Sunday, July 27, 2008

New Integrated Supply Report: Implications for Distributors

Integrated Supply and related supply contracts are something every distributor and their partners need to prepare for in the future. Distributors have been on the front line of the integrated supply initiative. The large national wholesalers have a bit of a leg up on the rest because of their ability to provide consistent pricing and unified billing across many facilities and large geographic areas. But often the national distributors miss the mark on service, especially on technically-based products (Automation, Motion Control, Sensors and other lines). SupplyForce and Vanguard National Alliance have come up to meet the challenge on behalf of the smaller independent regional and local distributor.

Clearly this is an area where distributors and their vendor partners need to work to make the flow of products as seamless as possible for the customer.

More details from the report:

Recently (7/22/08) Frank Lynn & Associates released the results of their latest study on Integrated Supply. Integrated Supply and related hybrids are now responsible for over $14B of the MRO spend in the US, according to the report. Further, this represents over 20% of the large industrial end-user's MRO spend.

Report findings suggest that over 80% of suppliers are now using integrated supply chain routes to market and 78% believe hybrid channels, including integrated supply models, will continue to expand. Over 60% of suppliers who have targeted these new channels report having been successful in expanding sales through them. The report, compiled from interviews with more than 200 sales, purchasing, product and marketing managers and business owners, shows that traditional contracts account for roughly half of the $14 billion spent annually on integrated supply. Limited on-site contracts account for about $3 billion more, with the remainder, about $4 billion, going to third-party logistics and other outsourcing providers.

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