IT Manufacturers Can Reduce Total Costs Through Distribution, According To Study
ST. PETERSBURG, FLA. / Sept. 29, 2008 – IT distributors are the lowest-cost means for technology manufacturers to enable business-to-business solution selling, according to a comprehensive independent research report released today by the Global Technology Distribution Council (GTDC). Conducted by Milwaukee-based 21st Century Equity Research, the study presents average total estimated costs of nine leading IT companies specializing in systems, storage, peripherals, software, networking and other IT product categories. The approach included analyzing all selling, general and administrative (SG&A) data supplied by participating vendors in aggregate ranges pertaining to their U.S. businesses, by channel, over the past year.
21st Century Equity Research leveraged a detailed online questionnaire as well as follow-up interviews with study participants, which included financial and operations personnel of participating companies. The report focused on the most relevant cost categories across all channels, including:
• Special Bids / Spot Offers – Discounts allocated to specific sales channels by the supplier in unique circumstances, including competitive replacement programs, large volume purchases, and to move certain inventory.
• Market Development Funds (Soft Dollars) – Dollars allocated to specific sales channels by the supplier to help generate incremental demand, including co-op advertising and rebates.
• Programs / Promotions / Marketing – Dollars allocated to specific sales channels by the supplier, including training, marketing support, and product-specific promotions.
• AR Reserve / Credit Card Fees – Reserve to cover uncollectable receivables and transaction fees charged by credit card companies.
• Price Protection / Inventory Depreciation – A credit to sales channel partners when pricing is adjusted by the supplier and the relevant depreciation of a supplier’s inventory when price is adjusted.
• Direct Sales / Advertising – Allocation of direct sales support and total advertising dollars by channel.
• Shipping / Handling / Warehousing – Allocation of these expenses by channel.
• Collections – Allocation by channel.
• Warranty / Returns – Allocation by channel.
• Inventory / AR Financing Costs – Suppliers’ cost of capital multiplied by inventory and receivable balances allocated by channel.
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