If it’s been drilled into your head that in today’s business world, the only thing that will allow your business to survive is to buy into Internet commerce, you’re not alone. But according to experts, that’s simply not the case.

Although the consensus points to the fact that technology is important, and that it will be a driving force that will shape future business, distribution consultants feel it’s equally important for distributors to use the capabilities they already have, and their knowledge of business and supply chain issues, in conjunction with the Internet and other technology. E-commerce is not the only answer, experts say. E-business — or using the Internet for things other than transactions is where the most opportunities are.

Almost every business owner complains from time to time about the inability to recruit capable employees, according to Steve Epner, president of BSW Consulting Inc., St. Louis. The Internet can alleviate many of those hiring problems, says Epner. Employers can browse among available candidates at the United States’ top colleges.

“You’re going to find the people who are interested in your company, in your industry and your location,” Epner says. “And those help-wanted areas aren’t just for students. The have places for alumni.

“You can find and get to potential employees that you never had the opportunity to reach before,” he continues, “and the cost is zero.”

Epner, speaking at a recent summit held in Phoenix hosted by Prophet 21, Yardley, Penn., told attendees that without a doubt, future customers are going to be Internet users. Because they were raised with it, they’re comfortable with it, and will demand it be an option in coming years.

“Your future customer, your future supplier, your future business partner are all going to be [Internet users],” Epner says. “This is how they communicate; this is their dial tone. If you’re not out there you’re invisible to them,” he says.

And Epner says there’s no getting around the fact that the Internet will change many of the things business owners are accustomed to, especially things like pricing. Yet, it shouldn’t be a death sentence, Epner says, unless you allow it to get the best of you. Distributors need to accommodate for change rather than run from it, Epner advises.

“Distributors are scared of this wondrous thing we call the Internet. They think it will allow manufacturers to sell direct and let me tell you, they already can and they already do,” Epner says. “All the Internet is going to do is make it easier, and all that means for us in the world of distribution is that we have to work harder at making sure we add and advertise the value that we add to the transaction to stay in business.”

It’s imperative to reiterate the value-added services a distributor provides, Epner says. They’ve always been there, but it’s more important than ever to remind customers of education and customer service’s importance.

Global pricing is another trend that will squeeze distributors from every angle. The prevalent pricing information available on the Internet allows customers to price products before they approach a distributor, ensuring they’ll get the lowest price available. Product prices are reaching standardization, Epner says, and squeezing markets.

The scariest thing out there, Epner continues, are reverse auctions, in which companies reveal a year’s worth of intended purchases, and allow companies to bid on them until the lowest price is reached. Epner says this is becoming common in other industries, and that this is where the manufacturer has an advantage. When this happens, though, the service and follow-up often needed aren’t there since the distributor was left out of the picture. Therefore, Epner says, manufacturers are realizing they need to leave the margins that will allow the distributor to remain competitive.

Epner also touts the efficiencies created by the Internet in terms of reduced paperwork, invoices and tracking.

“Think about what’s happening,” he says. “The process that took four to eight weeks now is done potentially in less than 24 hours. A process that requires many people, forms, file cabinets, carbon copies and staples is done without human intervention, without one piece of paper. Think about the value this adds to your business,” he says.

Epner believes that all these forces together will change the dynamic of the supply chain. He says the supply chain was characterized by:

  • Individual or independent links
  • The weakest link determined the strength of the entire chain
  • Limited contact between links
  • Where links connect, often there’s friction

This business model will change to reflect a more coherent and efficient “team,” Epner says. Traits of the supply team include:

  • Tightly integrated partners who work together
  • Everyone adds value or they are dropped from the team
  • Partners have common goals and direction
  • There are high levels of trust and sharing


Epner concluded his presentation by predicting that the entire supply chain will experience a reconfiguration period where sourcing will change from “buy-hold-sell” to “sell-source-ship,” and that manufacturers will limit the number of distributors they work with. Distributors, too, will limit the number of overlaps with each other and with manufacturers.

With business changing so quickly, it’s important that distributors not bury their head in the sand. They need to keep up, stay aware, accommodate for change, and make rational decisions that will allow them to continue to run efficient and profitable businesses.




POSTED ON: 3/1/2001