May 29, 2007
Whenever I visit a distributor, I always make sure I pay a visit to the warehouse manager and invite him to show me anything he believes we could improve. If possible, I would ask one of our logistics managers to come with me, provided they can share the same language. Try it if you have never done it before. You will discover the impact of the cost savings policies your company implements without necessarily realizing that the cost is actually only being transfered elsewhere.
Distributors quite rightly represent themselves as a bank and a conveyor belt between the Vendor and the Channel Partner; a direct extension of the Vendor, so when we change the way we package or ship something, we should remember that our logistical extension is going to have to cope with it. They also need to operate efficiently so we should always make sure that our decisions aren’t at the cost of our Channel and that we are always doing what is best for them. Here are just two real life examples:
- No more packing list! Distributors across Europe started complaining that we were omitting the pallet packing list, costing them additional time to work out what had been delivered. our logistics center confirmed they were being applied as per the procedure…in fact, the new packer in the Dutch warehouse (lots of warehouses in the Netherlands) was 2.10m (6ft 8in) tall (lots of tall people in the Netherlands) and was simply slapping the label on the top of the shrink wrapped pallet where about 1% of the world’s population could see it. A change to the procedure solved the issue.
- Finding the colors. I was once told by an angry warehouse manager that they had to open every carton of 8 toner cartridges they received -and they received pallet loads of them every week- each box taken out for the staff to know which color they were to receive in their system.
- This didn’t seem to make sense until I found that our logistics center was actually re-using old cartons to ship mixed sets of toner.
- We then found that the cartons had been designed in such a way that once opened, you had absolutely no way of knowing which color was in each box since the markings on the boxes were on the wrong face of the box.
- Of course, the mixed cartons were never marked as mixed,that would have been far too simple.
- Finally, we discovered that rather than recommending or enforcing standard quantities (of 8), we were letting our Partners order free multiples. In our western culture, people tend to order metric multiples of 10 or dozens -never multiples of 8. So we always ended up with a mixed carton.
As a result of the strong relationship we built with the logistics teams of our Partners, our Brand became synonymous of ease to do business with. This invariably got back to the senior management of the distributor who would then use their influence to increase their sales of our products. It became a real win-win situation, reducing both our and their cost of doing business.
May 24, 2007
I was talking to a fellow consultant this morning about how few real Channel Account Managers there are in the business.
How many of our CAMs really understand what makes a Partner want to work with one Vendor rather than another. We had a great laugh about a survey I had commissioned a few years ago.
We had asked a Channel agency to find out how we were perceived by our Partners across Europe. When we asked the owner of a key Channel Partner what he thought of his Account Manager, his answer was four words long: “He drinks my coffee…”
This was about 8 years ago and I notice that the coffee business is booming. How many coffee drinkers do you have in your company…?
May 24, 2007
I just read my former colleague Adrian Moss’s post about CCTV and the fact Britain has more cameras per inhabitant than any country in the world (take me there). By the way, Salford police didn’t doctor the pictures (yet), they painted the line under the car. Adrian is predicting the next step is that they will paint lines into pictures or move cars onto lines, or drivers into cars, or gangsters into bank robberies. There is no limit, check this out, its scary.
This whole discussion about CCTV and freedom brings to mind some of the massive contradictions people don’t seem to worry about.
Despite the attempts of successive governments to explain why an ID Card would make sense, Britons seem to think that having them would result in a reduction of their freedom (idiot’s guide to the ID Card) …they forget that with CCTV, GSM phone positioning (have you ever wondered how Orange knew where you were when you dialed the Road Info number), etc…freedom and private life is already a view of the past.
Being a Frenchman who lived in the UK for ten years, I was able to discover to my total amazement that an Estate Agent could buy information about my banking and financial situation from companies like Equifax (what do they say about you…). When I moved to the UK, one of the first things I bought was a bed to “furnish” the house I was going to live in until my family turned up. Well guess what: since I had no banking history in the UK, I only had a Cash Card, and the shop wouldn’t accept the £250 check I wrote out on the checkbook I was given by the bank! They ended up photocopying my passport and asking me to write out 5 checks for £50 each.
It’s not all bad: in France, when you rent a house or an appartment, you have to bring three payslips to prove you earn more than 4 times the rent (!). You might be earning five times the rent and have just borrowed a fortune to buy a Ferrari F40 and a 40ft boat and have no money available at the end of the month…they wouldn’t know.
I think Adrian has a good point here, maybe there is some future mileage in editing CCTV films. By the way, for those of you who own a Ferrari (I don’t so I’m not allowed), here is the link to the Ferrari community site.
May 23, 2007
…and you don’t know what you don’t know!
“Education is a progressive discovery of our own ignorance” Will Durant (1885-1981)
Five years ago, I was with a European executive of one of the largest global IT Vendors brainstorming what has since become a highly successful (and ongoing) channel ecosystem building program. The guy was extremely astute and aware and this six hour face to face session allowed us to lay down a very solid foundation for the program (it also resulted in me falling asleep in the taxi during the short drive back to Heathrow).
His opening gambit was the “You know…” saying and I regularly find I need to remind Vendors of such a basic concept. Think of it: we deliver our products to our end user customers through several layers of channel partners who are in fact serving their own respective customers. This is particularly true in the SMB and Mid-Market segments. We always tend to forget that end users are purchasing many different brands from “our” partners. All we see is the business the partner generates for us. That is what we know.
What we don’t know -unless we deliberately go and research it- is how big that channel partner actually is, and how important he is for his customer (be that a reseller or an end user). A simple illustration could be that if we own 20% market share in an market that represents 20% of the ICT market, we probably represent no more than 4% of a distributor’s activity and a varying share of his margin and profit. Of course, things are not as simple but we must never forget that our basic channel mind-share is no more than the share we represent in a partner’s total business.
One can increase that mind-share in two ways: increase our share of his business or become a more profitable product line for him through exciting channel programs or by reducing his costs of doing business with us.
We should always ask ourselves whether our Account Managers actually understand that their channel partner is more interested in how he makes money and satisfies his customers with our products than what products he is actually selling…
I suppose one could call that being somewhat modest. If we don’t know what how our Partner perceives us, we are probably going to be seen as arrogant in our relationship.
May 21, 2007
The other day, I was with an IT Hardware vendor who was saying he was tired of giving the channel 30% margin for no service. This vendor wanted to open his own eCommerce activity and expected to increase profits by doing so.
Ever since eCommerce appeared, Vendors have been tempted to set up their own eCommerce section on their own web site. The number in the bottom right corner of that spreadsheet says you should make more profit since you are not “giving away” part of your margin to your Channel …
If you go a few steps beyond the knee-jerk-spreadsheet-conclusion, you will find that there are many reasons for not making that step (unless it is your only trading model):
- do you really want your (struggling) logistics organization to start having to ship units rather than cartons, cases, pallets or even containers?
- have you ever thought about the fact that the handling cost of each of those packaging units is more or less the same? In fact, in may cases the actual handling cost is lower.
- do you think you can set up an eCommerce activity without any support staff. People expect to find a human when things go wrong. How many languages will you need?
- how about payments: are you set up to handle credit card payments across geographies?
- What about the tax and VAT issues, are you ready for that?
Once I got my client thinking…he started finding his own objections and finally decided that the Resellers did a much better job than he, the Vendor ever would, and at a lower cost.
Here is another reason why you don’t need your own eCommerce activity: – go onto your favourite internet search engine and type the name, code or reference of one of your products followed by the word “price”. You don’t even need to type your company name and I bet you’ll find 10 companies you can buy your stuff from and get it delivered to your doorstep tomorrow morning.
You see…you already have your eCommerce activity. Its just that it is being managed by the people whose job it is, and who serve their Partner, the End User. That End User certainly buys many other Brands from his preferred Reseller. Why would he want to establish a new relationship with each of the Vendors he has referenced? That would make his life more difficult; he might even decide to change Vendors.