The distribution business is based on people. If a reseller doesn't like the person it is dealing with at a distributor, it won't place the order.
Which is why this is such a crucial time for Ingram Micro. The reverberations of losing two UK managing directors in two years are being felt throughout the organisation.
As exclusively revealed in PC Dealer (12 May), Sandy Scott, UK managing director of Ingram Micro since March 1998, has left the distributor. His departure is understood to have taken place on 10 May.
As you would expect, Ingram has battened down the hatches, refusing to speculate on the reasons behind Scott's departure. Did he jump or was he pushed? If you listen to industry gossip, the majority of people are saying he was pushed. Following reports claiming that Robert Grambo, vice president of Ingram Micro Europe, believed the UK management team had not done a good job of executing the subsidiary, Scott's departure was not such a shock to the industry.
What was a surprise to observers is how long Scott actually lasted. When he joined Ingram, much fanfare was made about the fact that he had no IT background, coming from private healthcare company PPP. Well, surely if you are a distributor you can sell anything, be it healthcare or a Unix box? Obviously not.
It was this theory that distributors can sell anything that led Scott to set up a call centre - believed to have cost about £5 million to implement.
Not a small amount of money. In theory, there is nothing wrong with a call centre; it's just a posh name for telesales. At the time, the industry was very sceptical about why a distributor needed to do this, but Ingram felt that to give a valuable service to resellers it warranted a call centre.
Ingram had been heavily criticised by resellers for getting orders wrong and not being able to answer technical questions. These problems don't go away overnight just by setting up a call centre. Indeed, one distributor threw down the gauntlet to Ingram, pledging to give £10 to any reseller that succeeded in getting its call answered by Ingram in less than five minutes.
Whether it was the healthcare background or not, the call centre mentality failed to meet reseller needs. There were complaints that when Ingram staff went on holiday they were not replaced by temporary staff. Staff were moved around the call centre so frequently that there was no consistent person for resellers to deal with. As with all distributors, there is - and always will be - credit issues, but Ingram saw no reason to solve these quickly, so resellers placed orders elsewhere.
With the fundamentals of distribution being ignored, it was not surprising things quickly turned sour at Ingram. The first rumours of Scott's departure surfaced at the beginning of the year. Which is why when he did eventually part company with Ingram, two of its vendors were surprised at the timing.
Alison Heath, sales director at Kingston Technology, said: 'I am surprised Scott has gone, just as he was beginning to turn things around at Ingram. I have heard reports from resellers that the service is getting better. I think it was a good idea to get all the sales staff in one place. The atmosphere and training was better.'
Adele Knox-Roberts, distribution manager at Microsoft, said: 'Scott was good at driving through business at review meetings. I don't think there is an obvious successor.'
One vendor, who was slightly more candid about the departure, remarked that Ingram seemed to have a bottomless pit when it came to spending money on the call centre, but he claimed that as a vendor he had not seen the return on sales he had expected. If you were really cynical, you might suggest that Ingram had to keep faith with the call centre as it had spent too much resource on it for it to appear to be a failure.
Whether the call centre is a failure or not, someone at Ingram has to take the brave decision of what to do with it. This is a task that Meinie Oldersma, Scott's replacement as managing director, needs to face up to - and quickly. Ingram Micro as a whole cannot afford to stand back and watch the centre drain it of cash. Last month, Ingram issued figures that showed it had made a 25 per cent drop in profit to $42.3 million, despite the fact that it had seen sales increase by 31 per cent to $6.7 billion. The first-quarter figures for the period ended 3 April included a charge of $6.2 million for reorganisation costs, which included the loss of 10 per cent of its staff.
While the worldwide axing of staff did not directly affect the UK arm of Ingram as most of the redundancies occurred in the US, Scott managed to get rid of 100 jobs in his first six months, including 10 senior managers, two of which were vice presidents of sales. It was commented that this caused a lot of ill-feeling within Ingram, with the old guard appearing to have been replaced by Scott's choice of personnel.
Oldersma, the third managing director in two years following Bill Gretton's departure in 1997, faces a tough time ahead. Not only is the entire distribution market suffering from poor margins, Ingram Micro has to sort out its issues at ground level in the UK or it will face an extremely hard 1999.
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