A conduit for change
The Internet eliminates redundant contacts and enables vital supplier-distributor exchanges
By Brian J Short -- Industrial Distribution, 12/1/1998
A pipeline already exists for manufacturers and distributors to start exchanging information to help them operate more efficiently and improve service to their end customers. This conduit for change is the Internet. And, as we approach the next century, the companies that incorporate this conduit into their daily operations will become the leaders in the distribution of low and high tech products to industrial users.Manufacturers, and some distributors, led the way on to the 'Net with web sites designed primarily to inform people about their products or services. Some realized the power of the conduit and began impressive development initiatives to take their Web site beyond an "online catalog."
W.W. Grainger's site integrates an online catalog, ordering capability, information about Grainger, and even banner ads for the products they sell. This site is the benchmark for industrial distribution on how to give the end user a seamless way to select and order products, without picking up the phone -- or even a paper catalog!
But how do the manufacturer and distributor take advantage of this conduit to improve their methods? An analysis of how, why, and how often manufacturers and distributors "touch" or contact each other in the course of a business day is a good place to start.
The two contact points are usually the customer service department for the manufacturer and the inside sales staff for the distributor. A common scenario involves an end user showing up at the counter of a distributor with some non-functioning part wrapped in an oily rag. The distributor's inside salesperson identifies the part, takes a quick tour of the warehouse, and then the computer inventory, and sees that the needed part isn't in stock anywhere.
Next move -- call the manufacturer and "check stock" -- the product is in the manufacturer's warehouse 600 miles away. The guy at the counter doesn't have enough pull to make a decision on airfreight, so he takes the information and returns to the plant. So far, one touch between manufacturer and distributor. The purchasing agent from the plant calls with a purchase order and authorizes a next day air shipment. Someone from inside sales calls the manufacturer and places the order, asking that the manufacturer provide the air bill number, when it becomes available. Touches two and three, once the manufacturer calls back with the air bill.
The next morning, the purchasing agent follows up on the shipment, prompting another call to the manufacturer to verify the part made the plane -- touch four. A fifth contact takes place between the distributor and the air freight company to make sure the package is out for delivery. Each one involves a phone call or a fax, the time of two people, and a lag in the feedback process.
Our own analysis showed that each of these touches could be handled online through the Internet. Authorized distributors can access our system to see real-time inventory, verify pricing, place orders, check order status, and hot link to the carrier of the shipment to check delivery status, all through our Dayco Direct Web site.
We view this as the first step in using the Internet to change how we do business. What's next? The concept of "virtual inventory" -- making our distributors' inventory visible to all other authorized distributors, improving turns and reducing the amount of overall inventory in the channel. "Dynamic referral" of orders and sales leads direct from the Dayco Web site to the authorized distributor closest to the request.
The Web will be a conduit for the exchange of forecast information and training materials, and provide online product design and specification functionality. This conduit will change the relationship between the manufacturer and the distributor, linking them closer together to service the end user more efficiently and effectively.
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