Two important announcements came out of is.group’s annual meeting, held last week in Tampa, Florida. And they both have the core aim of strengthening the group’s regional distribution centre (RDC) model and making it more accessible for dealers.
The first, announced during the Shareholders’ Breakfast, was that is.group had signed a letter of intent with global IT supply chain services provider Synnex Corporation to become its new third party logistics (3PL) provider. Having a lower cost model than is.group’s current 3PL provider, Excel, Synnex will be able to pass on lower fees to dealers.
The group also revealed that it has formed a strategic alliance with Advantage Marketing Wholesalers (AMW) – which consists of ActionEmco, O’Henry and PPI Wholesale Office Supply – that will provide dealers on the RDC programme additional cost savings and support.
is.group chief Mike Gentile told OPI+ that while the RDC programme – designed by is.group and its board almost two years’ ago to offer dealers a more efficient way to buy direct – was going well so far, costs for dealers were too high. The new alliances with Synnex and AMW will make the model better value for dealers. "The cost of the RDC model has been higher than anticipated due to lack of sufficient volume and it being a fixed cost-based model," he explained. "The cost before for dealers was based on a fixed price and we are now moving to a variable cost model, which I think will make more dealers participate and ensure the sustainability of the RDC model."
Gentile claims having Synnex as its 3PL provider will drive down costs "dramatically". Synnex, which was founded in 1980 and in 2005 reported consolidated worldwide revenue of $5.64 billion, is a low-cost operation because it is used to shipping out bulk product at lower margins. In addition to lower costs, the move to the new 3PL provider, which is expected to be completed over the next few months, will give dealers access to a greater breadth of full-line products and services, inclusive of IT products and equipment at a lower cost.
Jim Estill of Synnex said during the announcement: "Offering 3PL capabilities to is.group aligns with our core competencies. At Synnex we are known for our ability to handle back-end logistics with higher quality and at less expense than our clients can do themselves. We look forward to the opportunity to working with is.group and its members."
And then there is the group’s AMW alliance, which is not only expected to boost the bottom line profitability of is.group’s dealers, but also provide them with additional income. is.group and AMW will work closely together on marketing initiatives that will support sales growth, provide dealers with products, programmes and marketing tools that will strengthen their position in the marketplace, and also offer special volume rebates.
"AMW is a wholesaling alliance that will provide is.group members with an additional percentage or rebate over their current volume if they grow their businesses," said Gentile. "This is a new alliance for is.group. But of course our dealers don’t have to do business with AMW; we will offer it to dealers and see what they want to do."
Mike Maggio, SVP of sales and operations at ActionEmco, added: "AMW works exclusively with independent dealers and this strategic alliance is an example of our belief and commitment to the independent dealer community and is.group. We hope it serves as an example to all independent dealers and buying groups that the only way we will succeed is by working together to add value to our business and to increase market share by growing sales and profits."
is.group now has almost 300 dealers on its RDC programme, and although Gentile recognises that the model does not make sense for stockless dealers, he hopes that this number will grow significantly. "The RDC model works," he said. "And even those that have resisted agree. At our annual meeting in Florida we were unsure of dealers’ reactions to what we’ve done with our RDC programme over the year, but we received a standing ovation on Saturday morning.
"There is a significant number of stocking dealers out there for which the RDC model makes perfect sense," added Gentile. "The stocking dealer needs the product at the most competitive cost to compete against the likes of Staples and Depot and our goal is to help as many of them as possible."