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SYNNEX INTERNATIONAL : TRANSFORMING DISTRIBUTION OF HIGH-TECH PRODUCTS
Marketing Management Class - Group 7M Farhan Lucky [11P2156]
Meidi Indah Nurmiati [11P2158]Lingga Wardhana [11P2155]
History Of SYNNEX
Started in 1975 as division of MiTAC 1 of 2
pioneer in PC makers (besides Acer)
Distributed mainly computer parts
and components
In 1985 separated from MiTAC as an independent firm,
Micro Electronics Corp
Evans Tu as founding president
Grow up rapidly. In 1988 incorporated into Synnex Technology International
Corporation
In 1997 began overseas expansion, took equity
shares in several distribution company in
US, India etc
In 2007, sales close to US$ 6 billion & became third largest electronic
product distributor worldwide
Distribution of High Tech Products
Computer-component suppliers (hardware or software) e.g. Intel and Microsoft.
Relied heavily on local distributors to serve the market
Bigger group of manufactures e.g. HP, Epson, NEC, Canon, Kodak, Samsung.
Sold through multi layer channels, supplemented by mass media
Vendor Grouped
Startups with innovative solutions e.g Research in Motion’s BlackBerry
Challenge was to identify the product that had real market
potential
Business Issues
Little bargaining
power vis-à-vis their vendor
Distribution rights is not secure and
could be forfeited at any
time without warning
Scope of operations varied from case to case
Volume must big
enough to justify the
service cost
Mass exodus manufactures to
China lead to intensive market competition and
driven retail prices down
quickly
The SYNNEX Way
In 1987 begin to distribute computer peripherals to retail outlets. Response to the exodus PC makers to China and the booming market for consumer electronics
Generated sales mainly from parts and components to PC manufactures, and sales to institutional clients
In The beginning (1985) did not differ from other, except its operation scale was bigger than most rivals
The SYNNEX Way – Unconventional Practices
Broad client base, willing to cater to small outlets that were neglected by others
Problem : profit generated from small clients was usually not big enough to offset the service cost
No volume sales, Synnex refused to fill orders that too big for a store to handle. Instead, it increased frequency delivery
Facts we know : high volume sales helped distributors reduce frequency delivery & lower the service cost
No reimbursement for unsold stock, manufactures allowed distributors to reimburse retailers the loss of unsold stock caused by pricing changes in the retail market. Synnex decided to discard this practice
Problem Detected
Problem Solving
How to keep its business profitable ?
Synnex could boost the efficiency of serving small retailers by bundling multiple items in one shipment.
Action 1. Positioned itself as a one-stop distributor for small clients. Increase number of vendors from 28 (1992) to 300 (2008). Also increasing number of items distributed from less than 1000 to 7000.
Action 2. Tighter control over the shipping process by established a fleet of trucks that numbered in hundreds. Kept shipping errors at or below 0.004 %
Action 3. Build logistics centre to handle all aspects of inventory management, such as unpacking, repacking, assorting, shipping and so on.
Problem Solving – Management Information System
How to linked all operational units ?
Inventory Control. Based on current inventory and historical sales data, IT systems can classify products into 5 categories : shortage, normal, overstock, slow-moving and dead items.
Customer Management. With 35,000 clients, the IT systems could track all clients based on their business size, transaction volume, frequency order and the number of items in each order.
Express delivery. Synnex pooled all multiple item in one big box to reduce time consuming in delivery. The warehouse videotaped the packing process and assigned a computer number to each box.
Problem Solving – Management Information System
How to linked all operational units ?
Telephone Sales. To reduce cost many firms replace personal sales with telepohone sales. But many attempts failed because face to face business dealings important in some area.
Synnex quickly figured out that the key to the success of telephone sales lay in an information system that made customer data available to any telemarketer who answered the phone call.
Service Differentiation
1997. Attached a service label to the
products that it distributed
2000. Offering an additional year of
quality asurance on top of original
manufacturer warranty
With its advanced logistics systems,
Synnex required less than 30 minutes to repair broken item from retail outlet
Selected some retail outlets as “partner
stores” to push service quality and increased consumer exposure
International Expansion
Step 1. Implement MIS in the foreign subsidiary
Step 2. Build logistics centre after business volume grew and local knowledge in the host contry accumulated
1997. Acquired an electronic products distributor in Hong Kong (covered China Market), and also distribution company in the United States (covered Canada and Mexico)
2004. Took partial stake (36.3 %) in an Indian distibutor called Redington that also operated in several Arab and African markets
141 cities
16 ,000 outlets
16 nations
Merger with local distribution company
How to replicated in foreign markets ?
Thank You
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