CRN Interview: Steve Raymund, Tech Data

As chairman and CEO of Tech Data, Steve Raymund has spearheaded the distributor's strategy for the better part of two decades. Looking ahead, he said supply chain optimization will be a key issue for the distribution sector. Raymund recently discussed visibility into supply chain information and realtime pricing in an interview with Editor In Chief Michael Vizard, Editor/Online Timothy Long and Senior Writer/Executive Producer Online Jeff O'Heir. Here are excerpts:

CRN: What are some of the things that Tech Data is doing to refine its supply chain and bring down costs?

RAYMUND: If you look back historically, four or five years ago, our vendors probably had a lot of work in progress in inventory. We were carrying six weeks, and our customers were carrying two to four weeks. Today, our vendors,with the assistance of contract manufacturers,are down to very low inventory on hand. We, in turn, are carrying roughly three weeks, and our customers are carrying zero, for the most part. So we've squeezed a lot of cost out of the system. I think we may be reaching the point, and I'm sure we are, of diminishing returns.

But we can still do a better job of not only reducing the inventory but also ensuring that we've got the right product in the right place at the right time for the right price. That really is the next chapter, the next major challenge in the process. When we started with IBM, for example, we were carrying 800 SKUs or something like that, and invariably we were long on the product when the demand was absent or flagging. And then we were in short supply on products when demand was heating up. So we just weren't doing a good job collaborating to align supply and demand.

So they're really our showcase of success of what can happen when two companies partner closely to help identify the SKUs that are going to be hot. To work better at forecasting those through pricing, marketing and demand planning and supply chain management, [we need to focus our resources around the items we think are going to move the most.

CRN: Is IBM getting more visibility into your supply chain, or are you getting more visibility into their supply chain?

RAYMUND: They're getting more into ours than we're getting into theirs. But, frankly, I think that part of the next wave of this process will be better longitudinal visibility up and down the channel, where we are connected directly with contract manufacturers and are able to see into the forecasts and supply chain more clearly so we're in a better position to provide an available-to-promise status for products to our customers.

CRN: As that supply chain model moves forward, how much will Tech Data shift its role in terms of who assumes the risk for transactions? Resellers say that one of the things they're most frustrated with is the turnaround time in getting special pricing for customers. Approval has to go through Tech Data, up to the manufacturer and then back. Is it worthwhile for you to just give them the 'yes' directly and then go negotiate the back end?

RAYMUND: It's actually one of the big issues gumming up the works,quoting competitive, realtime prices by our customers and end users. We think the answer is to deal with the challenge programmatically, so that on the front end Hewlett-Packard or IBM authorizes us to make discrete decisions on the front lines,subject to certain predetermined or prenegotiated parameters,vs. having to beg for permission on every single transaction, which inevitably takes more time than the customer is willing to put up with and the end user is willing to put up with.

So, right now, the process is not working very well. I think there's high awareness of the opportunity among our vendor community to improve and streamline the process. We're kicking around different things that we can do to rationalize and speed up the ability to give price deviations or special, below-cost bid pricing to our customers on a realtime basis. The problem from the vendor standpoint, you have to understand, is fraud, which is reputedly quite rampant. And we have been all over our vendors to do a better job policing, sanctioning, firing and prosecuting any distributor or dealer that they catch engaged in fraudulent, gray-market behavior.