Strategic Sourcing of Indirect Materials through a Distribution Model

While buying direct from the source is the preferred approach to the procurement of direct materials, the procurement of indirect materials (aka MRO) presents both opportunities and challenges in the use of distribution channels. For example, there are many suppliers of IT equipment who prefer to use distribution channels to get their products to market. Synnex, TechData and Ingram Micro are the three main master distributors with networks of warehouses both in the U.S. and internationally. They sell only to resellers including companies like CDW and Insight. Companies like Cisco sell networking gear and other products through distribution.

Service industries such as health care, IT infrastructure management, repair services (including automotive, HVAC, plumbing and electrical) all rely on distributors to source products. Distributors provide supplies, equipment and parts in unit of use quantities without the requirements of large qualifying orders and the management of hundreds if not thousands of direct manufacturer relationships

Distribution can create significant value in and of itself but that value can also be greatly enhanced through the use of strategic sourcing but there are right ways and wrong ways to approach distributors. In future posts on the topic of distribution and strategic sourcing I will address the value of distribution, its history, the emergence of multiple value chains, virtual inventory, opportunities for distributor engagement, value added services and creation of savings.

Note: Lynn Everard has managed distribution operations in the health care industry and has been a distributor customer in several industries including health care and IT.

Lynn James Everard

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