November 26, 2011 A Perfect Match

Volume 14 | Issue 3

Some partnerships, like some machines, are built to last. For instance, consider Grupo Sotreq’s longstanding relationship with Caterpillar

The manufacturer and the dealer first joined forces back in 1941 when the recently created Sociedade de Tratores e Equipamentos Ltda. (Sotreq), based in what was then Brazil’s capital of Rio de Janeiro, signed a contract to sell and distribute Caterpillar’s equipment throughout the states of Rio and Espírito Santo.

Over the next few decades, as the partnership flourished, Sotreq expanded, to Minas Gerais and part of Goias, opening new dealerships throughout the region in which it operated.

Then, in the 1970s, Sotreq further expanded into the vast Amazonian states of Pará and Amapá.

NON-STOP GROWTH
It didn’t stop there. At the turn of the new millennium, the company enjoyed a major expansion, as it acquired new territories and began selling Caterpillar products, services, and systems throughout Brazil (specifically the north, central-west and in São Paulo). In 2002, Sotreq created a second company (Somov). In doing so, it became the Grupo Sotreq. Based in São Paulo, Somov is a Hyster dealership and supplies material handling solutions integrated to customers’ production processes.

Recently two other companies joined the group. With its headquarters in Vitória, capital of Espírito Santo – and home of one of Brazil’s most important port zones – Soimpex is a trading company that imports equipment, machines and parts for the group, as well as other resellers and clients.

MD Power was created to be the master distributor of Perkins engines and related spare parts for Brazil.

Although the group commercializes other brands – MaK, Hyster, Tennant, Perkins and Michelin’s tires – the bulk of its business, and 95 percent of its revenues, come from sales and service of Caterpillar equipment.

“Throughout all of these decades, we’ve been accompanying the expansion of the Caterpillar product portfolio,” points out Renato Pimentel, Sotreq’s director. “Wherever they expanded, so did we. As a result of this long partnership, today the dealership covers 70 percent of Brazil’s territory, and Grupo Sotreq has become one of the world’s largest resellers of Caterpillar equipment.”

In 2004, due to its expansion – and with customers in many different markets – Sotreq’s traditional business model proved inadequate. As a solution, the company completely reorganized its operations into separate business units. The units focus on four markets – construction, mining, energy and petroleum/marine – and each functions autonomously.

“This model made us a much more customer-oriented organization,” says Pimentel. “It allowed us to focus on our clients’ different needs and to create specific solutions. As a result, we improved our market share in all of these segments.”

Indeed, today Sotreq is a leader in all the markets it serves. The company continues to grow in leaps and bounds, spurred on by the constant expansion of both Caterpillar and the Brazilian economy. Between 2010 and 2011 alone, the group grew by a whopping 40 percent. It’s expected that this year’s revenues will reach R$4 billion (US$ 2.5 billion).

BOOMING MARKETS
Four markets are responsible for such booming business. Driven by Brazil’s soaring demand for infrastructure and its upcoming hosting duties of the 2014 World Cup and 2016 Summer Olympics, the construction market has really taken off. Among the most important contracts Sotreq recently landed was exclusive supplier of earthmoving equipment (including 700 equipment pieces for the Belo Monte hydroelectric dam, one of the largest infrastructure projects ever undertaken in Brazil).

Spurred on by the boom in commodities, the mining sector is also experiencing major growth. Thus, a growing number of global mining companies have set up shop in Brazil and production levels are spiking. Sotreq has gained a significant edge in this market by offering differentiated support. Literally, the company sets up shop right next to the mines themselves, where its engineers. Further, technicians provide 24/7 assistance to miners and ensure equipment maximization by monitoring performance and anticipating failures.

Then there is the petroleum sector, which also offers huge opportunities due to the discovery of massive offshore oil deposits. Numerous companies flock to invest in the future of Brazilian oil and gas, and Sotreq is there to supply them with equipment as well as qualified specialists able to support the increasingly high-tech products required.

To support growth and energy needs in these markets – plus all of the new industries flocking to Brazil – the energy sector also is experiencing significant growth. Sotreq is the leader in supplying complete energy solutions to the ever-expanding data center business, integrating and building solutions that provide customers the confidence of uninterrupted quality power.

Indeed, the growth of these markets has been so phenomenal that a major challenge for the Caterpillar/Sotreq partnership is to plan for the future by upgrading facilities and investing in new technicians and engineers.

“Caterpillar is under a lot of pressure to expand,” notes Pimentel. “Already it’s increasing production capacity in its main São Paulo plant and investing in a second facility in the state of Paraná. We’re following their lead by expanding throughout Brazil. We now have 31 branches, but many have been around for decades. So we’re changing the locations of some and updating others to make them more modern and sustainable.”

For example, in Belém, the company is increasing its facility from 20,000 to 160,000 square meters (66,000 to 525,000 square feet). “This really shows the level of growth we’re expecting,” comments Pimentel. “In total, 65 percent of our branches are being rebuilt, expanded, or completely overhauled to meet upcoming demand.”

Sotreq is also investing heavily in its employees. This year alone, the company increased its work force by 30 percent. Of its now 3,500 employees, more than 50 percent are specialized technicians that support the equipment Sotreq sells. Yet looking ahead, the company predicts that it will need to double the number of technicians over the next five years. With this in mind, Sotreq is investing in the hiring and training of candidates from all over Brazil.

Central to its strategy is the building of a special training facility in Belo Horizonte, capital of Minas Gerais. When completed in 2012, it will have the capacity to train 400 technicians each year – more than enough to meet Sotreq’s future demands. This emphasis on qualified personnel is key, as Pimentel indicates: “The biggest difference between us and other players in this market is the level of product support we provide to customers. We have technicians and replacement parts ready whenever they’re needed. We have the facilities and the qualified management necessary to support our customers’ businesses and, due to the new model we adopted, we really understand their businesses.”

As such, it’s no wonder that Sotreq was selected as the best retailer among Brazil’s 500 largest companies by Brazil’s leading business magazine, Exame.

FUTURE LEADER
Sotreq also works hard on solutions that help its team to support Caterpillar’s equipment and its various components. The company possesses a monitoring center in Contagem (a suburb of Belo Horizonte) where technicians can monitor equipment in real time. It also boasts the largest oil lab for Caterpillar in South America, where 400,000 oil samples a year can be analyzed.

Both the monitoring center and oil lab allow Sotreq to anticipate eventual wear or failure of equipment, and then to take the necessary steps to repair or replace parts in advance – a strategy that saves customers considerable time and money.

“In terms of product support, the role of technology is really going to increase in the future,” predicts Pimentel. “New technology won’t be used just to improve equipment’s productivity and efficiency. It will also increase the level of monitoring as well. Eventually, we’ll be able to manage not only the product’s maintenance but further monitor the level of productivity, operator performance, and everything that has an impact upon our customers’ own operations of the machines and engines.”

From this information, he adds, Sotreq will be able to provide added value that will result in higher productivity and lower costs.

Another example of Sotreq’s commitment to added value is the three remanufacturing centers – in Contagem, Sumaré (São Paulo), and Belém (Pará) – where the company rebuilds used components, endowing them with a second or even third life. While other manufacturers can do this on an individual basis, only Caterpillar dealers are prepared to rebuild components on an industrial scale, using a production line approach.

With its “recycling” activities, the remanufacturing centers tap into one of the most important trends driving the company (and the Brazilian market as a whole): sustainability.

“Caterpillar is developing many new environmental solutions, from environmentally friendly products to increased efficiency in terms of fuel burning. But we dealers also have a responsibility in terms of product support,” points out Pimentel.

Current initiatives range from non-polluting ways to dispose equipment oil to generating energy from the methane gases produced at landfills. “We’re very conscious of the fact that manufacturers and dealers that provide environmentally oriented services will be the leaders of the future.”

More importantly, Sotreq realizes that the key to the future is maintaining the synergetic ties that have bound it together with Caterpillar for the last 70 years.

“The relationship we share with Caterpillar is a unique one between a manufacturer and a dealer,” describes Pimentel. “Caterpillar has always recognized that the dealer network is one of the most important differentiators of its business model. They’re constantly working with us to improve the level of service that we carry out together. Meanwhile, we know we can rely on the support of their factory for product and part availability and new technology. In the end, we work as one, as a seamless organization. It’s only when one fully appreciates this level of integration that one can understand why we’re so successful.”

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