Vendors invite dealers to stock and roll party

AST, Compaq and Apricot are encouraging resellers to hold moreinventory. But do the advantages of having instant access to stockoutweigh the risks that excess inventory levels carry?

A modest comeback appears to be in the offing for the PC dealer warehouseman.

The species looked doomed to extinction in the UK, in all but a few isolated mega-dealerships that are still locked into the IBM quarterly commitment programme.

But the future of the reseller-employed forklift truck driver could be safeguarded for a little longer, following some modest manufacturer-led initiatives to encourage resellers to hold more inventory.

In recent weeks, AST and Apricot have suggested that their resellers carry minimum stock holdings on some, or all, lines. And Compaq is making it much easier for resellers to hold inventory by reducing the number of Prolinea and Deskpro SKUs this year from 67 to 31.

Apricot is offering increased co-op funds and incentives to resellers which guarantee to hold stock. Harry Thuillier, chief executive officer of Fraser Associates, the biggest Apricot reseller/distributor of the lot, welcomed the vendor's move. But he noted the breadth of Apricot's product range and urged smaller resellers to proceed with caution. 'I think Apricot could help themselves by reducing their product range. There could be as many as 500 stock items for machines,' he told PC Dealer last month.

AST is also offering a big carrot to a select few resellers which agree to hold a minimum of 25 units for this month's J-Series notebook launch. The vendor is offering marketing support, prioritised leads and blitz training days to the 10 to 15 resellers who participate in the campaign.

Con Mallon, AST marketing manager, said the resellers needed the ability to react fast in the peak corporate buying season. Lapland, the Basingstoke-based notebook specialist is wholeheartedly convinced by the AST argument; others less so. One reseller, which sources from AST direct, declined the vendor's invitation to join the J-Series campaign, because he felt it was inappropriate to hold such high levels of stock.

Our anonymous source makes a telling point. It is all very well committing to keep inventory, when you know the stock is going to fly out the door. But you also have to be convinced the kit is going to stay out. And that is not the easiest judgement to make when one considers the notorious unreliability of notebooks (AST products, of course, excepted).

The precipitous fall in hardware margins during the 1990s and the switch made by the hardware vendors to two-tier distribution, means it is no longer so attractive or so necessary for resellers to hold stock. And the soaring levels of robbery and burglaries directed at computer resellers could mean it is positively unhealthy.

How much more comfortable it is to let your friendly local multinational distributor carry buffer stock. Well that's the theory. Many resellers operate back-to-back delivery agreements with either distributor or manufacturer, which means they never see the kit. Few dealers like to talk openly about back-to-back deals. But there is nothing to be ashamed about there, as some of the few publicised deals illustrate.

Infobank, which has developed a proprietary online system to sell software, has signed a fulfilment deal with Technology plc. Dell relies on Merisel to fulfil its non-PC sales.

And Vanstar, the US giant reseller, operates a European-wide fulfilment agreement with Ingram Micro, and a global maintenance deal with Bull. Vanstar retains the high-margin design and consultancy work on each account.

The alliance, which was signed last month, is already in action in Europe, servicing five US-based multinational accounts in Europe, according to Colin White, Bull's group director of international service. The ownership of the relationship was very much in the hands of Vanstar, he said. 'Vanstar can offer one solution, one service and central billing.' The idea is that each part of the alliance concentrates on its respective strengths, in turn making a sum greater than its parts. The argument may be compelling - but it is the execution that counts. This arrangement could provide a pointer to the future - of the channel - if the trio can make it work. Or maybe not. Few resellers would want to see another service company trampling over their accounts.

But most could be happy to outsource product fulfilment to a slick logistics distribution outfit like Ingram Micro or Frontline.

Back-to-back agreements will be the next engine for the distributors and a margin-saving activity for the resellers.

Most medium and big resellers do hold some stock - if only to insulate themselves against structural shortages. Time and again, channel profitability has been harmed by the inability of manufacturers to forecast demand accurately. Big hardware vendors say that UK resellers suffer more than their European counterparts because of their reluctance to commit to firm orders too far in advance. This smacks a bit of hypocrisy given the just-in-time practices which the manufacturers enforce on their components suppliers.

Vendor inefficiency is no reason for resellers to build inventory levels. It is up to vendors to get their manufacturing levels right. And it should be up to the vendors to carry the risk of excess stock levels. Most hardware vendors offer stock rotation, but few address the full cost of stock financing.

The stock message for most resellers is this: just say no.