Preferential treatment gets up everyone's nose, especially if you aresafeguard major accounts. It's time suppliers helped, but most refuse to release sensitive information. not among the preferred few. When manufacturers experience shortages in product supply, preferential treatment comes into full force, with most suppliers earmarking a percentage of product for their major accounts.
For manufacturers and distributors, it makes business sense to look after the most lucrative accounts, ensuring they are well stocked and don't go running off to alternative suppliers. But when there isn't enough product to satisfy demand, someone loses out.
Small dealers are hit hardest when product supply shortages strike. Smaller players often don't hear about shortages until they try to source product.
And if there is any product to be had, it is invariably snapped up by the bigger dealers.
'It becomes a major problem if another dealer gets hold of the product you've been trying to source,' says Marcus Evans, internal account manager at Surrey-based dealer, 1st Stop. 'It means spending a considerable amount of time phoning alternative distributors to get what you need.'
Smaller dealers will always feel the pinch most. 'Large accounts like Computacenter and Compel will always be ahead of the game in terms of product supply,' says Evans. 'Most distributors allocate a certain amount of stock to them to ensure they are always well serviced.'
Evans points out that the difficulties for small dealers are compounded when large dealers like Computacenter have their own distribution division.
Computacenter's distribution arm supplies its dealer arm with product, but it also supplies 1st Stop. Evans claims that when the chips are down and product is in short supply, 1st Stop immediately has to look for an alternative distributor as Computacenter's distribution arm will always favour its dealer arm.
The lack of communication between suppliers and dealers is one of the biggest problems when shortages hit. Evans says manufacturers and distributors do not inform the company of forthcoming shortages in stock or supply. 'There are ways round it,' he says, 'but it can impede on other business you are trying to do.'
Joel Abramson, MD of Senate Computer Services, agrees: 'No manufacturer or distributor ever informs us of product supply shortages or foreseen problems.'
Abramson says that when product shortages have struck, he has 'always managed to find alternative suppliers'. He adds: 'The biggest problem I've faced is with Iomega products being in short supply, but after a bit of phoning round I managed to come up with something. I have never been badly hit.'
Tony Dowling, MD of Dowton Computer Services, argues that the lack of communication about product shortages, particularly to smaller dealers, can be damaging. 'If I built 10 computers a month, it would be a problem, especially as I don't hear of any potential droughts in supply. There has to be a way of tracking the manufacture of products.'
Dowling points out that because of the nature of his business, he does not suffer greatly from shortages. 'It's not something I come across on a large scale. I have a handful of suppliers and don't have a high turnover of product sales, therefore, my needs are less.'
Evans is unhappy with the overall approach of manufacturers to the shortages problem, particularly, he says, when there are steps manufacturers can take. 'They know what's in stock and must know well in advance of any forthcoming shortages. So why don't they tell us?'
The bottom line is that manufacturers have too much to lose. Andrew Chandler, sales and marketing director at storage distributor Karma International, believes it's a question of integrity. 'In an ideal world, manufacturers would stand up and tell everyone about imminent shortages, but in reality, the last thing they can afford is to tell people about supply problems and effectively destroy any loyalty they might have.' He adds that 'manufacturers don't live on integrity - they live on sales figures'.
Small dealers are in an almost impossible situation. Large accounts will always get the nod ahead when supply gets short, and that's just a fact of the business.
Chandler agrees: 'The smaller you get, the less loyal you get, and the smaller your customers get. That's the general rule.
'Most small dealers expect it. It's the nature of the business and we don't hear many complaints. Most of our customers only complain when we don't have something in stock that another distributor down the road does.'
Chandler thinks that trying to improve communications between suppliers and dealers is an unworkable solution. He believes it is not something many small dealers are asking for, or will find of value. Chandler argues that manufacturers will not release detailed and accurate information anyway, so any attempt to forecast shortages would be useless.
'It is something Intel could do, or perhaps one of the big memory manufacturers, because they are operating from a point of such dominance. But in other product areas, owning up in advance that you're going to be short on product could really hurt manufacturers,' says Chandler.
While Chandler admits that product shortages are 'the bane of everyone's life', he believes he cannot really help smaller dealers with forecasting, and says it is just 'one of those things'.
When product shortages hit, one solution is to get the customer to agree to a change in product. The results often depend on the urgency of the order and whether the customer is set on one particular branded product.
But it is far from an ideal solution.
'There's a bad supply of Hewlett Packard Dat drives at the moment,' says Evans. 'We managed to convince a customer who wanted this drive to take a Blue Disk drive instead. That solved the problem, but not all customers are that understanding.'
James Wickes, MD of Ideal Hardware, says his company is trying to address the communications gap between dealers and suppliers. Ideal is set to upgrade its profile online intelligent robot, Boris, at the end of April, which should enable it to use Push technology to inform registered users of potential product shortages. It would be a massive step in improving communications, at least for Ideal Hardware and its suppliers.
Wickes admits 'there is no forecasting of product supply for dealers'. He adds: 'It is a problem we should be able to address, at least for registered users of Profile. I can't help feeling everyone would benefit from better forecasting in the industry.'
Ideal claims it gets over the problem by having three manufacturers covering each product area, giving it alternatives should one fall short on supply.
It makes good sense from a distributor's point of view and ultimately means its customers have a better chance of getting product during a shortage.
Wickes admits Ideal Hardware's strategy for dealing with product shortages will be put to the test later this year when the industry braces itself for a big shortage in hard drives.
A hard drive shortage is the sort of thing that can affect everyone, although some dealers claim not to be too affected by shortages of any kind. It really depends on individual circumstances and the ability of each dealer to shop around for available product.
Distributors and manufacturers tend to use this kind of scenario as justification for not having a blanket policy on shortages, but even those dealers that aren't greatly affected are aware of the need for improved communication.
And the general feeling in the industry is that the real blame has to be placed on manufacturers since they are the ones that have to come up with the answers.
'I will hold my hands up,' says Dave Griffiths, UK channel marketing manager at Hewlett Packard. 'We could communicate more. We certainly have no policy to withhold information from the channel. In fact, the last time we had a shortage was with the laser printers. We sent a note to all our partners with the regular price list informing them of the shortage. It is something we need to do more of, I know.'
The feeling from Griffiths is that from Hewlett Packard's point of view, it has perhaps been a lack of organisation rather than a lack of any kind of strategic decision.
He claims the company will attempt to remedy the situation within the next few weeks when it launches its Website, Connect, as part of its channel restructure.
The Website will connect Hewlett Packard's partners to product information, including secure areas where details regarding product shortages will be posted.
'We want to tell our partners about supply and product availability, but we don't really want our competitors to know,' says Griffiths. 'They will undoubtedly find out eventually, but at least this may give our partners a head start in the decision making. We want to help them grow, not hinder their business.'
The Hewlett Packard Website has been put together from the results of a channel survey the company carried out. The service will allow for the kind of Push technology email service that Ideal Hardware is setting.
Griffiths points out that product shortages are often unavoidable. He says there are occasions when the company 'underestimates demand' for a particular product, and that can lead to breakdown in the supply chain.
The most effective way for dealers to play the market is to keep their options open. That means having no loyalty and looking for the best credit and most prolific suppliers.
Suppliers' attempts to improve communications with dealers can only be applauded, but it's no good if just one or two companies are doing it.
The technology is there to inform people quickly. It doesn't have to be trumpeted across a hall full of competitors.
Dealers do admire supplier honesty and, in the long run, that honesty will help build loyalty, not undermine it.
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