How Industrial Markets Are Structured
The chain of manufacturers, contractors, distributors and end users that every industrial order passes through.
13 min
Activities: 0 of 2
One order, many hands
In consumer markets a seller and a buyer usually meet directly. In industrial markets an order often passes through several organisations before the equipment reaches the plant. Each organisation has its own interests, its own approval rules and its own idea of what "value" means. A senior technical seller must know who sits where in this chain for every opportunity, because the person who signs the purchase order is often not the person who will live with the equipment.
The main parties are the original equipment manufacturer (OEM), which designs and builds the product; the engineering, procurement and construction (EPC) contractor, which designs and builds a whole facility for an owner; the end user or owner-operator, which runs the plant for decades; and the channel of distributors, agents and system integrators that sits between them.
The main parties and what they want
Worked example 1: a new gas processing plant
An owner-operator decides to build a gas processing plant. A licensor supplies the process design. An EPC contractor wins the contract to engineer and build it. The contractor issues an enquiry for twelve process pumps. On paper, the contractor is the buyer. In practice, four parties shape the decision. The licensor's package defines the duty. The owner's company standards list approved manufacturers. The contractor chooses on price and delivery among the approved names. The owner's maintenance team, consulted late, asks for parts that match their existing pumps.
A seller who only visits the contractor's buyer is competing on price alone. A seller who was on the owner's approved list, knew the licensor's requirements and had spoken with maintenance has three advantages before the price is opened.
Worked example 2: a replacement valve through a distributor
A food processing plant needs a replacement control valve for an existing line. The plant has no project and no contractor. Its maintenance planner checks the stores, finds no spare, and calls the local distributor that has supplied the site for years. The distributor offers the brand it stocks, which is not the original brand. The original manufacturer never hears about the order.
The lesson is that the route to market changes with the type of purchase. New projects flow through contractors and specifications. Replacements and spares flow through maintenance, stores and local channels. A manufacturer that ignores the channel loses the installed base one replacement at a time, even if it wins every new project.
Common mistakes and their fixes
Match each party to its main concern
- Owner-operator
- EPC contractor
- Licensor
- Distributor
An EPC contractor is buying compressors for a new plant. Which action gives the seller the strongest position before the bids are opened?