synnex case analysis

Synnex International: Transforming Distribution of High-Tech Products

GROUP 8:ANIVESH KUMAR B H A R AT HAJARE RAHUL VERMA RAJARSHI

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 1997  Worldwide 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 Synnex  Optimal 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 & distribution  Logistics -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 Rapid drop High Unit Value

Product Characteristics

Manufacturer

Distributor

Retailer

in retail prices

Short Life Cycle

Power Structure in a Traditional Distributional Channel • Upstream Manufacturer – Maximum Power • Downstream Retailers – Least Power

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 Synnex

Manufacturer (Vendors)

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 

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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

RECOMMENDATIONS (CONT.)  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’

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

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