Getting More From Value-Added Distribution

I was reading one of my favorite business books the other day, Direct from Dell . It may seem funny that I like this book, since I work in the distribution business, and the direct model is the competition. But I believe there is much that can be learned from the direct model and applied to distribution, especially in areas of internal communication and customer service.

One thing Michael Dell, CEO of {complink 1544|Dell Inc.}, said that really stuck with me is “Information is better than inventory.” If information is critical in the direct model, where a manufacturer sells directly to an end user, it is even more important in the distribution channel.

The channel generally comprises four parties. At the top of the channel, we have a manufacturer, which creates the hardware and/or software. These goods then flow down through the channel to a value-added distributor (VAD). The VAD adds value by offering integration services, technical expertise, and financing. The goods then flow to a value-added reseller (VAR), which, in turn, sells to its customer, the end user.

The sharing of information through ongoing communication is always beneficial. An example of when communication is essential and could be improved is in the event where a VAR may go silent for a while and then suddenly reappear at the end of the month with an emergency purchase order. While VADs certainly like getting POs, having to rush an order can lead to complications and undue stress for all parties.

When a VAR goes silent, the communication flow stops, and the VAD is not able to assist with making sure the purchase goes smoothly. VADs look forward to being seen as the trusted advisor. They want details such as the customer's reaction to a presentation or if the client is getting close to submitting a PO. VADs value this information and use it to ensure everything is set up appropriately for a smooth booking process.

The following are some suggestions that should make working a deal easier for all parties:

  • Involve your VAD early in the deal and give it some background on what the client is trying to accomplish. The VAD may have helped win a similar deal and can add valuable insight.
  • See if you can source all products through your VAD and if your initial contact will be willing to help engage support for other products; this will save you time and energy.
  • Ask the VAD for help registering your deal with the manufacturer if you are not familiar with the process. I have seen a number of POs that were not able to be booked because a registration had not been put through.
  • Follow up after your presentation and let the VAD know how the client received it. They may be able to help resolve concerns.
  • Ask for help regarding engagement with the manufacturers. With many product lines, the manufacturer sets the discounts, and distribution usually can help sway the conversation toward deeper discounts.
  • Focus on solution sales with multiple product lines, and engage with a VAD that specializes in this (Avnet is a great example). Offering a complete solution will help you protect your deal from a sneak attack from a competitor, since the end user will view you as the trusted advisor.
  • Make sure you have enough credit with the VAD for the deal to go through, and see if it has any other financing options such as a leasing program. It's good to get this settled upfront and not wait until the last minute, as it can take time to process.

The whole goal is to close the deal and make the booking process as seamless as possible so ultimately the end user can quickly receive shipment of the purchase. The best way to ensure this happens is through consistent communication. I hope the ideas I presented help you have success with your future deals. I'd love to hear what others do to share information in the channel to make their deals successful.

2 comments on “Getting More From Value-Added Distribution

  1. Barbara Jorgensen
    February 14, 2012

    Alex–thanks for the in-depth look at the systems side of distribution. I'm not sure most readers are aware that component distributros have a big stake in systems sales as well. The business model is significantly different in many ways, as you point out. However, customers can benefit from the same values distribution provides: one-stop shopping, product knowledge, integartion assistance; regardless of whether they are component buyers or VARs.

  2. saranyatil
    February 14, 2012

    Alex, thanks for your valuable input on Vad. This kind of system can help to reduce the load on the purchase department side it creates a huge relief and the process becomes simpler with good value adds.

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