Here at Tech-Research
we have picked up the thorny issue of technical support within component
distributors. Over the years distributors have invested heavily in their
technical teams to help their customers design in new technology. So has this
benefitted themselves, their customers or their suppliers? If so what are the
future trends?
On the surface, Distributors appear to benefit as they attract new suppliers with the offer of additional technical support, this in turn means greater potential margins through new exciting technologies, supported by design registration schemes. It also means access to new markets and customers and a greater, deeper understanding of the market, as they embed themselves in major design projects.
However many distributors are questioning the value of this
service, do the numbers work? Can they guarantee a return and if so can they
quantify it?
Show me the money!
Clearly the additional resource of field and internal
application engineers have to pay for themselves and these are not cheap
resources. The pace of change in technology requires regular and on-going training,
which adds to the bill. Margins for new products over the years have also been
squeezed, with suppliers generally reducing the level of return from design
registration schemes. Customers often resent these schemes as they appear to
dictate pricing, which goes against their understanding of a free market.
Ultimately, customers want to retain the ability to choose their source of
supply, irrespective of who carried out the design. Distributors therefore need
to ensure a commercial and a technical relationship with their customer base. A
registration system in itself will not guarantee an order!
But the greatest threat to the distributor is being able to effectively track design projects, when design activity takes place here in the UK, potentially through a third party design house, but manufacturing is abroad in Eastern Europe or Asia. This is a major challenge; the purchasing is now through a third party, potentially only interested in the lowest price. Add in cultural and language barriers and the task is formidable.
The distributor ideally needs a presence in the second geography, which only suits some channel models and it must also have a system and process that effectively tracks the design. Assuming this is all in place, the support of the supplier is needed to ensure a level playing field on price against local competition and it is fair. Even in these modern times, there is no such thing as a global price.
In an effort to remain profitable distributors’ technical
teams will cover several franchises’ products, which means they offer a broader
view of the technology available, but by default, less specialist knowledge and
less allegiance to any one supplier.
Online Design
Access to the internet and the availability of information
has grown massively, leading to all design engineers using various websites, to
gain all their technical information. Online communities of engineers have
created forums for learning and sharing experiences, to help in this process.
This has produced online “gurus” or influencers, who need to be championed. Suppliers
and distributors alike invest in this channel to market with varying degrees of
success, which in turn takes money away from human technical resource.
Design Direct?
The supplier finds himself in a difficult position, needing
to seed the market with his new technologies by motivating the channel to
promote his products, whilst recognising the distributor may have multiple
conflicting technologies to promote. Concurrently, he needs to promote his
technology over the web.
One supplier had an alternative view, to minimise all his direct selling and place all sales activity through the channel. This left him the time and resource to take all the responsibility for design in his own hands, with dedicated engineers and Rep’ing agents. This ensures that their leading technologies are being introduced and as long as the distribution customer coverage is broad enough, no sales opportunities are lost.
Interestingly, suppliers face the same off-shoring challenge as distributors. Tracking the revenue is critical to ensuring that the right level of technical resource is placed in the geographies where the design takes place, irrelevant of production location. In theory this is easier for the supplier since no matter what the channel or where the geography, the revenue will always come back to them.
What about the customer?
The customer clearly wants the best of all worlds and
generally wants to make his own choice of technology with the best support
available, via the web or dedicated personnel.
It is not always clear where he should start! However there is a big
difference in finding a similar specification of an existing component (normally
done over the web) and developing more sophisticated products requiring design
tools and application support.
A Technical model?
It appears, in the end, that distributors CANNOT be all
things to all men. Ultimately they will offer the best support, where they have
their best specialist people, in the strongest market, with the greatest
return. There is no substitute for real expertise and focus, working closely
with both supplier and customer. This inevitably leads to differentiated
distribution models, which in the end, can’t be a bad thing? The secret is to
clearly understand your key strengths, which customers to target and to
commercially ensure, with your supplier, that your efforts are rewarded. This
means a co-ordinated sales, marketing and technical strategy. It means great
systems and processes and it means clear, mutually beneficial terms and
conditions in the supplier agreement.
Distributors face some tough choices about where they put their resource and more importantly where they won’t!
Further questions:
- Are you maximising your design-in potential?
- Do your customers know where to go for help?
- What else could you offer to improve your design in capability?
If you want help answering these and other questions then why not contact us on:
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