Vendor View: Service Reshapes the Future
Service Reshapes the Future of Distribution
For distributors to be successful in the 21st century, they must have a unique competitive advantage. But technology, in and of itself, is not the answer. Distributors who best manage their inventory, offer value-added services, increase productivity, and provide a high level of customer intimacy with government agencies will be the most successful.
There should be no doubt that the linking of PCs with innovative packaged software via the Internet has had and will continue to have a major impact on distribution, enabling national and, in some cases, international reach from the local level. But these developments pose both opportunities and threats.
While these tools will benefit distributors who can afford them, the cost of integrating state-of-the-art supply chain technologies may be too high for some to bear.
In addition, these tools are available to suppliers and government agencies too, potentially opening the door to dis-intermediation.
As a result, leveraging leading-edge information technology and supply chain capabilities to raise the bar on performance and value for government end-users is key for distributors.
An understanding of how recent technology advances might actually play out is critical when analyzing future distribution and supply chain activities and relationships.
To that end, following are four main touch points for supply chain analysis: inventory planning and deployment; value added services support; productivity benefits; and customer relations enhancement.
Having the right products in the right place at the right time is the core of what distributors offer customers, including government.
For small distributors, this represents a significant challenge. For large distributors, with hundreds of locations and carrying thousands of items, projecting demand and quickly reacting to customer needs poses a difficult challenge.
To respond to those challenges, new inventory-planning software tools have been developed.
Recently, using the Internet to bridge the gap between suppliers, distributors, and end users has further enhanced the effectiveness of these tools. The latest developments include capturing quoting activities so that a hit rate can be established between inquiries and future revenues.
Most new inventory planning systems allow independent data — for example, government information on industrial utilization or housing starts — to affect projections.
To close the loop, these systems also allow manufacturers to view distributors’ order pipelines on a real time basis, so they can better manage their production cycles. These powerful products move the theory of supply chain collaboration into reality.
Value added services are rapidly changing our business. Where the old paradigm for distribution emphasized the simplistic “Buy—Hold—Sell” model, today’s government customers want more. They need accurate and reliable real-time information from suppliers on large complex multi-release orders.
To succeed, distributors must embrace the new model of “S4″—Sell, Service, Source, Ship—to capture a bigger slice of what customers spend.
Part of that model includes distributors who can source many parts and bring them together to form a kit, meeting repeated maintenance or installation needs.
Some customers need a supplier that can kit or build an entire sub-assembly and deliver it just in time. Others need a partner to manage their procurement, while providing total visibility throughout the process.
Distributors who implement, enable, and combine these technologies and functions can carve out unique niches as hybrid suppliers with manufacturing capabilities.
Such companies can become outsourcing partners to government agencies by taking over activities the manufacturer wants to shed.
These systems will allow distributors to tap deeply into the manufacturer’s organization and become a seamless component in the value provided to government customers.
Back-office functions accounts receivable, accounts payable, payroll, bank reconciliation, etc. don’t directly add customer value. Instead, distributors can earn “economic points” and additional opportunities from government procurement professionals by minimizing the costs associated with these functions.
In fact, enhancing productivity to manage accounting, payroll, and finance, has triggered development of many packaged software solutions.
By leveraging the Internet, this functionality can be performed any where in the world. Distributors who hope to prosper in the future will use communications and software to minimize the cost of these corporate and back-office services and functions.
Customer Relationship Management (CRM) software enables large distributors to capture very specific information about their government customers on a grand scale.
In the past, much of this information was in the heads and notebooks of individual sales reps and, therefore, not available to the entire company.
By analyzing this captured data and comparing it with historical trends, customer needs can be anticipated, resulting in such value-added services as automatic replenishment and order placement.
The ultimate goal of CRM is to create a powerful linkage between the distributor and government decision makers, resulting in an exceptional level of reliability and trust.
Editor’s Note: Beatty D’Alessandro is V. P. and Chief Information Officer for Graybar, specializing in supply chain management services and products. He holds an MBA from the University of South Florida in Tampa. He is overseeing the implementation of Graybar’s Enterprise Resource Planning (ERP) system which went live this year. For more information, go to www.graybar.com.