Time to take stock out of the warehouse
Channel players are looking to minimise inventory levels in partnership with their distributors and vendors. Fleur Doidge finds it no zero sum game
Space race: Less inventory means resources saved for competitive action
Once upon a time it only made good sense to keep inventory in house as a buffer against supply chain problems, if and when customers demanded quick delivery of business-critical IT. But warehousing appears to be falling out of favour, with promoters of stockless dealing suggesting everyone can be a winner.
Vida Barr, logistics director at office products wholesaler Spicers UK, this month called for more resellers to adopt a stockless-dealer model. In an opinion article for the channel media, she noted that stock sitting unsold in a warehouse can cost millions of pounds in unnecessary operational costs.
The alternative a minimal or zero inventory policy can help VARs streamline their businesses and stay competitive with larger rivals in what is likely to remain a challenging marketplace.
Not holding stock yourself, according to Barr, can help resellers appeal to more customers across a wider geographical area because the logistics of delivering to a region that may be at a distance from the reseller’s warehouse no longer apply.
Barr told CRN that most of Spicers’ resellers are B2B resellers or dealers. “Some of these dealers have retail premises. Other customers may focus on internet trading,” she said.
“Stockless dealers are able to reduce the fixed costs in their business by running smaller premises. They do not have cash tied up in stock and yet through pick-and-wrap services or Spicers’ distribution centre, they can receive the orders packed and ready to distribute each day or have them sent direct to the end user on their behalf.”
Assistance available
Barr said Spicers also offers its resellers the chance to network and learn from each other through groups such as its Synergy programme.
“The support is there at Spicers to help dealers review the options available to them and help them gain confidence in the stockless dealer model,” said Barr.
“It delivers more scope in terms of contracts that can be serviced by a dealer with a relatively small setup. The simplification will be down to a reduced need for warehouse management, space, stock, and the like, delivering more time to focus on driving sales and service.”
Barriers to entry are much lower than for setting up a dealership that holds stock, although any change is going to be a challenge for a reseller that has traded a certain way for a long time.
“Some dealers feel there is a security in holding stocks of product in their own warehouses. But we can get around 16,000 products to a dealer next day for onward delivery,” she added.
Barr said in her original article that savings can then be reinvested into the business, as well as passed back to customers. Thirty-five per cent of Spicers’ UK sales now come from stockless dealers.
The model is becoming a viable alternative to traditional stockrooms, she wrote.
Sukh Rayat, vice president of EMEA sales at Avnet Technology Solutions, agreed.
“I think the long-term resellers are now starting to understand financially what they need to be doing to become real solution providers,” he said. “That is what is changing things.”
Rayat said many resellers are waking up to the fact that they do not need inventory in-house. Distribution must back the changes up, though, with financial and credit support to help VARs take working capital out of their businesses and keep product flowing. Meanwhile, the supply chain to the customer is protected via a tight contract with the reseller.
“In some cases, we will even collect the money from the end user and pay the margin to the reseller that they would have made if they had transacted the product,” he said.
“Resellers can leverage the position of a larger company like Avnet in the marketplace, and shift their business model to a more consultative, services-driven role.”
Everyone’s a winner
In doing so, distributors make their role more relevant and valuable, while customers get the service they desire. Everyone can win.
Dan May, operations director at Surrey-based VAR and consultancy Ramsac, said stockless dealing has always been the way it operates. Most resellers could follow suit, he suggested.
“I think the distribution channel is so efficient now, particularly when you look at firms such as Computer 2000,” he said. “If you place an order, it delivers it the next day to its clients.”
May said the obvious benefits include improved control of cash flow and reduced storage requirements, as well as improved agility in customer relationships.
“That is why we like to sell Dell products, when something is built to order,” he said. “You can get exactly what is needed.”
He conceded that things could be different. For example, stockless dealing could prove more tricky an issue for resellers that focus on particular products for those with more of a box-shifting approach to reselling or those that must keep stocks of hard-to-
get parts for technological emergencies, associated with services such as break-fix or other maintenance work.
“If you have a very niche offering where you buy a particular product and are selling a limited product range, you probably need to be able to guarantee your supply chain. But, to be honest, if you are providing general networking services, those supply chain issues just do not exist,” said May.
“And, if they did, you are just as much at risk if you are selling with your own stock.”
Selling a range of older kit creates more supply chain issues. However, Ramsac focuses on new equipment and, with the right distribution relationships, maintains that it
has few problems.
Computer 2000, according to May, just has such a massive product range that, without fail, Ramsac expects it to make its next-morning deliveries.
“They have never let us down. It is an around the clock operation for them,” said May. “If you place an order by midnight, it is there and that is well beyond the hours that we at Ramsac work. So that is fine by me.”
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