VIA International

Advancing
Channel Value
Propositions &
Programs that
really work in
Distribution
Introductions
Julian Dent – Chairman, VIA International, specialist channels
consultancy & Author of Technology Distribution Channels
David Morse – General Manager LATAM, Quadmark, sales enablement
and business consulting
Advancing Compelling Propositions
To advance a compelling proposition, first you have to:
• Think like a distributor, understand their business model
• Focus on the outcomes they are measured on
• Focus on the metrics they use to assess vendor performance
• Identify where they are hurting right now
Then you can put together a proposition that:
• Addresses the above
• Leverages your unique strengths and assets
• Is clear, consistent and can be communicated by your front line
teams
Distributor Business Model
Value Created/
Destroyed
Net Profit
Interest
Operating
Profit
Capital
Employed
ROCE / ROIC
Net Current
Assets
Gross Profit
Overheads
GMROWC
Sales
Working
Capital
Payables
Cost of Good Sold
GMROII
Receivables
Inventory
Other current
Assets/
liabilities
Weighted Average
Cost of Capital
Other Assets
& Liabilities
Global
Broadline
distributor
model:
Ingram Micro
2014
Global
Broadline
distributor
model:
Tech Data 2014
Avnet
ROIC
Year 2 June 27 , 2015 Accounts
Year 1 June 28 , 2014 Accounts
12.7%
12.3%
Year 2
Year 1
Global
ValueAdded
Distributor
model:
Avnet
2014/15
Year 2
Year 1
Net Operating profit
after tax
$687 2.5%
$635 2.3%
10.5%
10.1%
Operating profit
Fixed assets
$828
$790
$2,158
$2,297
3.0%
2.9%
Gross profit
Year 2
Year 1
Revenue
Year 2
Year 1
Overheads
$3,194 11.4%
$3,226 11.7%
$27,925 100%
$27,500 100%
$2,366
$2,436
Cost of Sales
$24,731 88.6%
$24,274 88.3%
Capital
employed
$6,528
$6,272
ROCE
8.5%
8.9%
Excess cash &
non int liabs
$5,378
$6,099
Total Assets
$10,800
$11,251
Non interest
liabilities
$4,272
$4,979
Cash
$1,106
$1,120
Inventory
$2,482
$2,613
Invested
capital
$5,422
$5,152
37
39
Other current
liabilities
$934
$1,577
Receivables
Year 2
Year 1
$5,054
$5,221
GMROII
Year 2
Year 1
129%
123%
GMROWC
Year 2
Year 1
76%
73%
66
69
Payables
$3,338
$3,402
Payables
49
51
Working capital
$4,198
$4,432
53
57
$3,338
$3,402
Cash
$1,106
$1,120
Global ValueAdded
Distributor
model:
Arrow 2014
4. CEO for a Day
See if you can put yourselves into shoes of the distributor
CEO
Activity: The new Distributor CEO
Following your success at A Disti Co you
have been appointed CEO of CenterState:
ê Review the 2 years of financial statements &
ratios
ê Identify your three most significant positive
trends over the period
ê Identify your three major areas of concern
ê Be prepared to share your answers
CenterState
Distribution
business model
CenterState
Distribution
business model
Debrief: CenterState CEO
1. Revenue up 10% and Gross
Margins up $131m
1. Cash reserves down by $471m
ê
2. Operating margin up 0.2%
ê Operating Profit up 29%
ê Overheads down as % of
sales and only up $56m
3. ROCE improved by 21%
(6.7% à 8.1%)
DPO up 1 day
Additional $479m of WC (up
24%) to do $2.3bn (up 10%)
additional turnover
2. Gross margin down 0.3%
3. Working capital up 4 days as DPO
up only 1 day
ê
DIO up 4 days, to 53 days
ê
DSO up 1 day
GMROII down 9% & GMROWC down
by 16%
ROIC down 0.1%
Key business model insights
Profit is a very small number between big numbers
Capital intensive, cash flow matters
Many small changes add up
Earn and turn matter
Key ratios and metrics
(GM%, NM%, DIO, DSO, DPO, WC Days)
Combination measures are used to manage the business model
and measure vendors (ROCE, GMROII, GMROWC)
Margin trends - All Distributors
Working Capital Broadline Distributors
Working Capital Value Added Distributors
Developing your own Programs
Business
Priorities
Strategies
• What are the
distributor’s
objectives?
• What are the
distributor’s
strategies?
• Which measures
matter most?
• How does it plan
to execute them?
• How do we as a
vendor perform inside
the distributor’s
business model?
• Which measures
will change?
Vendor
program
Business
case
• What should be the
business impact?
• What measures will
be affected & how?
• How well does the
program fit the
distributor’s
strategies?
• What is the timing
and cash flow
impact?
• How will other
distributors respond
to this program?
• What are the risks?
How do we perform inside the distributor’s business model?
Category report card – How are vendors performing?
How will our Vendor Program impact the distributors’
business model?
Profitability impact
Revenues
Gross Margins
(FE & BE)
Working Capital impact
Cost structure
Inventory
Receivables
Risks
Payables
Example: Assessing Vendor Programs
Program 1 (Cloud-centric Offering):
• Extended credit (25 days) or Consignment stock to support channel take-up
of cloud-centric offerings
• Have to take on additional specialist sales & product management headcount
(which vendor funds only 50%)
• Have to support resellers delivering projects with longer implementation
cycles (resulting in increased receivables)
Program 2 (Pay-For-Results Program)
• PFR program which drives growing the SMB-focused reseller base because
vendor is taking larger resellers direct
• Marketing funds are available to support well-engineered programs
Program 3 (Q/E Inventory Loading Program)
• Quarter-end inventory loading, with additional lucrative rebate for achieving
certain volumes. Rebate to be paid on normal basis (ie 90 days after earning)
First Question: What are the distributor’s objectives (from
the previous analysis)?
Profitability impact
Revenues
Gross Margins
(FE & BE)
Working Capital impact
Cost structure
Inventory
Receivables
Risks
Payables
Debrief: What are the distributor’s objectives (from the
previous analysis)?
Profitability impact
Working Capital impact
Risks
Revenues
Gross Margins
(FE & BE)
Cost structure
Inventory
Receivables
Payables
Continued
growth
Reverse declining
Gross Margins
Further reduction
dependent on
growth
Inventory days
need reducing
urgently
DSO needs
reducing
Need credit lines
to grow with
sales
Cash
facilities
constrain
growth
Second Question: How will the program impact the business measures of the
distributor?
Debrief: Business impact of Program 1 (cloud-centric
offering)
Profitability impact
Working Capital impact
Risks
Revenues
Gross Margins
(FE & BE)
Cost structure
Inventory
Receivables
Payables
Continued growth
Reverse declining
Gross Margins
Further reduction
dependent on
growth
Inventory days
need reducing
urgently
DSO needs reducing
Need credit lines to
grow with sales
Cash facilities
constrain
growth
New growth
from cloud
services
Higher margins
on new
offerings
Incremental
headcount costs
Neutral at best
– may have to
take on new
SKUs
Will increase
unless strong
credit
management on
traditional
business
Extended credit
Cash tied up
Credit limits
exhausted
Revenues
below targets
New sales staff
unproductive
Debrief: Business impact of Program 2 (PFR program)
Profitability impact
Working Capital impact
Risks
Revenues
Gross Margins
(FE & BE)
Cost structure
Inventory
Receivables
Payables
Continued growth
Reverse declining
Gross Margins
Further reduction
dependent on
growth
Inventory days need
reducing urgently
DSO needs reducing
Need credit lines to
grow with sales
Cash facilities
constrain
growth
Loss of revenue
from larger
resellers
Higher margins
from SMB
focused
resellers
Higher account
handling cost
from more
accounts
Neutral
Will increase
unless strong
credit
management on
SMB resellers
Neutral
Rebates
MDF funding to
offset
marketing
activities
Cannot
replace lost
revenue fast
enough
Threat to
net profit if
extra cost >
extra
funding
Debrief: Business impact of Program 3 (Quarter-end
inventory loading)
Profitability impact
Working Capital impact
Risks
Revenues
Gross Margins
(FE & BE)
Cost structure
Inventory
Receivables
Payables
Continued growth
Reverse declining
Gross Margins
Further reduction
dependent on
growth
Inventory days need
reducing urgently
DSO needs reducing
Need credit lines to
grow with sales
Cash facilities
constrain
growth
Likely to
increase… or
bulge
Under threat
from
discounting to
hit volume
targets
Neutral
Will bulge due
to loading
Will increase
with vendor
debit and sales
bulge
Neutral
Rebates
passed to
street so
not
available for
financing
stock
Over-trading
exhausts
cash limits
Rebates may be
consumed by
discounts
Advancing Compelling Propositions
To advance a compelling proposition, first you have to:
• Think like a distributor, understand their business model
• Focus on the outcomes they are measured on
• Focus on the metrics they use to assess vendor performance
• Identify where they are hurting right now
Then you can put together a proposition that:
• Addresses the above
• Leverages your unique strengths and assets
• Is clear, consistent and can be communicated by your front line teams
How can you develop this level of mastery?
GTDC Certificate & Diploma in Distribution
to
This is
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BRIDGE
Has ac
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hieved
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certify th
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credit
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tion
Distribu
991/C
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no: 344
in Tech
rtificate
OUZA
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arded:
Date aw
nt
Julian De
an
Chairm ational Ltd
rn
VIA Inte
Has achiev
ed the GTD
013
28/11/2
C accredita
Diploma
rran
cil
Tim Cu
n Coun
stributio
CEO
logy Di
Techno
Global
Date awarde
tion standa
rd
of
in Technolo
gy Distributio
n
d: 29/06/20
15
Diploma no
: 797476/D
Julian Dent
Chairman
VIA Internatio
nal Ltd
Tim Curran
CEO
Global Techn
olo
gy Distributio
n Council
Gaining momentum with Vendors..
•
•
•
•
•
•
•
•
Acer
Apple
Canon
Cisco
Eaton
Fujitsu
Hewlett-Packard (Ent & Inc)
Hitachi Data Systems
• Juniper Networks
• Intel
• Lexmark
• McAfee
• Microsoft
• StarTech
• Symantec
• VMware
Course content
Certificate
•
•
•
•
•
The role of distribution
Distributor business model
Margins & profitability
Working capital and the cash-tocash cycle
Productivity & capital efficiency
measures
Diploma
•
•
•
•
•
•
The value of different distribution
models (to vendors and final tier)
Optimizing vendor–distributor
engagement
Leveraging the distribution business
model
Category management
Effective vendor propositions and
programs
New business models (services and
cloud)
GTDC Diploma Course Agenda
Day 1
TRAVEL
10:30
Day 2
9:00
6 PRODUCT MANAGER FOR A DAY
- how to improve the numbers
1 INTRODUCTION
2 THE ROLE & VALUE OF DISTRIBUTION
- Broadline & Value added
- Value to vendors
- Value to final tier
10:45
3 DISTRIBUTION BUSINESS MODELS
- ROCE, ROIC, Economic Profit
- Benchmarks & trends
LUNCH
13:15
5 DISTRIBUTOR MICRO-ECONOMICS
- Front end, Back end margins
- Contribution profits
- Stock & Working capital management
- Prompt payment incentives
- Portfolio Management
16:20
17:15
6 PRODUCT MANAGER FOR A DAY
End of day
7 MANAGING GROWTH
8 Business model evolution
- services,
- infrastructure
- cloud, etc
4 CEO FOR A DAY
12:40
REVIEW OF DAY 1
13:00
9 HOW TO ASSESS VENDOR PROGRAMS
- compensation programs
- marketing programs
10 APPLICATION TO YOUR OWN ROLE
11 PRE-EXAM PREPARATION
15:00
TRAVEL
Accreditation process
Take
Certificate
Webinar
Take
Certificate
F2F Course
Take
Certificate
Self-study
Take
Certificate online course
Take
Certificate
exam
Certificate
Take Diploma
F2F Course
Take
Diploma
exam
Diploma
Take
Refresher
course
Vendor feedback
"The GTDC Diploma in Distribution Technology Channels is by far the
most comprehensive, relevant and tailored training we have
deployed to our distribution sales force in EMEA.
As a result of passing the Diploma, our Distribution Business Managers
have been able to drive a much richer conversation with our
distributors about their business model, key financial metrics and
the levers to improve our attractiveness as a vendor and
differentiate from our competition.”
Simon Ewington, Hewlett Packard Enterprise
Vice President - EG Distribution Europe, Middle East, and Africa,
Participant Response
Average course evaluations are 5.6 out of 6
Graduates become avid internal advocates
Typical benefits from adopting the Diploma: it helps to:
• “Change the conversation” with distributors from Margins to ROCE
• “Access new levers” in the relationship
• Go into the conversations with “a Point of view” about what they
want, and how to achieve it
• Think about which levers the A/C Managers can control themselves,
and which levers the Vendor can control
Participant feedback
"I am currently attending the Tech Data Vendor Summit and I am
extremely happy to have knowledge expressed during the course of
last week with me!” Head EMEA Volume Channel & Distribution
business, Lexmark
"The course has certainly given a different perspective of
understanding Distributor’s business and will definitely change the
way we converse with them now.” DPAM, Cisco
“Personally the course was of immense value to me, it changes the way
I look at my business as a distributor, with multiple
brands.” Software Solutions Director Westcon
How to progress interest?
Open Courses:
•
•
•
•
April 6-7, 2016 • San Jose, California
April 12-13, 2016 • Miami, Florida
www.events.quadmark.com/gtdccertification
Course information leaflet
Contact David or Julian for further information:
•
david.morse@quadmark.com
•
jdent@viaint.com
•
Check out information on GTDC.org or viaint.com
Thank you!
Next steps:
This is to certify that
RYour
ENTON
D’Shere!
OUZA
name
Has achieved the GTDC accreditation standard of
Diploma
in Technology Distribution
Date awarded: 29/06/2015
Julian Dent
Chairman
VIA International Ltd
Diploma no: 797476/D
Tim Curran
CEO
Global Technology Distribution Council