There's trouble ahead in the wide-format supply chain according to Time Greene, Consultant at InfoTrends, which is researching a report called 'Disruptive Supply Chain Strategies' that will be published in 2014. Here's his heads up.
There are multiple dynamics at work in the wide- format digital printing supply chain that InfoTrends believes will result in a big shake-up. On the one hand, wide-format print buyers frequently wait until the last minute to place their print orders. You already know that print buyers also often shop for the best price and service, so the printers that can do jobs for the lowest price and the fastest turnaround are the ones that will win the work.
On the other hand, many wide-format print shops manage inventory and cashflow closely, so they don’t want to buy ink and media products until they know they need them. Of course, just as buyers compare print service providers, print service providers compare dealers to get the products they need for the best prices and under the best terms. Those factors have several very important implications.
First is that large high-volume wide-format print shops have a significant advantage in today’s market; because they have the physical space to maintain inventory and the ability to negotiate preferred pricing directly with manufacturers and distributors.
At the lower-end of the market what those factors mean is that there is tremendous pressure on the distribution channel to fulfil orders very quickly and at the lowest prices they can - and that’s not a good formula for managing a profitable business. So what ends up happening is that dealers shop around manufacturers, deciding which to represent based not on what products they make, but by the quantity of market development funds (MDFs) or rebates the company offers to its dealers.
Furthermore, the pressure to meet customer requirements for low-cost has driven many dealers to push ‘white box’ ink and media products that are typically less expensive than branded OEM and global manufacturer brands. Since many dealers are selling both there is often less-than-perfect representation of those higher-priced global branded products. In the middle of all this we have a trend towards what InfoTrends has been calling ‘segment convergence’, which means that there is now a wider variety of print service providers competing in the wide-format digital printing market - wide-format digital print specialists but also screenprinters, colour photo labs, quick printers, commercial printers etc. Each has its own historical supply chain, and there are many small local dealers that have served the wide-format market.
Global manufacturers of wide-format digital printing equipment and supplies are under pressure to make their products available at a moment’s notice just about everywhere. Obviously to make that happen they have at least four major strategic options:
- to sell direct to PSPs and drop-ship via FedEx or UPS
- to sell to dealers?
- to use master distributors to manage their channel?
- a combination of these
Many suppliers just don’t have the resources to hire a direct sales force that can give them the coverage they need with resellers, but the more specialised a product line is, the smaller and more focused the group of resellers and end customers can be.
Also, many suppliers may be tempted to sell direct, but that requires a great deal of brand market as well as both a direct sales force and a fulfilment capability that many suppliers can’t meet. Master distributors such as Synnex and Tech Data are a great way to get products into the hands of end users and resellers, and promise to take products to market more inexpensively than manufacturers can if they could do it themselves, so that is an option, but manufacturers lose some control of their channel if they go that route.
At InfoTrends we think a lot of the market trends favour large establishments and larger manufacturers that have resources that can be applied to solve these channel issues. Still, we would advise companies not to just throw resources at a problem, but take a different view of how they get products and how they bring products to market. Examine supplier and distributor relationships based on effectiveness and profitability and don’t fall into the trap of doing something just because it’s “ the way we’ve always done it”.
InfoTrends is studying the wide-format digital supply chain issue in a study called ‘Disruptive Supply Chain Strategies’ that will be published in 2014. It will look at how some of the most innovative stakeholders in the wide-format industry are dealing with this issue, and at how companies from other industries are addressing complex supply chain issues and whether those principles can be applied to the wide-format sector. We look forward to posting some of those results in future Image Reports articles.