TABLE OF CONTENTS A $300 million distribution company in the U.S. had an enviable following, which it had built up over its twenty-year history. Its customer list of thousands of companies and government sector buyers reads like a Who's Who. The manufacturers that the company represents are the cream of the crop in the communications industry. Yet the company was stagnating, even though their market share was below 20 percent.
This distribution company, with many thousands of products in its warehouses, chose to grow its business by trying to become the single-source supplier for all of its customer's needs. In its industry, the products change very quickly. Many products have a life of nine months or less. It is not practical for the distributor to inventory every manufacturer's item for the same type of product. To put it into perspective, there are so many overlapping products, that the distributor would have required ten times its warehouse space, without the inventory turns to justify it. Many products are one-time buys for customers.
In this environment, you have customers constantly calling and asking for items that are not stocked. Even though the distributor may have a reasonable substitute, there are also many reasons why customers cannot or will not accept the substitute. From the perspective of the VP Sales, if you do not have the right product in stock today, you have an excellent chance of losing the entire sale and also that customer's future business. Also, given a life cycle of...
