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17 September 2019

SWaG: iron production rules

Melitopol company SWaG is known far beyond the region as a manufacturer of spare parts for agricultural machinery and solid fuel boilers. These are highly competitive areas where it’s difficult to work, joining the leaderboard is almost impossible, and staying in position for twenty years is amazing ... How it turned out to be possible is explained by the company's executive director Alexei Simonenko and the promotion department head Natalya Drebeda.

SWaG is an abbreviation of the name of the founder, Vadim G. Stanchev. He began to engage in various types of entrepreneurial activities in Melitopol from the very first years of Ukraine’s independence. In the city, both then and now, mechanical engineering was developed, the production of various types of spare parts, components, assemblies. And since the region belongs to the agricultural sector, the businessman assumed the demand for spare parts for agricultural machinery. In 2001, he founded the production company SWaG.

They decided to concentrate on the key direction - production, not trying to create a closed business cycle, and trade and sales through dealers. “This was probably one of our first successful decisions,” says SWaG Executive Director. - Moreover, we immediately chose a clear narrow segment: a wide range of spare parts for post-Soviet agricultural technology. First of all, our facilities were HTZ and Yuzhmash tractors, then Belarusian MTZ tractors, as well as Don, Niva combines ... were added. Formation of the nomenclature is a creative process with many interconnections. ”

This niche at first glance is not ordinary, but historically justified. According to the head of the enterprise, some agricultural production companies ceased to exist in the 90s, and those who work to this day have removed a number of models from production, ceasing to provide them with “branded” spare parts. Large manufacturers of spare parts associated with these enterprises also disintegrated. Good specialists were left without work, equipment was sold cheaply. At the same time, already purchased and working equipment constantly required repair, replacement of parts and assemblies.

Such marketing "black holes" clearly could not remain unfilled. As a result, many small manufacturers appeared on the market - from “artisanal” to quite competitive, comparable in quality to foreign companies. The heroes of our article also found their place in this market.

They started at SWaG just like most similar businesses in those years. The basis of the team, which, by the way, today is about a hundred people, was very carefully selected from specialized specialists. Well-trained, experienced and motivated staff is another key to the success of the company, the head notes. And the list of successful solutions includes continuous modernization and technical improvement: “This is an ongoing process. At first, we carried out part of the work at other enterprises under a contract; over time, we collected under one roof all the necessary equipment for a closed production cycle. In 2008, just in time for the crisis, they took a loan from Raiffeisen Bank Aval to upgrade equipment. It was hard to pay, but managed. Over time, we expanded production, completed an office and two workshops for the production of spare parts and solid fuel boilers. ”

The assimilated assortment of spare parts for agricultural machinery is more than one hundred positions, of which about fifty are currently offered to the market. Solid fuel boilers of various types and capacities - up to 200 units per month. Solid fuel equipment is presented in a wide assortment - in the production line of the plant are boilers of top (long-term) and classical combustion (traditional), pellet (automatic) boilers and burners, air-heating heat generators.

The production and marketing of these product categories has a pronounced seasonality, it does not coincide with the second direction - the production of spare parts, so the company has a load almost all year round. This makes it possible to maintain a permanent staff of workers, to pay them a decent salary.

As the interlocutors note, their business cannot be called easy. The market is oversaturated. "Post-Soviet" tractors are gradually "leaving" technology parks. Therefore, every year the niche narrows, increasing pressure among manufacturers serving it. Companies that have a stronger position, are upgrading equipment, selling obsolete at low prices. It, accordingly, is bought by newcomers and the so-called garage manufacturers, trying to establish sales at the expense of low prices, thereby further complicating the situation. “The company manages to survive in such conditions only due to high quality and the right marketing approach,” says Alexei Simonenko.
“Our customers are not the end consumer, but trading organizations, regional representatives, dealers. We operate b2b, ”says Natalya Drebeda, company’s marketer. - The geography of sales of spare parts is, of course, primarily Ukraine, but 70-80% is exported. We export spare parts to Kazakhstan, Uzbekistan, even Belarus - in a word, to those countries where Soviet and post-Soviet equipment was supplied. And also to the Czech Republic, the Baltic states, Bulgaria, Cuba, Egypt ... Previously, the lion's share of production went to the Russian Federation. ”

Solid fuel boilers for the population are a relatively new area of production. At first they were made for themselves, since the mid-2000s, they launched the product for sale in 2013, having favorable demand forecasts. According to the interlocutors, the Melitopol, and generally the Ukrainian market for this category of goods is now fairly streamlined, although before the events of 2014 it was also oversaturated, primarily - low-grade products. To a large extent, the formation of this market was due precisely to the efforts of SWaG.

In boilers, geography is all of Ukraine; the factory has a dealer network in all areas. It is difficult to determine the leading regions, sales depend on the material condition of the population and the work of sales representatives. For example, in the last heating season, Zhytomyr, Lviv, and Kiev regions were leaders. Although in the same half-gasified Zaporizhzhya need for such equipment is many times greater, the possibility of purchasing it from the population could appear only if there were certain subsidies from the state.

The order and predictability in sales are the rules without which a successful business is impossible. Particular attention is paid to monitoring the work of sales representatives, dealers, the level of services they provide, the quality of communications with the end user. Of course, motivation is also there: various teambuildings, training events and seminars, contests for sales performance are held with good encouragement to the winners. They also train SWaG employees. Managerial staff, management, marketing, constantly improving their knowledge.

The products manufactured by the company - even spare parts, even boilers - are not cheap, rather in the middle and upper part of the price range. But it is also a conscious policy - commitment to quality, but it does not happen cheap. Any product under the SWaG trademark has guaranteed workmanship, wear resistance, and durability. For example, boilers instead of the usual 3-5 years work from 10 to 15 years. This is easy to believe by comparing at least the weight of the products, which indicates the thickness and quality of the metal. The same goes for parts.

Regarding the assortment, work is ongoing on this. The dream of company management is to build a full-fledged plant instead of two workshops. The enterprise’s personnel, technical and technological potential is significant, it also understands demand, and it is ready to launch new product categories “even tomorrow”. But, alas, there is still not enough money for all this.

“Fundamental quality standards are not always at hand for us. The company had to abandon the production of some parts, because we are becoming uncompetitive in price. The market was filled with base, but cheap counterparts, often Chinese. But in order to go down in price, we need to abandon technology. We don’t want to do this, because we value our reputation and brand, ”says Alexei Simonenko

“Consumers do not remember the names of companies who produced where, but they remember how and how much the part works ... To be recognized and chosen, we created a package that is remembered and associated with the product. Having gained good operating experience, customers eventually come to their “point” and ask for spare parts “in a black and yellow box” - ours. Visual marketing works. The registered trademark, logo, the presence of branded packaging - this is what distinguishes us from the crowd of competitors, - Natalya Drebeda talks about effective solutions. - We will work and exist as a business, while the consumer will demand our products. Until they order it from us. ”

There is no company if it is not online - SWaG fully agree with this statement and build their communication policy with an emphasis on Internet resources. Of course, the enterprise has a website, groups in the FB, which are focused on dealers and partners, and the pages are different in directions (boilers and spare parts), because the audience and their interests are different. From trending tools - YouTube channel. There are published videos and stories that demonstrate how certain details are made. Thanks to them, both end consumers and sales workers begin to understand how difficult and laborious it is to make a good, high-quality part. “We show the value of our products, what exactly they pay money for and why it is worth paying more than for seemingly the same thing from someone else,” Natalya explains. In addition, in the videos, experts give advice on the use, extension of the operating life ...

When asked if he considers his company successful, its executive director Alexei Simonenko answered unequivocally: yes! “First of all, we work! SWaG has been around for almost two decades. The trademark is recognizable, it did not change, we did not close under the burden of debts and did not reopen as another company, although this happens. We have built a civilized business that has survived all the crises that our country has experienced. In order to have such a story, every entrepreneur, standing at the origins of the business, must count on a long game. Without lightning fast profits and quick results. Build a reputation for product quality, create quality on good equipment with the hands of trusted, cool professionals. And enter the markets of new countries, ”he advises Ukrainian manufacturers.

Alexey Simonenko on cooperation with Raiffeisen Bank Aval

As already mentioned, the loans that we took from the bank to purchase equipment and machine tools were important for the formation of the company. Last year, we opened a revolving credit line, in this we were extended for five years. Development and modernization is what money is always needed for production. There is an unsecured loan - it helps close cash gaps. Settlement account, currency exchange operations - also in the active list of products.