OPI speaks to Greg Welchans, President and Chief Marketing Officer of Distribution Management and Supplies Network, about creating more cost-effective, efficient distribution options.
OPI: Firstly, can you provide a brief overview of Supplies Network?
Greg Welchans: Supplies Network is a US-based print and imaging wholesale distributor. We largely focus on the print space, both from a hardware and consumables standpoint, representing about 70 different brands including all the major OEMs such as HP Inc, Canon, Xerox, Lexmark, etc. In addition to our comprehensive line of products, we also offer a turnkey Managed Print Services (MPS) program which is quite compelling and a key point of differentiation.
We deal primarily in four channels: The Business Technology Association — basically copier dealers — the office products space, government and value-added resellers. Our biggest channel by some margin is the copier dealers.
We had record revenues in 2017 and it may well happen again this year. In total, we currently have around 350 employees.
OPI: Any plans for international expansion?
GW: Currently, Supplies Network only serves the US, but we are looking to expand to other parts of North America rather quickly. It will be Canada first and we are already working on gaining manufacturer approval to move into this market.
Under our parent company, Distribution Management, we operate another business, DM Fulfillment, where we’re already managing international distribution. Within this division we own and operate a facility that is a designated Foreign Trade Zone in the Chicago (IL) area. It’s also a TSA (Transportation Security Administration) Certified Cargo Screening Facility which allows us to send shipments direct to air carriers supporting speed to international markets.
OPI: Please tell us more about DM Fulfillment.
GW: DM Fulfillment is our rapidly growing fulfilment as-a-service model. We’re a hybrid distributor with the technology and know-how to deliver an omnichannel customer experience.
For Supplies Network we buy the product and we wholesale it. The DM Fulfillment business is third-party fulfilment (3PF) as-a-service which is an important differential. While the two businesses operate as independent systems, there are many synergies between them and this enables us to offer a very flexible business model.
DM Fulfillment puts us in a unique position in the marketplace. A consumer packaged goods customer or office products manufacturer can utilise our distribution system for omnichannel fulfilment. There can be one set of inventory with one provider that can be used for multiple channels of selling and distribution — we can do wholesale, retail replenishment of shipping pallets or cases to stores, along with marketplace integration and drop-ship capabilities for e-commerce fulfilment.
OPI: How did this model come about?
GW: The primary and largest part of our company is Supplies Network, but ten years ago when everybody said print and imaging was going to decline, we looked intently at ourselves and asked what was at the core of our business. Are we an IT wholesaler or a distributor?
We chose the latter and created DM Fulfillment to realise the potential of the evolving e-commerce landscape. As e-commerce continued to grow and the need for drop-shipping to consumers increased, we definitely felt this was the sweet spot for us.
As this business evolved, we realised that there’s also an in-between model whereby manufacturers and merchants could benefit by streamlining the supply chain for all their channels, be it wholesale, retail or direct-to-consumer. Today we’re having success with this model and are applying it to a variety of products: dog food, mouthwash, personal accessories, leather goods, business supplies — you name it.
OPI: Do you have an example?
GW: For instance, we deal with a mouthwash company called Smartmouth. We have the product in our warehouses — but we don’t own the inventory like a typical wholesaler — and we handle the in-store retail fulfilment, direct e-commerce orders, Amazon and Walmart.com orders, and now we’re beginning to offer this into the OP e-commerce channels. Some of this is purely as a fulfilment service and some is done as a wholesale transaction, but regardless we’re managing orders for all channels from one set of inventory.
OPI: So where’s the sweet spot for the business supplies industry?
GW: The traditional OP distribution model in the US is either dealers stocking products or buying inventory from SP Richards or Essendant. The model can be prohibitive for some manufacturers in terms of overall supply chain scale, inventory management or cost. We are currently a tertiary supplier for the OP market, but I believe our hybrid model can help in terms of making the supply chain more efficient, which will ultimately create a highly cost-effective model well into the future.
OPI: What are your plans for DM Fulfillment?
GW: DM Fulfillment is growing quite nicely purely as a 3PF provider. We’re still evolving this hybrid model, but we’ve been talking directly to the OP manufacturers and rep groups that have products which fit this drop-ship and carrier distribution platform. Carrier simply meaning we utilise companies (UPS, FedEx, USPS, local carriers, etc) to distribute the products from our distribution centres.
OPI: What has been the response so far?
GW: It has been overwhelmingly positive for those that have engaged with us. It has become clear to us that many have struggled to modernise their supply chain in the face of rapid change over recent years. A few have tried this hybrid model with one product as a pilot and as they’ve seen success, expanded not only the product mix but the partners to whom they want the products to be distributed. We might start out in the OP channel with a manufacturer, but then expand into other channels we serve, for example.
While OP and related manufacturers are a good target, we are also talking to independent dealers and have already engaged with some of the buying groups.
A huge selling point is that we already offer 1-2 day delivery to 99% of the US population. DM Fulfillment offers an alternative path to Amazon or Walmart.com, for example, because we offer those delivery times as standard.
OPI: Has Amazon disrupted the distribution chain from your point of view?
GW: As I’ve mentioned, we already offer an exceptional delivery model for our Supplies Network customers. Many of them are highly specialised in business printing, so they don’t seem to be too impacted by Amazon, though maybe a bit more on the OP dealer side. The fulfilment part of our business has absolutely been favourably impacted as it has driven manufacturers to us because they didn’t have a competitive way to distribute their product within their existing as well as newer marketplace channels.
We also know from having discussions with various intermediaries that there are companies and merchants where almost all of their business goes through a particular e-commerce platform such as Amazon, Walmart.com or eBay, for example. Now they’re looking for ways to diversify their portfolio of partners because they’re fearful something might happen to that provider or the rules of engagement might change. They’re looking for different options to get product to the customer.
OPI: Earlier you alluded to international expansion for DM Fulfillment.
GW: We are looking to offer DM Fulfillment to European manufacturers as a pure 3PF service model to enable them to distribute in the US.
OPI: Finally, what does the future hold for Supplies Network?
GW: We see a bright future. We’re excited about the print hardware segment of our business. We are now Lexmark’s largest distributor and on 1 May 2018, we were awarded Authorized (Tier 1) distribution of HP Inc A3 copier products, A4 M series printers and HP Samsung products.
We’re also really focused on the print-related parts side of the business. We have invested significant resources in adjacent categories such as the thermal and barcode space which is a huge market and a growing division for us.
As security becomes more and more crucial, it’s no coincidence that much of our hardware line-up presents the same message. It’s an endpoint that people can tap into and most of our manufacturers are heading into security solutions.
MPS, which is a core competency for us, also continues to grow. We are really the only distributor that has a complete solution which also ties nicely into the burgeoning security market.
Even though we have almost tripled space in our distribution centres over the past three years, I see that same trend happening over the next several years. To manage our growth, we will have to add new facilities and locations.