As the ebb and flow of the channel forces ever-increasing improvements in efficiency, the three-tiered channel model is often the target of productivity purists. From a distance, a double or even single-tier system would appear to deliver product faster and at less cost than the more widespread multi-layered IT distribution model. However, before you tear off to the vendors petitioning higher margins and more direct marketing models, spare a thought for the continuing importance of the traditional roles of distribution, local warehousing and credit provision.
Bruce Harvey, CEO of distributor Siltek, believes neither vendors nor resellers fully appreciate the role of distributors. Harvey believes that as the channel feels the cuurent economic squeeze, resellers will begin to appreciate the service element inherent in traditional three-tiered supply chains.
"Distributors provide a buffer zone for resellers and vendors," Harvey said. "We don't just store the stock, we take on a great deal of the credit risk, and deliver products as they are required by the reseller."
Although he predicts a further constriction of the distribution channel, Harvey believes vendors have neither the will nor the infrastructure to side-step their distribution partners.
"Even if they figured out the logistics, they would not be able to offer resellers any product range," Harvey said. "We consolidate a series of different offerings under one roof and on one invoice and that all means time-savings for resellers."
Rob Kester, business development manager for Avnet Applied Computing, is of the opinion that, despite changes in the distribution channel, logistics is the key to a successful distribution business.
"The most important area of any distribution is logistics - without an efficient and reliable supply chain, there is no point in offering any sales support," Kester said.
The centrality of logistics in the distribution channel is reflected in the fact that most of the revenue associated with distribution is still attributed to product fulfilment. Nonetheless, there is a service element inherent in the transaction that is often forgotten. Proactive business models, where the distributor plays an important role in stimulating the end-user market or providing the resellers with product training and sales support, are essential to overall sales growth, but rarely factored into the profit margin.
According to Greg O'Loan, Express Data marketing and planning manager, the service element of distribution has become necessary.
"There is no way vendors could get the sort of reach into the reseller markets that distributors can provide," O'Loan said. "Resellers require a certain amount of support from distributors. Not only do we supply credit facilities and storage, we provide leverage across different vendors, which our channel partners alone could not achieve."
O'Loan believes distributors need to remain privy to resellers' requirements in order to survive. Such awareness will impact the types of services distributors can provide both to their vendor partners and their reseller channel.
Proactive models, participation in joint marketing, regular face-to-face contact with channel partners, the provision of multiple lines of contact for reseller partners and so forth are all part of a successful distribution business, even if they are not itemised on the invoices.