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
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