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Industrial Distributors Face Integration Challenge

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Ann R. Thryft
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Re: Product Integration (noun) : Product Integration (verb)
Ann R. Thryft   1/3/2012 12:24:34 PM
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Paul, thanks for sharing your direct field experience with this issue. It's easy to get rather abstract in a (relatively) short feature that has to cover a lot of territory. I think you've hit the nail on the head about the central problem discussed in this article: how can a large, non-specialist, global distributor sell a non-commodity service and non-commodity products via a channel that is tailored primarily toward commodity sales? The larger distributors I interviewed are looking at the problem from different angles and coming up with a variety of answers. It's definitely a WIP.


PaulBurke
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Iron
Product Integration (noun) : Product Integration (verb)
PaulBurke   12/30/2011 2:10:26 PM
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Firstly, thanks for the thoughtful article. As an integrator and former manufacturer's rep for a large PLC vendor, I see the challenge for distributors to effectively sell their advanced integrated products because those sensors, freq inverters, actuators, and safety devices have features and benefits that are only feautures and benefits when applied in a holistic way. eg. A frequency inverter that supports a STO (Safe Torque Off) function via a network like ProfiNet or EtherCAT is a huge selling feature, but to whom will you sell this particular feature to? A very sophisticated OEM or integrator perhaps. More importantly, who is going to do this selling? The technical acumen of the average industrial distributor falls quite a bit short of this. The distributor then needs to rely on either the manufacturer directly for the support and as a result loses their margins and demonstrates their inability to sell and support the product. Or the distributor needs to invest in high priced help to sell these more advanced products. A "systems salesperson". This is seldom done, partly because the status quo does not allow for the salaries required, and the lack of available and eligible people. The hybrid solution the above dichotomy is the new Process & Industrial Control "boutique" distributor mentioned in the OP. This distribution model is application and solution focused like an integrator, but selling from a fixed basket of goodies like a distributor. The focus is shifted from high volume commodity OEM business and towards actual end users. True solution-selling. Whether the integration is performed in house completely or by strategic integrator partnerships is mostly irrelevant and would be transparent to the end customer. A distributor performing integration will also be alienating the integrators in the market, an unpleasant side effect and yet another challenge!

Ann R. Thryft
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Re: Strain on the small distributor
Ann R. Thryft   11/17/2011 2:37:38 PM
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I think that's right, Rob . The other thing I heard was the primacy of software design support in this sector among small regional distributors. The big guys just don't do it, it seems.

Rob Spiegel
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Re: Strain on the small distributor
Rob Spiegel   11/17/2011 2:33:11 PM
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I would guess being close to the customer is a major reason they are still competitive. A good portion of the system integration is local, so it makes sense that small distributors who are close by would nab the business. So, even while the larege distributors are continuing to increase their design support, perhaps they just can't beat out proximity.

Ann R. Thryft
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Re: Strain on the small distributor
Ann R. Thryft   11/17/2011 12:19:42 PM
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Interestingly, the smaller distributors in the automation/control and mechanical sector can compete when it comes to design support. In fact, this is their biggest claim to fame, along with the fact that they tend to be physically located near their customers. Apparently, commoditization in this sector hasn't gotten very far--at least not yet.

Rob Spiegel
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Strain on the small distributor
Rob Spiegel   11/16/2011 2:49:49 PM
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I can certainly understand the pressure on the small distributor. Most parts of being commoditized, which makes it difficult for small distributors to match the prices of the large broad-line distributors. And those broad-line distributors are offering a wide range of engineering and design solutions to beef up their razor-thin margins. The smaller distributor really can't compete on either end.

Ann R. Thryft
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Blogger
Re: Up for the Challenge
Ann R. Thryft   11/16/2011 2:47:01 PM
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What a cool use of 3D models, for evaluating components. Sounds like that could be a big trend in distribution.

Beth Stackpole
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Re: Up for the Challenge
Beth Stackpole   11/8/2011 12:16:21 PM
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One of the trends that I've seen lately is the idea of creating product portals for buying components, parts, and electronic gear, but also delivering the 3D models of those parts and components so engineers can directly drop them into their product designs in their CAD format of choice. Social media can also play a role in these portals via capabilities like rating tools for ranking components or supplier quality, discussions on quality issues or design concerns, or just for finding like-minded peers or speciality expertise depending on what the development project demands.

williamlweaver
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Up for the Challenge
williamlweaver   11/8/2011 9:19:03 AM
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Thanks, Ann! Fantastic overview! I agree with you that social media and customer engagement are diffusing throughout our entire system. We are in one of the biorhythm cycles where after a huge flurry of differentiation in new products for performing different tasks, the industry is “inhaling” and integrating sensors and actuators into standard platforms and products. The Internet of Things is coalescing into a tangible object. Folks should gear up to manage the connections between people and things rather than simply leveraging the acquisition by people of things.

Here in the Ivory Tower, we are pushing like heck to prepare our graduates for the impending wave toward integration. The acquisition of fundamentals and skills is a given, but learning how to integrate those skills for the benefit of themselves and their employer is a continuous challenge.



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