Tuesday, March 22, 2011

Using technology to achieve Instant Distribution

I have been fascinated with the mechanics of distribution since the early 1980s. I have been privileged to work with the finest flooring, tile, and stone distributors in North America, as well as with inspiring distribution consultants such as Bruce Merrifield of The Merrifield Consulting Group  and the brilliant Wayne Quasha.

Over the years, distribution has had its challenges but it has survived though consolidation, the rise of the big boxes and manufacturers going direct. Technology, the Internet and globalization now provide great new competitive advantages to distributors willing to embrace change.

Manufacturers and importers do not question the need for the function of distribution, but they should and do question the need for traditional distribution methods of the past. Today’s distributors must address their web presence and Business-To-Business (B2B) capabilities with as much attention as their warehousing and trucking capabilities.

Emerging manufacturers and importers need “Instant Distribution” and distributors can offer such services by using tools that are now readily available through technology companies.

What are the components of Instant Distribution?

•    Regional or national coverage, for physical distribution
•    Inventory control
•    Warehousing and delivery
•    Traditional accounting and order management
•    Activity-based cost accounting (for services provided)
•    B2B connections to the manufacturer or importer
•    B2B connections to the retailers and other customers
•    B2B connections to as many distributors as needed for full coverage
•    Web site for tracking orders, checking stock, prices, etc
•    Ability to pass data back and forth with minimal human intervention

The key to “Instant Distribution” is that all of the components listed above do not have to be supplied by the same company AS LONG AS THEY ARE SEAMLESSLY INTEGRATED. In fact, a company can offer “instant distribution” services without even being a distributor, as long as it has all the technology and connections in place. When you order from Amazon do you know (or care) what companies are actually involved in getting the product to you, so long as it is shipped on time and in good condition? Amazon is often the sole source of sales to its suppliers, and yet in many cases Amazon never touches the product.

My company, Dancik International, was recently involved in a successful “Instant Distribution” startup with a foreign wood manufacturer that needed to quickly establish distribution throughout the United States. They had a new brand and only a handful of people in a new office. Using technology, partners, and a modern “everything is possible” approach, they were up and running in weeks. They partnered with a group of distributors that were already capable of quickly integrating with manufacturers. They delegated the initial setup of the computer system, including running the accounting and order systems to Dancik International, and delegated the logistics to local experts who could hook up to the computer system and deliver to the customers.

The key to this process is an evolved form of outsourcing. The companies they partnered with each had a “plug and play” set of services, designed to hit the ground running. Modern distributors should have a deep and wide set of plug and play services for any opportunity, whether the product will be sold via independent retailers, buying groups, on-line, or at Home Depot. Distributors must be able to track costs for these services and operate simultaneously in both a traditional “buy/sell/margin” arrangement and a “fee for service” arrangement.   

The first time I encountered a form of “Instant Distribution” was  in the 1990's when I received a call from Jim Gould, telling me that he was bringing a new flooring product called “Pergo” to the United States.  Simple. Get a few new phone lines into his distribution business (Misco Shawnee) and answer as “Pergo.” Put together a network of distributors that can work together, and get the computers in place. No-one really knew or cared that a regional distributor in St Louis was functioning as the national distributor of Pergo. It all worked fine, and it took five years before Pergo answered their own phones in the United States. Jim Gould later created the company Distribution Service, Inc. (DSI) to offer one stop distribution services to other manufacturers and importers. Instant Distribution.

Today, using the Internet and modern software, it’s a lot easier to do what Jim Gould did in the 1990's. As new companies bring new products to our shores, distributors should be ready and able to deliver the modern web-based services that will be demanded. 

I look forward to your comments. Thank you.    

Mitchell Dancik

Mitchell Dancik is president of Dancik International and a consultant for the Floor Covering Institute.

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