GROUP 8:-ANIVESH KUMARBHARAT HAJARERAHUL VERMARAJARSHI DEYSUNIL KAMAL

Synnex International: Transforming Distribution of

High-Tech Products

HISTORY

Started in 1975 as division of MiTAC to distribute Intel CPUs

Became independent in 1985, named Micro Electronics Corporation

Incorporated as Synnex Technology International Corporation in 1988

In 1993, built fully automated warehouse facility and became a full range channel management company

Became first (and only) distribution company listed on Taiwan stock exchange in 1995

Began overseas expansion in 1997Worldwide revenue of US $170 in 2007

INTERNATIONAL EXPANSIONS

Acquired a distribution company in Hong Kong in 1997. Used it as a springboard to serve mainland China

Took equity stake in the 3rd largest distribution company in U.S. in 1998, which also covered Canada and Mexico

In 1998 itself, it created its Australian subsidiary that also served New Zealand

Took partial stake in Indian distributor Redington (36.3 %) in 2004

By 2006, it served 181 cities in 29 countries and had over 35,000 clients

GLOBAL PRESENCE OF SYNNEX

CASE ANALYSIS

We have analyzed the case considering following points:

Use of innovative business practices by SynnexOptimal design of a channel structure to

accommodate IT & Telecom products (unique features)

Achieving economies of scale and economies of scope in distribution

Impact of web technology on distribution channel

Use of web technology in expansion of business

OPERATIONS

Products - multi-brand, multi-category & multi-field

Channels - Sales & distributionLogistics -Warehousing & transportation

Represented 300 brands, 7000 items in 4 categories :

IC components Information products Communication devices Consumer electronics

SYNNEX DISTRIBUTION STRATEGY

BROAD CLIENT BASE Catered to small outlets which were neglected by

others

NO PUSH FOR VOLUME SALES Discouraged large volume orders Increased delivery frequency

NO REIMBURSEMENTS FOR UNSOLD STOCK Inventory carrying risk transferred to retailers

DISTRIBUTION OF IT PRODUCTS(TWO ASPECTS)

Supply side distribution: Parts and components (eg. memory chips) System products (eg. mother boards)

Demand side distribution: Computer peripherals (eg. printers) Consumer electronics (eg. cell phones)

HIGH TECH PRODUCTS: TRADITIONAL DISTRIBUTION MODEL

Manufacturer

Distributor

Retailer

Power Structure in a Traditional Distributional

Channel• Upstream Manufacturer –

Maximum Power• Downstream Retailers –

Least Power

High Unit Value

Short Life Cycle

Rapid drop in retail prices

Product Characteristics

OPTIMAL DESIGN (Channel Structure)

To accommodate IT & Telecom products (Unique features)

High Tech products (High Retail Price, Speedy Turnover, Fragile)

Synnex upgraded to Logistic Management Company

Internal trucking operation Million deliveries every year ( 97% of total shipments) Shipping errors (< 0.004%)

Fully Automatic logistic Centre Core competency of Synnex Real time Networking of Warehousing Facilities

OPTIMAL DESIGN (Channel Structure)

State of the art MIS Enhanced accuracy of order contents (> 7000 items ) Lowered ordering cost Linked all operational units Delivery in 2 half days Delivery of 3400 orders/daily

THE SYNNEX WAY

Manufacturer (Vendors)

Synnex

Retailer (Clients)

• Synnex never misused trust unilaterally for short-term gains

• Earned trust from Vendors which advocated “the Synnex way” outside Taiwan

• As a result, a Unique Vendor-driven expansion into foreign countries

MANAGEMENT INFORMATION SYSTEM

INVENTORY CONTROL Automatic classification (shortage, normal, overstock, slow-moving & dead

items) Demand prediction based on Life cycle Through sales volume tracking, improvement in

robotic packing efficiency

MIS (contd.)

CUSTOMER MANAGEMENT Client tracking based on business size, transaction

volume, order frequency and number of items in each order

Helped in building long-term relationship with clients

EXPRESS DELIVERY Small items pooled in a single box Videotaping of packing process Verification of order done by store owner

MIS (contd.)

TELEPHONE SALES Easy availability of customer data to telemarketers Customer could place order with one telemarketer but

make corrections with another

SERVICE DIFFERENTIATION

One year additional Quality Warranty over original manufacturer warranty

Reliable after-sales services to end-users for vendors

Accurate tracking of items under repair through Information system

Advanced Logistics system which enabled it to repair and return a defective item in only 4 half days

Helped retail outlets to set up service stand

STRAGIES RECOMMENDED

Geographical Expansion Venturing into unexplored regions like Europe,

Africa and South America through:- Acquiring a stake in existing distribution company or

setting up a new distribution Channel Setting up a MIS system After collection of relevant data, setting up warehouse

facilities

RECOMMENDATIONS (CONT.)

Implementation of web technology for distribution channel of Synnex

Michael Porter (2001) has argued that e-commerce can allow economic actors to significantly reduce their transaction costs.

A reduction in transaction costs then often encourages the use of markets instead of internal hierarchies in order to organize economic activities (Malone et al. 1987).

This is argued to increase efficiency not just at isolated firms, but throughout a commodity chain.

Producer driven chains often are dominated by large corporations who coordinate the entire network. Such chains are readily observed in technology-intensive commodities.

A COMMODITY CHAIN

Use of Internet creates a “borderless” virtual business platform on which suppliers, customers, competitors and network partners can freely interact without going through the pre-defined channels on the value chain, members of the same business network or of different networks can by-pass the traditional interaction patterns and form virtual value chains’

RECOMMENDATIONS (CONT.)

PARTIALLY DISINTERMEDIATED CHAIN

DISINTERMEDIATED COMMODITY CHAIN

RECOMMENDATIONS (CONT.)

Product Line expansion Supply side expansion Synnex can venture into distribution of Auto

components. The auto industry is a booming sector today and

Synnex can leverage this opportunity by supplying parts and components to the Original Equipment Manufacturers (OEMs)

Demand side expansion Pharmaceutical industry holds a great promise today

due to the booming Healthcare Industry. Synnex can explore this opportunity to expand its distribution channel in this sector

RECOMMENDATIONS (CONT.)

Providing Logistics support to other distribution companies Synnex has presently lots of unused space in existing

warehouses due to extra capacity. This leads to capacity unutilization. Synnex can provide this space to other distribution companies and earn some extra revenues

Providing market research solution to other firms Synnex has a lot of data due to its robust and efficient

MIS system. It can use this information for providing marketing research solution and analysis to its clients and other firms

THANK YOU