Dealers--Changing Distribution Models

BY ALLISON ECKEL

The Internet is the new favorite pastime of business, and for good reason. From yard sales to stock sales, modern commerce is evolving and everyone involved is re-examining their current business models with an eye for the realization of the mantra Better, Faster, Cheaper.

Commercial printers are rethinking the way they interact with print buyers through e-procurement solutions from such companies as Collabria, Impresse and Noosh. It was only a matter of time before these commercial printers turned to apply these new relationship models to their vendors—the companies in the equipment and consumables distribution channel of the graphic arts industry. As Internet technologies continue to creep into the realm of print manufacturing, the distribution channel has remained relatively quiet. But that is not to say the channel has been avoiding process improvement.

Peter Brehm, president and CEO of the North American Graphic Arts Suppliers Association (NAGASA), cites emerging technologies such as Internet-based commerce, as well as continuing issues such as industry consolidation, as topics to be discussed at the NAGASA Forum 2000 conference scheduled for early April. As dealers and distributors face these issues, some of them are running head-long into the possibility of a fundamental shift in their role in the print supply chain.

Point, Click, Done
"The advent of widespread business-to-business Internet usage and the uncertainty as far as what impact, if any, that will have on the business," is among the chief issues Brehm outlines. The current growth in e-commerce and e-procurement Websites, especially those targeted to the various niches in the graphic arts industry, is leading the charge in digitizing the business end of print.

Electronic data interchange (EDI)—a subset application technology within e-commerce—is not a new concept, yet it is finding new applications facilitating transactions between members of the print supply chain. "Time is the biggest competitor that we have today," states Fred Heinkel, vice president of sales and marketing for PrimeSource, citing the effect that tools such as e-mail and fax machines have on his company's transactions. Now accustomed to such instantaneous communication, commercial printers want quick turnaround from their distribution vendors: fast order submission, fast response, fast results. In the early 1990s, PrimeSource developed an EDI solution—Remote Management System—to keep pace with the increasing speed of its clients' businesses.

"The channel is being driven by its customers [and is] using the Internet to develop more intimacy between dealer and customer to mutually reduce costs and provide more usable information," states Robert FitzPatrick, co-editor and publisher of The Eagle, a quarterly journal for manufacturers and distributors.

But the channel is not the only one initiating digital connectivity. Commercial printers are seizing opportunities—such as Printeralliance.com—to initiate new connected relationships. The brainchild of President and CEO Joe Lyons, Printeralliance.com is an aptly named group of independent printers that have banded together in pursuit of savings on their purchases of equipment and consumables. Stressing a deep respect for the relationship between printer and dealer/distributor, Lyons states that "We are very distributor neutral. We allow the printer to buy from whomever he wants." The benefit to printers is manufacturer rebates that are issued by the alliance.

An additional benefit is that the whole transaction will soon be as easy as a few mouse clicks.

April is the organization's target for launch of its Internet functionality. By July, Lyons reports that through the site, Printeralliance.com will set up members' dealers with digital storefronts, enabling printers to submit electronic orders and both parties to communicate via e-mail. The Web-based solution uses EnTrade technology, developed by the alliance's parent company, which Lyons describes as "a New York Stock Exchange, business-to-business Internet incubator, with transaction- and auction-type software."

That is the long way of explaining that, this summer, Printeralliance.com "will be able to lower the cost of doing business for the distributor and make it much easier for the printer to order his products," Lyons concludes.

Broadening Horizons
The reality of digital business transactions is only the latest in a long line of technology innovations for the graphic arts industry—and it is far from the last. Such developments as computer-to-plate and on-demand printing are among a host of manufacturing processes that require not only new equipment, but new knowledge and new business strategies. Instead of requiring super-human juggling abilities from their sales representatives, distributors are finding innovative ways to keep pace with technology without exhausting resources.

One straight-forward solution is to broaden the sales force to encompass personnel other than just sales reps, Brehm suggests.

Citing the differences between a year 2000 sales compensation study now under way and the same study from 1998, Brehm observes that "the channel is starting to define the sales team as encompassing technical specialists."

PrimeSource, one of the largest players in the domestic distributor/ dealer arena, has instituted a different solution. The company has corralled its offerings for digital printing, including online solutions, into a digital technology division and has given it a dedicated staff.

Mike Silverman, director of marketing for this digital group, explains that the division offers focus and expertise dedicated to fast-evolving technologies such as variable data and on-demand printing. "A typical dealer sales channel needs to be accountable for a gazillion products," Silverman says. "We have gone to the extreme in creating an independent business unit with dedicated people who are solely involved in this narrow niche of digital printing."

All of the burden for keeping up with technology need not be on the distributor/ dealer, however. The manufacturer has a vested interest in the training of its re-sellers, and often will be involved in training programs.

Blurred Vision
In a perfect world, Brehm notes, a logical supply chain can be drawn from a product's manufacturer to its end user: manufacturer to distributor to dealer to end user. "But as we all know, ours is not a perfect world," he says. Through factors such as industry consolidation and adjustments in business focus, Brehm notes, some companies are blurring the lines between manufacturing, distribution and dealership.

"Distributors get a product to the end user quickly and efficiently, and a dealer is bringing value [through] other services, such as training and developing technology," explains Heinkel. PrimeSource, he says, has bridged the gap between distributorship and dealership. The paradigm shift that traditional distributors may face as they integrate new technologies is exactly what PrimeSource has done: It has combined the supply chain steps of distributor and dealer.

"The channel is recognizing something that has not previously been done: We don't just deliver the products; we are supporting processes," NAGASA's Brehm points out. "If I am selling and delivering a product, then I sell something and deliver it—and that's that. But the healthy companies in the channel are recognizing that we are in the 'process support' business."

"To compete, a graphic arts dealer will have to do systems integration work and be able to service products," FitzPatrick agrees.

Digital business, therefore, is bringing dealers closer to distributors while bringing buyers closer to sellers. Whether the dealer or distributor builds that functionality into its business model or the printer helps him do it, the end result will be faster order submission, and possibly a whole new way of viewing business. But the underlying message is that business on the Internet is still so new that anything can happen; the only revolutionary idea so far is the Internet itself.