Distributors extend their range with Web-based functionality linked to back-end systems
By Staff -- Manufacturing Business Technology, 9/1/2005 12:00:00 AM
"We make our living selling, but we make our money moving material," says Clarence Martin, CEO and CFO of State Electric Supply Co., Huntington, West Va., which sells everything from residential light switches to power-generation transformers and components for automation control equipment. "We are in an industry with extremely thin margins—a half-point gain in margin is big for us."
The challenge is to move inventory more cost-effectively. "The Internet has changed everything," Martin maintains. "We don't see it as a threat, but as an opportunity."
In fact, the Web has enabled plenty of distributors like State Electric Supply to both extend their geographic range and sell more effectively by exploiting technology that enables them to become more market-driven.
"Distribution companies have primarily done missionary sales by knocking on doors," says Ross Elliott, VP of strategy & marketing for enterprise vendor Infor's distribution software suite. Infor itself sees tremendous market opportunity for customers like State Electric Supply in enabling them to operate more like direct-sales companies. This is accomplished by creating a strong Web presence—e.g., establishing portals—and delivering analytics for market segmentation and targeting, all linked to back-end distribution software.
"They need both the control and discipline of a distribution system, and a creative means to hone in on their target market," says Elliott. "It's all about understanding customers and better segmenting them, and then building campaigns and measuring their effectiveness," Elliott says.
Infor calls this process "market-driven distribution."
"In down-home terms, it's direct marketing," says Ernie Schell, president of Southampton, Pa.-based Marketing Systems Analysis. Schell works with end-user companies to select and implement market-driven distribution strategies.
"It's an extension of database marketing, whereby you analyze customer buying behavior to better segment and target them, Schell adds. "The critical aspect is that customer behavior is being tracked. Distributors are very definitely beginning to do more of this, and the reason why is the Web."
Austin, Texas-based Activant Solutions is another vendor addressing this trend. Activant offers vertical ERP solutions for the automotive aftermarket, and home centers, wholesale trade, and lumber & building materials markets. Its Prelude suite enables distributors to extend their Web presence by transparently hosting Web sites for their customers. Another feature permits seamless order processing at the customer Web site, which is performed in the background directly within the distributor's order processing application.
Says Greg Crofton, Activant's director of marketing, "[We offer] advanced supply chain capabilities [that give distributors] entry to a market they were traditionally locked out of. Ultimately this gives the customer greater convenience and choice."
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