Synnex International Transforming Distribution of High-Tech Products

Group 10Anurag

Deepali

Vigneshwar

Parvez

Shubhanka

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

CASE ANALYSIS

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

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

Manufacturer

Distributor

Retailer

Power Structure in a Traditional

Distributional Channel

• Upstream Manufacturer –

Maximum Power

• Downstream Retailers – Least

Power

High Unit Value

Short Life Cycle

Rapid drop in retail prices

Product Characteristics

OPTIMAL DESIGN

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 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

MANAGEMENT INFORMATION SYSTEM

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

MANAGEMENT INFORMATION SYSTEM

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

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

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’

RECOMMENDATIONS (CONT.)

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

THANK YOU