synnex case analysis

G R O U P 8 : -

A N I V E S H

K U M A R

B H A R AT

H A J A R E

R A H U L

V E R M A

R A J A R S H I

D E Y

S U N I L

K A M A L

Synnex International:

Transforming Distribution of

High-Tech Products

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

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 3

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

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

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

Manufacturer

Distributor

Retailer

Power Structure in a Traditional

Distributional Channel

•

Upstream Manufacturer –

Maximum Power

•

Downstream Retailers – Least

Power

Product

Characteristics

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

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

THE SYNNEX WAY

Manufacturer

(Vendors)

Synnex

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

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

MIS (contd.)



TELEPHONE SALES

 Easy availability of customer data to telemarketers

 Customer could place order with one telemarketer but make

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

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.



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.)



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