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