Need for Agility in Channel Operations

Effective channel management is a challenge that companies operating in almost all industries have to handle, be they in high tech, CPG or life sciences. We’re planning to talk about some of these challenges in a series of blog posts here, as we explore and learn more about channel management. We’ll also discuss how to better handle these challenges for more agile channel operations. Our focus will be mostly on high-tech enterprises here, since that is one of our areas of experience!

A number of large enterprise high tech manufacturers have well established sales and distribution channels to augment their direct sales channels. Let us first understand how the channel is constituted. A typical high tech sales channel is a multitier model, with some direct sales but a large number of transactions taking place through an intricate network of sales reps, agents, brokers and local/regional/global distribution companies. Channel partners are not only involved in reselling, but are also involved both upstream and downstream in the supply chain, e.g., logistics solutions, product assembly, outsourcing of services, etc.

High tech companies which sell through the channel rely on data from their channel partners- inventory reports, POS data and sales data- for important business processes like sales forecasting, revenue recognition, inventory management and product pricing. The first challenge that companies face is that the convoluted channel network results in poor communications across the channel. This results in lack of timely, accurate sales data, slower time to market and lack of real time visibility into channel sales performance and product movements.

In his blog, the Channel Guru Richard Flynn talks about partner performance being criticalto maximizing channel performance. A recent Aberdeen study (May 2011) showed that it is becoming increasingly difficult for to control the flow of data across multiple geographies, extended product lines, and sheer volume. Multichannel semiconductor companies need to better integrate order and inventory management processes – for two very important reasons, which traverse both up and down the channel

1) Manufacturers need to acertain that their core value proposition, pricing and positioning are being uniformly carried out across the channel to deliver a consistent to customers of the products’ value.

2) Timely and relevant data from different channel touchpoints will allow for better order and inventory management, eventually leading to more on-time deliveries and customer satisfaction.

Over 90% of respondents in the Aberdeen survey said that they needed more visibility into channel partners’ performance, while only 50% said that they have such visibility. Enhanced visibility will ensure:

– Which sales channels are best for which region, product segment or customer?

– Keeping track of sales pipeline, stalled or missed deals

– Awareness of supply constraints due to unplanned capable-to-promise dates

– Material tracking across outsourced operations

– Quick response to changed market conditions

Poor communication and lack of adequate, timely data leads to the channel management challenges listed below:

  • Poor price and margin management
  • Inability to make product/order availability commitments to customers
  • Higher cost of sales (returns, billing disputes, logistical costs)
  • Incentive over-payments to partners and sub-optimal pricing
  • Inaccurate Ship & Debit claims
  • Inability to react in real-time due to reporting latency

In summary, it is important to increase collaboration in the channel to increase accuracy and efficiency to drive increased revenue and enhance sales execution. Global business faces a new era in which agility is central to success, today and in the future.

Stay tuned as we discuss the challenges listed above in our upcoming posts. And let’s discuss how we can reinvent this area together. Subscribe to our blog feed here.

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