Article: Distributing Change

Requires Adaptive E-commerce

The traditional viewpoint of the distribution channel has emphasized physical delivery and logistics. Consequently, the emphasis has been on inventory management, shipping and transportation, eliminating shortages or stock-outs, etc.

The rapid development of e-commerce presents challenges and opportunities to business at all levels of the channel as they develop their distribution strategies. Nevertheless, companies are forging ahead with their e-commerce strategies, in part fearing they will lose customers to competitors if they do not take some position.

The key characteristics that impact a manufacturers or dealer’s product, service, and information expectations from their distribution channel include how many potential customers, their geographic location, their goals and values, business characteristics, and overall buying behavior.

Before the Internet came on the scene, a dealer’s road to success and survival was due to their sales and in particular their local or regional area of service. A manufacturer’s success was in promoting its products and sales through the dealer channel.

Surrounding distribution channel decisions today is a profound change in information and communication technology, and the opportunity to use e-commerce capabilities to reconfigure the distribution channel. The fundamental challenge for the distribution channel is to meet customer expectations for solutions and manufacturer demands for representation, and do so while satisfying increasingly high demands for efficiency and low cost, responsiveness and flexibility, and effectiveness and timeliness.

Traditional distribution channels try to meet those challenges by forcing the manufacturer and its distributors to stock excess inventory or hire surplus personnel. Recognizing the costliness of this approach, business managers need to rethink their on-line approach. The nature of the Internet can allow a manufacturer and its distributors to respond to extraordinary situations by sharing inventories and support services in return for pre-specified remuneration.

Managers must view their distribution channels as webs of capabilities embedded in an extended enterprise. You must realize that by sharing your resources and capabilities in novel ways and new situations, you can take advantage of profit-making opportunities that could not be exploited alone.

The potential benefits of these new arrangements come from the opportunity to leverage resources and share capabilities within the channel. As redundant pools of inventory and duplicate services are reduced, costs will fall, at the same time, the amount of business lost because of insufficient inventory and the inability to respond to emergencies drops,

What makes these systems possible are information technology and integrated ecommerce systems that can monitor the availability of products and services, process orders, and deliver products and services rapidly from distant locations to customers’ sites.

Pressure is intense to improve market share. Most certainly change is often required to gain this market share. Clearly this is a time of transition with respect to distribution in all industries. Many E-commerce firms offer new virtual storefronts and alternative distribution models.

As an existing manufacturer, dealer or distributor you must re-evaluate your position. In particular, a manufacturer now has even more ways to reach its customers. During this transition period, many alternative models will be tested in the market. And, those that survive will satisfy the twin objectives of efficiently meeting the customer’s need for solutions and the manufacturer’s need for representation. – John Shenton – August, 2002