcilvainecompany.com 847-784-0012 ext. 112. 

LIFO vs. FIFO filter pulsing to maximize acid gas capture - Last sorbent on the cake is first removed. How do we change that to FIFO? Click here to participate in the preliminary analysis.

Direct Sorbent injection is becoming increasingly popular. Much of the acid gas is removed on the cake formed in the pulse jet filter.  It is critical that the unreacted or last in sorbent is not the first out. The LIFO vs FIFO accounting concept may apply.  Input on this subject is solicited from sorbent, dust collector, bag and valve suppliers.  Over the next few months we will assemble an analysis and decision guide on maximizing acid gas capture in the bag filter. A webinar will be scheduled for early Fall to discuss the findings. For more information contact Bob McIlvaine at rmcilvaine@mcilvainecompany.com 847-784-0012 ext. 112

Molecular Sieve Switching Valves

Molecular sieves are used to dehydrate gas. The valves used in switching from one sieve bed to another are subject to severe service including zeolite particles and corrosive, hot conditions. There is considerable controversy on the best valve designs and materials choices. Over the next few months we will assemble an analysis and decision guide on this subject. The preliminary analysis is provided at Severe Service Valve Technologies and Markets.  A webinar will be scheduled for early Fall to discuss the findings. For more information contact Bob McIlvaine at rmcilvaine@mcilvainecompany.com   847-784-0012 ext. 112 

Choke Valve Decision Guide and Webinar

Mcilvaine is compiling a continually updated Decision Guide for operators of choke valves used in oil and gas and other industries for fluid control. Contaminants such as sand integrated into varying mixtures of water, oil, methane and other gases provide both operational and maintenance challenges. The guide will identify the major applications and then the performance of various designs and various materials for specific conditions. The Guide will be the basis of a recorded discussion to be conducted in early fall 2016.  The guide will be offered free of cost to any end user.  It will also be published in Industrial Valves: World Markets and Strategies.  The wisdom of the industry is sought in order to make this guide the best it can be.   Input is welcomed from any and all sources. White papers, articles and other data to further the discussion would be most helpful. The background information and part of the analysis has been prepared and is displayed at Choke Valve Decision Guide. For more information contact Bob McIlvaine at rmcilvaine@mcilvainecompany.com847-784-0012 ext. 112 

Details on Webinars

McIlvaine conducts periodic webinars which are in a discussion format and are free of charge to all participants. The displayed material and recordings are free to purchasers of the products and services and by subscription to others.

Format:  50-90 minute recorded discussion using Mcilvaine display material. The session will be free of charge to all participants but registration is required.

Approach: There are two types of webinars. One is focused on Markets and directed to suppliers. The other is focused on aiding purchasers make the best Decisions relative to purchases of flow control and treatment equipment and services.

Markets HTH
General overviews of the market including size and major variables will be discussed with heavy emphasis on technology and regulatory drivers. The presentation will be based on the latest information appearing in Mcilvaine multi-client reports. Questions and views from both subscribers and non-subscribers are encouraged.

Decisions HTH
McIlvaine has been publishing information systems on pollution control since 1974. Each subject is organized by the pollutant control technology e.g. fabric filter, scrubber etc. There are search capabilities to retrieve information on any application. The newest addition has been slide deck systems displaying the issues and options relative to a specific applications. Coal-fired power, cement, steel, and waste combustion decision slide decks are continually updated.

The continually updated slide decks are displayed on the applicable Decision System.  It is recommended that participants view the slide deck in advance of the session and be prepared with questions and views.

Value to purchasers and specifiers:  Your questions and interests will be prioritized in the discussion. You will get a monthly newsletter and have continuing access to the system and multiple ways to interface in the future along with a networking directory of suppliers.

Value to Suppliers:  You have the opportunity to provide data to be considered at no charge. If you are also a subscriber you will see the summaries in advance and be able to shed light on issues and options not properly covered in the slide deck.  If you are a subscriber you will receive the monthly newsletter and continuing yearly access to the system including networking directories.

44I Power Plant Air Quality Decisions  includes 1ABC, 3ABC, 4ABC, 9ABC decision services but not 2ABC. So those with multiple technologies and at least partial focus on power will find this combination most cost effective. 

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You can register for our free McIlvaine Newsletters at: http://home.mcilvainecompany.com/index.php?option=com_rsform&formId=5

Bob McIlvaine
President
847-784-0012 ext 112
rmcilvaine@mcilvainecompany.com
www.mcilvainecompany.com