Distribution Execs Laud Two-Tier Model To Vendors

In the long run, the strategy could help increase solution providers' sales and profits, and improve their business models, GTDC members said.

"A year ago, most of the vendors were up to their rears in alligators," said Steve Raymund, CEO of Tech Data, during a recent interview in which he outlined the GTDC's initiatives and introduced the group's new CEO, Tim Curran. "They were more concerned with making payroll than going forward with channel strategy. A lot of companies are still struggling, but it doesn't seem to be getting any worse. So maybe people will stop to think about how they will grow their channels."

When that time comes, the GTDC, which includes executives from broad-range, regional and specialty distributors, wants to make sure vendors use distributors as a major piece of their supply chain strategy.

Curran's top priorities include selling the two-tier distribution model to Wall Street and vendors by using a newly released database that tracks the regional sale of product through SKUs or categories on a weekly and monthly basis.

"For many vendors, the vast majority of sales go through the channel," said Curran, a former senior vice president of U.S. sales at Tech Data. "But to have visibility [of product sales by geographic region and channel against their key competitors is an enormous window of opportunity through which they can analyze strengths and weaknesses and respond with marketing programs that target the actual issue."

While the reports are targeted at the investment and vendor communities, the GTDC is working on ways to share with solution providers some of the information, such as the top-selling products in certain regions. "Are [solution providers selling what everybody else is selling? Is your business reflective of general market trends?' " Curran said, citing some of the issues. "Previously, they didn't know that, except on a real time-lagged basis. Now it will come from an aggregate distribution list."

The GTDC will also work on building participation in its annual distribution forums to form tighter relationships with vendors' CEOs and channel chiefs. GTDC principals said they were disappointed with the low turnout of high-level executives at the first forum, which was held in the spring.

The forum's keynote speaker, Cisco CEO John Chambers, is one executive the council would like more vendors to emulate. "He's one guy who gets it," Raymund said. "He makes sure partners up and down the supply chain are happy and are working productively with his team. He's a 360-degree kind of guy so he can better understand how all the pieces and parts work."

As part of that vendor education, the GTDC will shift the debate from direct sales vs. indirect sales to distribution's success in cutting costs from the entire supply chain and improving go-to-market strategies. "We can demonstrate that using the channel is a more efficient delivery mechanism to reach the marketplace," Curran said. "[Vendors don't have an efficient supply chain into the component suppliers. If they can focus on that, they'd ultimately get their SG&As down and be more competitive in the marketplace."

Meanwhile, distributors will have to change their own models to adjust to a maturing market that will show single-digit growth rates in the future instead of the 20 percent to 30 percent growth of several years ago, Raymund said. They will need to offer more complex solutions, deeper training and stronger support to help vendors sell more sophisticated technologies, he said.

"In this environment of specialty, slow-growth technology, what it will take for vendors to be successful is educating, training and empowering their channel sales force, which is really what distributors do," Raymund said.