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THINKTANK: Enhancing the supply chain

THINKTANK: Enhancing the supply chain

Forget boxes, forget CDs, forget shrinkwrap -- the software distribution of the future is digital over the Net. The trouble is, today's commercial use of the Web is still basically to move boxes.

Generally speaking, the Internet has been oversold -- rather than defined by its limits. It's been more a case of 'hype and hope'. Consequently, many organisations have not yet realised how the Internet can benefit their business.

For example, numerous e-tailers scurry around searching for the magic bullet that will propel them to successful e-tailing -- the so called path to profit. But there isn't one. Most e-tailing remains essentially an electronic catalogue order business -- it's Sears & Roebuck (the instigators of the first mail order catalogue in the 1800s) gone electronic.

It is a marketing challenge, not a technological challenge. What is required is to change the basic purchasing behaviours of a sufficient number of people to achieve a market critical mass. This is not easy. It is a long-term process and it is resource-hungry.

Obviously, as a tool for delivery of product, the Internet is only useful if you are selling something that can be digitised -- it will never be possible to squeeze a TV set or a zucchini down a telephone line. I see the Internet fundamentally as a business tool that can deliver significant benefits in the sale and distribution of only those items which can be digitised. It is the perfect medium for selling software. So what's the benefit to a reseller?

With no physical warehouse, the supplier saves on many of the costly overheads associated with box-moving. No physical stock means there is no need for inventory and its administration -- no back orders, stock turnover, accountability, or warehousing and storage requirements. It's a lean, mean operation without the usual costs to the reseller, without the high infrastructure and management costs -- in transport, employees, logistics -- associated with physical distribution.

The sales and distribution process changes from physically intrusive to extremely discrete. Advantages are manifest for every entity involved with getting the product to market -- from the software publisher to the distributor, on to the reseller and, ultimately and most importantly, to the end user. How does it work?

Customers visit a site and find the software they want. It could be the distributor's site, or it could be a reseller's site if they already have a relationship with that reseller. If they wish to purchase, they order the product from that reseller, or any other which they may find on the distributor's site. The reseller places the order with the distributor, and downloads a key or code to unlock the product.

This system of e-distribution redefines the whole nature of software product distribution. The key ratio for a traditional distribution company is stock turn, and its fundamental value-add is time and place. In the e-distribution scenario, there is no such thing as stock turn, just cash turn. Time and place is irrelevant in the immediacy of cyberspace. There is no requirement for the infrastructure traditionally required for effective physical distribution. The huge financial and resource savings can be redeployed in the business to create areas of value-add which would be out of the question in the traditional physical distributors' business model.

We don't see this model as revolutionary; rather, it's evolutionary. And this is only the first step in the digitisation of the supplier process. You'll see implementations in the near future which I believe will redefine the nature of relationships between distributors, resellers and end users to the benefit of all involved. Watch this space!

Glenn Miller is managing director of Janteknology Distribution.


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