RelaDyne, Inc., headquartered in Cincinnati, Ohio, is a leading supplier of comprehensive equipment reliability products and value added services. Serving a core part of that offering, RelaDyne serves as a multi-regional distributor of lubricants, fuels and fuel reliability services. It has also made the move into supplying its customers with Air1 DEF (produced by Yara and distributed through Mansfield Oil). <i>NPN Magazine</i> discussed the company's DEF strategy with Mike Ladd, the company's DEF general sales manager.
NPN: What are the current opportunities and challenges with DEF?
Ladd: The commercial/heavy-duty space is a very big piece of our business and DEF fits extremely well into the other products that we service to that segment so we knew that we had to develop a strategy. And the challenge has been the equipment dedicated to the business. It required a big investment on our part on the front end, and we don't get the cost used in other pieces of our business, which has affected the returns. The biggest challenge we had getting up and running was that everything was new. We've been pumping fluids for 100 years, but we had to have specialized equipment and this is where our relationship with Mansfield Oil proved to be extremely beneficial. They went out and found suppliers and researched what equipment was required and were on the front end of getting some of the suppliers to develop solutions customized for our needs. This saved us a lot of time and energy.
NPN: What was your DEF strategy?
Ladd: We had a twofold strategy. Initially, we viewed it as a defense to protect the customers we had. We did not want competitive entities coming in and providing DEF to our commercial/heavy-duty customers and then having the risk of them quoting them other pieces of that business. But conversely, we also turned it around as an offensive strategy to prospect for new opportunities in the diesel business that we had not been able to access earlier. And once we had entry with DEF, we had the opportunity to sell our full boat of solutions.
NPN: How have you approached your customers with DEF?
Ladd: We have taken an educational approach. Many of these folks did not know how to deal with DEF quality control requirements or equipment compatibility requirements. They've been very receptive when we come in and we offer a customized solution to their situation, and of course, we have to be price competitive with some of their other options. We've done very well being the trusted advisor, if you will.
NPN: Is it a true profit center now?
Ladd: We quickly covered the cost of our investment and DEF is a profitable business for us now. We think that will continue to be so. However, margins have been challenged as more people jumped into the business.
NPN: What DEF solutions do you offer your customers?
Ladd: We primarily offer bulk, but we have tank wagons in our system, we have combo trucks that have the ability to pump DEF, we have drums and cases (of jugs), but our primary focus is on the bulk business because that is more in line with our typical distribution method.
NPN: What growth do you expect in coming years?
Ladd: The numbers that we have are from Mansfield, which is partially derived from Integer Research, and the forecast is for a 13 percent adoption rate this year and they predicted a 6.5 percent adoption rate in 2011 that was very much on target. So 2012 represents a doubling of demand from 2011 and 2013 is projected to almost double that so there is a lot of upside ahead. And then the off-road market comes into play and construction companies—as the big off-road equipment starts coming out of manufacturers— demand will continue to jump. When you're looking at gallons, 2011 was 63 million, 2012 is forecasted at 127 million; 2013 is forecast at 200 million; 2014 at 279 million and 2015 at 359 million. And we are seeing that in the marketplace.