Value study nears end - Supply Chain - study commissioned by the National Electronic Distributors Association - Industry Trend or Event

Electronic News, Nov 4, 2002 by Heidi Elliott

CHICAGO -- Much has been said about the value of authorized distributors. Soon, there will be quantifiable data.

A study commissioned by the National Electronic Distributors Association (NEDA) is scheduled for publication in March 2003. The comprehensive study--seen as the first of its kind--started in 2000. Researchers at Texas A&M University discussed their progress on the study to date at the NEDA Executive Conference here last week.

The two-phase study first identifies the perceived value of distribution from the customers' perspective, suppliers' perspective and then the distributors' perspective of what their value is to each of those groups. This phase has been completed. In the second phase, which is going on now, researchers will quantify the value, putting together "cost calculators" so that a customer or supplier can compare the cost of using a distributor or eliminating this channel.

Researchers plan to deliver calculators that can show what the monetary cost is to a customer if it does the work itself and then what the cost is if it uses a distributor to perform that function. For example, the inventory management cost calculator would take into consideration the cost of capital, warehousing, obsolescence and the cost of shutting down a production line. Professor Barry Lawrence said, "End-users are deciding right now if they're going to use distributors or go direct ... the end-user needs to understand the value each player brings to the supply chain. If they understand the true costs, they can make a better decision."

Researchers have visited six distributors and have collected data from 38 suppliers and customers from a cross-section of the electronics industry. Data collection will continue through December, then the university will analyze and digest the information. NEDA will then publish the findings.

The association is excited about this project. "This is really groundbreaking research. It's the first of its kind for any distribution study," Robin Gray, NEDA executive VP, told conference attendees. "Hopefully this will dispel the myth that you can take cost out of the channel by taking the distributor out. Yes, you can take out (certain) cost, but what (other) cost do you add when you take out the distributor?".