Developing Key Account and Distributor Management to Stimulate Sales in Krakatau Steel

: Krakatau Steel (KS) is a steel manufacturer in Indonesia. As a steel manufacturer, KS has to operate efficiently by achieving the economies of scale. Plays in commodity, make KS has to deal with price fluctuation. In uptrend price, customers tend to place more order to maximize the profit. Customers tend to place less order in the downtrend price to minimize the risk of high price inventory. KS has domestic competitors like Gunung Raja Paksi, Gunawan Dian Jaya Steel, Java Pacific, and ArcelorMittal Nippon Steel. KS also has competitor from import like China, Japan and Korea. To fulfil production capacity constantly, KS has to collaborate with its custmers, understanding their needs and fulfil it with the product and service that delivered. There are several categories of customers in this industry, large fabricators, small fabricators, large resellers, small resellers, projects and retailers. Large fabricators and large resellers have a big portion in order placement. KS has to select large fabricators and large resellers to join with key account and distributor management. Then categorize it into strategic customers, star customers, status customers or streamline customers. KS has to collaborate with every category differently to be effective and efficient.

KS products (HR and CR) price are very fluctuative.In the increase trend, customer tend to place more order because customer want to get the momentum by buying low and selling high.When the price trend is decreasing, customer tend to place less order because customer want to minimize the risk of high price inventory.High price inventory is difficult to sell because it is potentially made a negative margin.Indonesia steel market architecture consist of large fabricators, projects that account for 50-55% of the consumption; and small faricators and retailers account for the remaining 45-50%.

Figure 1. Indonesia steel market architecture
To fulfil production capacity constantly, KS has to collaborate with large fabricators and large resellers.Fabricators are the company that process HR or CR to the next product.They have a fixed cost and to be more efficient they have to increase the utilization of their machine so that they can reduce the unit cost.Resellers in steel industry are the one that have a storage and sell the product to end user.Mostly, they have a high purchasing power and hight inventory so that they can buffer the price fluctuation.KS has to implement key account management with the large fabricators to grab minimum order quantity and implement distributorship program to maintain domestic price and market inventory.

LITERATURE REVIEW
The characteristics of upstream market are high quantity and low margin.Therefore, implementing cost leadership is important for KS rather than differentiation focus.KS can not charge the price that far different above average price, so that cost reduction is the option to generate more profit.KS has to collaborate with large fabricators as key account and large resellers as distributor.Selected large fabricaotors and large resellers that meet with criteria like capability & infrastructure and willingness to partners & exicetement will be joining with key account management and distributorship program.Key account and distributor management digs deep within a company to find the breadth of offer and innovation that these customers seek.It necessitates a significant shift from traditional working methods.Any supplier's capacity for intimacy has a limit that must be acknowledged.The optimal number of key customers is somewhere between 15 and 35.They may range from 5 to 75, but those at the upper end of this range are usually actively working to reduce the number.KS selects and categorizes the larger fabricators and large resellers to join with this program by using strategic partner selection matrix Figure 3 [4].The position of customer in thes matrix suggests the decision to treat the customer for some aspects like investment, management and pricing.Based on this matix there are four groups of customers: 1. Strategic customers This group has a large amount of KS product in their business, but KS has to continue to find ways of developing further business together.KS make money from this customer, but KS has to invest, bring value and expand the market through collaboration 2. Star customers These are potentially become strategic customers in the future.Currently these customers do not do a lot of business, but analysis reveals that they are the kind of customers that fits well with KS strategy and has strong future potential.

Status customers
These customers do a lot of business with KS, but their attractiveness as a key customer is low.Their business or market is probably mature and unlikely to expand.KS has to treat them well because they likely contribute a large portion of KS revenue.KS has to spend money and give the idea to these customers wisely.

Streamline customers
These customersd mostly asking about the price.Since KS needs quantity to operate efficiently, KS has to manage cost and gross margin carefully.For analyzing data in this research, x axis is representing the customers exicetement to KS, y axis is representing about customers attractiveness, and the size of bubble explained about customer spending.The data of customer exicement is collected by the questionnaire.Customers's attractiveness is the internal data named customer rating that explained about on time of the historical payment, cumulative late amount, the six months of historical order, and order frequencies in the last six month.Customer spending is figure out by the average of order that placed by customers monthly.

RESULT AND DISCUSSIONS Customer Satisfaction Index
To know about customers excitement, the series of interaction between KS and customers are explained in figure 4. All touchpoints from the first step when customers meet salesman until claim process are identified there.

Figure 4. Customer Journey
Based on the feedback from customers, named Customer Satisfaction Index (CSI), there are two priorities that have to be solved by KS, price and product delivery.Steel is a commodity, which means that switching costs are cheap.KS has to manage price to be competitive compared to other domestics or imports.KS has to take into account about delivery, which necessitates proper production planning, prepared raw material inventories, and production efficiency.Based on short interview with large fabricator and large reseller it's ok if KS price is higher than imports around 200-300 IDR/kg.KS also has to manage it's lead time, at least faster than imports.KS has limited working capital based on the financial statement, increasing level of inventory is not a sollution to reduce the lead time.So that KS has to set several customers to be prioritized.

Price
We are ok with KS price being higher than imports by 200-300 IDR/kg higherit will take care of the exchange fluctuations for us.Anything higher, we have to look for other option

Large fabricator
Different surcharges levelled across months on different sizes makes pricing non transparentsome consistency is expected

Large fabricator
We have proven to give huge orders to KS when KS price is dropped to be within IDR 200-300 vs GG

Large reseller
We trust supplier who provide equal playing field (equal price, credit terms, payment guarantees, etc.) to resellers at same partnership level Large reseller Delivery KS delivery lead time is the highestimports get delivered around 2 months, local suppliers deliver around 4 weeks.KS is usually 2 months or more, sometimes faster.

Large fabricator
For the customers who have a time bound requirement I usually go in for other supplier as I am not sure KS will deliver on time.

Large reseller
We can increase purchase from KS from 10kT to 14-15kT if delivery can be with in 4 weeks.We will commit to order 90% of our forecast.

Selecting and Categorizing Key Account
Due to limited resources, KS has to select several fabricators that should be prioritized in delivering its services.From 62 fabricators, there are 15 fabricators that impact to 80% order placement.These 15 fabricators should be prioritized by KS and KS should treat these fabricators as key account.By solving the price and product delivery issues in key account, its expected KS can generate order that can fulfill 40-50% of the production capacity.

Status customers
This quadrant are customers that have high CSI and low customer rating.There is one customer in this quadrant, Tata Metal.For status customers, KS has to do a collaborative work to increase capability.

Streamline customers
Streamline customers are customers that have low CSI and low customer rating.Though have low CSI and low customer rating, KS has to serve this category as key account, because it can impact to 80% order placement from farbricators.For this category, KS has to manage for cash and manage cost carefully to make sure the gross margin.There are two customers in this category, Krakatau Pipe and Fumira.Selecting and Categorizing Distributor To be more efficient, KS must decide which resellers should be given priority when providing its services.There are 9 resellers out of 49 that influence resellers order placement by 80%.The 9 resellers should be given priority by KS and collaborate with them as distributors.

Figure 8. Resellers's order performance
The 9 resellers that selected to be distributors should be served differently based on their position in the matrix.1. Strategic customers Customers that have high CSI and high customer rating fall into this category.In this quadrant, there are two customers: Pandawa and Spirit.These two customers are essential to KS's long-term success and known as strategic customers.KS should continue to make investments in offering the value-added.With these customers, KS ought to work on innovative and important projects.

Status customers
Customers with a high CSI and low customer rating are considered as status customers.Krakatau Niaga, Intisumber, Hamasa, Sampoerna, Baja Prima, and Bilah are the six customerss in this category.KS should work collaboratively to develop capability and carefully manage costs.

Streamline customers
Customers who have low CSI and low customer rating are considered streamline customers.Although this category has a low CSI and low customer rating, KS must treat it as a distributor because it can influence up to 80% of orders placed by resellers.KS must carefully control costs and cash flow.There is one customer in this group: Papajaya.

Table 1 .
Domestic market share in 2021

Table 2 .
Customers's feedback Issues Feedback Source