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Two-tier distribution headed for the rocks?

05 Mar 2013

The times, they are a changing, and it’s not just because of that persistent cloud thingy which has the industry in thrall. Just as relevant is the reality of a world which is more connected by planes, trains and automobiles - the things that make trade a damn side easier today than it was back in the day.

And that, says Rob Spray, Avaya New Zealand MD, means distribution has to change too. He reckons the two-tier distribution model that we’ve all come to know and love (or maybe just know) has got to be on the block. Why? Because, he advances, anyone can do logistics today.

“The East India Company was set up for much the same reasons as the two-tier model: getting tea from China to the drinkers in England was difficult and dangerous, so it required a specialist to do it.

"Similarly, two-tier distribution was put in place because the tech things we were selling took a long time to make and deliver, so the distributor had to sit in between as a buffer, handling the complex and difficult logistics while providing stock, spares and support.”

Even if you’re still pushing tin (Spray says he can see 90% of Avaya’s products being offered as services within just a few years), today’s world of just-in-time manufacturing, rapid response and ready availability of around-the-world delivery at the drop of a hat means the value-adds of distribution are under fire.

“The model is changing; we’re moving to a flatter supply chain where end-users can buy stuff, for example, directly from manufacturers through services like Alibaba, or simply procure things that were once in a box, in a software-as-a-service model.”

Of course, distributors are far from oblivious to the seismic shifts; however, perhaps the biggest challenge they face is coming to grips with a world where big deals may be getting ever fewer and more far between.

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