Case #7 - RCI Master Distributor: Evolution of Supplier
Background of RCI
1946 – Mark Schwartz founded a motor repair business and secured a General
Electric (GE) franchise for component parts. When customers brought in motors
for repairs, Schwartz gave them a fully working motor in exchange for an
estimated repair fee. During this time, Schwartz then repaired the broken motor
and replenished his motor inventory. This service innovation allows the
customer did not have to wait for the lengthy repair delays.
1962- motor repair is the core of RCI business. However, GE’s General Purpose
Control operation developed a new contactor for its air-conditioning and
refrigeration business. Mark Schwartz persuaded GE and got to exclusively
distribute these contactors to the aftermarket through air-conditioning and
1963 – RCI sold the motor repair business and gained several product line from
GE. RCI had demonstrated to GE that they could get GE’s products to market,
with the parts moving from master distributors to wholesalers and ultimately
service repair persons. Mark Schwartz had implemented many innovation, he
worked with GE’s engineers designed six new units to replace hundreds of
models. This allows RCI continued to distribute these models exclusively.
1974 – Danny Swartz make most of the day-to-day business decisions with Mark’s involvement limited to the major decisions. Danny learned 2 most
important way to maintain a relationship with supplier. Firstly, never use
contract to deal with suppliers in order to build a relationship of trust with them.
Secondly, demonstrate to the suppliers how difficult distribution is, so as to
eliminate the risk of being cancelling the exclusive distribution rights.
1992 - Current operation
RCI distributed over 6000 electrical and related products earning revenue of $
35.8 million and with operating profit of $3 million.. RCI sells to air conditioning
and refrigeration wholesalers who in turn sell to air conditioning and
refrigeration contractors and repair houses. RCI do not participate in the
distribution of the appliances, their role is limited to the aftermarket channel for
Daniel (Danny) Schwartz, the CEO of RCI was received a call from Arnold Levy of
Component Manufacturing Corp. Levy wanted to change his dist