You can't manage something you can't see." With those words, Jim Manton, president and COO at Pinacor, Tempe, Ariz., summarized perhaps the biggest challenge facing the channel and its vendor partners as they seek to implement the new integrated distribution model: In order for the model to work, there needs to be a seamless view of the supply chain that extends all the way from the customer, through the channel and manufacturers, and back to component suppliers.
Without such an IT infrastructure to complement the new model, forecasting demand, estimating order cycle times or even pricing products is simply a shot in the dark. "We characterize [the new IT initiatives] as lighting up the pipeline," says Manton.
This well-lighted electronic pipeline is not a pipe dream, nor is it reality--yet. Very little of this channel infrastructure exists today, says Charles Smulders, a senior industry analyst with market researcher Dataquest Inc., San Jose. "There are some inflexible EDI-based infrastructures between larger players in the supply chain today," Smulders says. "But there is a long way to go."
A Common Language
Channel players, standards bodies, third-party software developers and Internet providers are coming together with that goal in mind. Only two basic building blocks are required to construct this infrastructure: clearly defined processes that all parties agree to adopt, and IT systems that can be commonly implemented and accessed throughout the supply chain.
"An entire view into the supply chain from start to finish is the ultimate end game," says Steven Horwitz, vice president of business development for Tech Data Corp., Clearwater, Fla.
"The systems will never be in place [to do this] unless we first agree on the business processes with which the exchange of information will happen," adds Fadi Chehade, CEO of RosettaNet, a nonprofit standards body with headquarters in Santa Ana, Calif. Under RosettaNet's auspices, channel partners of all kinds--manufacturers, distributors, resellers and end users--have come together to work out the kinks in the channel's product delivery system.
To date, RosettaNet has defined partner information processes (PIPs) that outline how channel partners will link their business functions. It has identified a part numbering scheme that is currently being adopted industrywide, and has agreed on a company identification system designed by Dun & Bradstreet. RosettaNet's 30 board members have agreed to implement these standards within their own organizations by Feb. 2, 2000, and to work with their channel partners and customers to accept those standards.
"This is the new channel reengineering revolution," Chehade says. "Once we agree on the business standards and dialogue, then we go to the technical people and say, 'Go build the XML stuff so our machines can effectuate the agreements we've made.'"
Joe Cermin, president of World One Technologies, an $18.5 million VAR in Jacksonville, Fla., likens the developing pipeline to a miniature version of the Web dedicated to computer products in which everybody understands the language. "In the reseller market, this is really indispensable," Cermin says. "It should have been invented a long time ago."
Pieces And Parts
Even though a channelwide system is still conceptual, pieces and parts of the system do exist. By examining the parts that are in use, the channel is learning what works, what doesn't and what characteristics need to be implemented.
Nearly every channel executive says the pipeline will have to be run in real time. For example, OEMs such as IBM Corp. and Compaq Computer Corp. have products they have built, but not yet allocated, called "open to buy" inventory that could, with the right system, be reserved.
"But the system would not be effective if it's only refreshed once a day or twice a week because you'll have a false record of what's available," says Ricky Stephens, senior vice president of North American operations at Merisel Inc., El Segundo, Calif.
Information in the system must be bidirectional from one end of the supply chain to the other. But cost will be a factor as to who can and will use the pipeline. Today, such a system is most viable for larger companies, but as more points in the supply chain use the pipeline, a valuable view of total demand in the channel will begin to emerge.
Third-party companies such as i2 Technologies Inc., Descartes Systems Group and Manugistics are working on systems that can aid in lighting up this pipeline. i2, Irving, Texas, a RosettaNet member, offers intelligent decision software and advanced planning systems that can help the channel, technologically, move toward its goal.
The company plans to host its planning and supply chain optimization service on the Web to allow smaller channel players to plug into the pipeline at a more affordable price. "For the typical regional reseller under $20 million in revenue, there is going to be an Internet-based shared system that will give them visibility like they've never had before into product availability, configurability and pricing," says Tony Levy, director of marketing for i2's high-tech business unit. VARs will be able to reserve inventory, commit to OEMs to take that inventory and offer faster turnaround on product purchases via the new pipeline.
Today, a scaled-back version of such an interface exists between many VARs and their distributors' systems. A customer can log onto Merisel's system, for example, and access or locate inventory data through a third party such as pcOrder.com Inc. Resellers also can give their customers a view into this data.
"The link that's [frequently] missing here is the distributor's being able to look into the manufacturer's system to see what's available for sale," says Merisel's Stephens.
Progress, however, is being made. Compaq, Houston, recently unveiled an expanded partnership with pcOrder.com, Austin, Texas, in which the e-commerce provider will help power Compaq's global e-commerce initiative. The arrangement gives Compaq a unified global e-commerce backbone, and by focusing on industry-standard e-commerce solutions, will take Compaq one step closer to broader pipeline visibility.
Looking upstream at finished goods inventory, however, is only one piece of the pie. The view must be extended to the component level so distributors and VARs can see what the manufacturer is able to build, says Merisel's Stephens. "It doesn't make sense to have inventory stored anywhere," he says. "You want to get to the point where, when the customer needs it, everyone can look upstream and determine if the manufacturer has the capability to build it, and then place the order."
All In Due Time
Pipeline improvements will begin to benefit both resellers and end users in six months' time, Stephens says, though the industry consensus says it will be anywhere from one year to three or more years before a truly functional, well-lighted pipeline exists.
The time it takes to light up the pipeline depends on the focus channel players are willing to give it. Additional stumbling blocks could include disparate computer systems and technologies or a lack of trust and collaboration among the partners. Pinacor's Manton says supply chain integration will not happen if the industry has not moved beyond that issue. Still, it appears the trend is leaning toward openness in the channel.
"This is not easy stuff, tying our systems together, opening books and analyzing costs," says Jeff Rodek, president and worldwide COO of Ingram Micro Inc., Santa Ana, Calif.
As the integrated distribution model emerges, many questions remain surrounding the roles of different channel players, how effectively these systems can be built and how open they should be. Lighting up the electronic pipeline will give the channel one more tool to answer those very questions.