Representatives of all aspects of the cabling industry are, for the most part, getting good service from their distributors. However, in an age when more and more businesses are talking about "cutting...
February 1, 2002
Representatives of all aspects of the cabling industry are, for the most part, getting good service from their distributors. However, in an age when more and more businesses are talking about “cutting out the middleman”, these distributors are going to have to evolve to stay relevant.
People have talked for years about cutting out the middleman — or “disintermediation” as the information-age pundits prefer to call it — but many of those middlemen are still around.
Those that have survived have done so because they serve a purpose. Distributors help manufacturers sell their wares to large numbers of smaller customers that they could not deal effectively with on their own. They help customers — and in the case of structured cabling systems distributors, the consultants who design network installations and the contractors who build them — find what they need in one place. Often, distributors also provide a first line of technical support and advice for customers looking for the solution to a problem.
Different distributors have different strengths. The largest cabling distributors in Canada operate right across the country, which is convenient for large customers and contractors working on nation-wide projects. Some offer storefront locations where a contractor or in-house technician can drop in to pick up a part in a hurry. Others have special strengths in particular areas of technology. Big distributors offer a wide selection of products, but sometimes the smaller companies have unusual items that nobody else can supply.
In general, exclusive relationships with distributors are rare. Manufacturers usually deal with more than one distributor, and the customers, contractors and consultants at the other end of the supply chain often deal with almost everybody. It just depends on what you need right now and who is best able to provide it. But representatives of all sectors of the cabling industry say Canada’s cabling distributors serve them well most of the time.
WHAT VENDORS WANT
Canadian distributors seem to get good marks from equipment vendors. For these vendors, the size and reach of a distributor is usually important. Leading Canadian structured cabling manufacturer NORDX/CDT Inc. of Montreal, for instance, prefers large national distributors. Michele Raymond, director of strategic marketing at NORDX/CDT says that when the company chooses a distributor, “we’re looking for national coverage, we’re looking for strength in the marketplace.” That means smaller players need not apply. “We are with four distributors in the Canadian marketplace, and that’s the way we plan to keep it,” Raymond says.
But the ability to insist on the largest distributors depends somewhat on the size of the manufacturer itself. Raymond says that in other countries where NORDX/ CDT has a smaller presence, it is more likely to work with a smaller distributor. The same would be true of companies with less of a Canadian presence choosing Canadian distributors.
To gain a national presence, a vendor will often choose two or more distributors that complement each other. For instance, Raymond says, while all of Canada’s national distributors are fairly strong in Ontario and Quebec, some have solid coverage of the west but are weak in the Atlantic region, while others are better established in the east. Working with more than one distributor helps fill the gaps to provide solid distribution right across the country.
Distributors may also complement each other in the type of customers they serve best. Some distributors have storefronts where customers can walk in and pick up the parts they need. That is a good way to reach smaller customers, Raymond says, and it may also appeal to contractors and others when they need an additional item in a hurry to finish a job. Other distributors focus on dealing with larger customers. “Each one does provide different services,” says Raymond.
For instance, 3Com Canada Inc. of Mississauga, ON works with two of Canada’s major cabling distributors: Anixter International Inc. and Graybar Electric Company, Inc. Nick Tidd, managing director of 3Com Canada, says that while Anixter operates nation-wide, Graybar does not have a presence in the west. 3Com signed with Graybar because of its expertise in voice products, he explains.
Raymond adds, though, that the distributor’s traditional role of splitting large shipments into smaller ones has changed. While manufacturers and customers will always exist, she says, the distributor’s future depends on offering some additional value beyond just being an intermediary. Part of that is simply relieving the manufacturer of the administrative load of shipping directly to customers. Tidd says the distributor’s role increasingly depends on logistics expertise. “They’re starting to understand that they have to be very, very good at operating a business on lower margins,” he observes.
Being able to answer customers’ questions and help them with technical issues can also help. That technical know-how is quite important to 3Com, and Tidd says it is the first thing the company looks for in cabling distributors. “When you’re dealing in this space, you’re looking at partners that can assist you in demand creation,” he says. That calls for representatives who know the market very well. Tidd adds that it is pre-sales technical expertise that matters most, as opposed to the ability to support customers after the sale, which the manufacturer can do for itself.
WHAT CONTRACTORS WANT
When it comes to contractors and their relationship with distributors, one thing is clear: While price matters, it is not the most important thing. “It doesn’t boil down to price a lot,” says Darren Fransoo, manager of the data division at Western Electrical Management Ltd. in Calgary. “I don’t want them to be pricing me out of the market, but if I’m a penny or two higher than the next guy, that doesn’t matter as long as your service is there.”
Fransoo says the most important thing he looks for in a distributor is responsiveness. “When I call, I don’t want to wait four days for an answer,” he says. In fact, quick response to both inquiries and orders seems to be the top concern for contractors. Blake Clothier, operations manager at Able Electric Ltd. in Halifax, virtually echoes Fransoo’s words. He says his two top concerns in dealing with a distributor are that “we don’t have to wait four weeks or six weeks for it and that they have a good price.” Like Fransoo, Clothier says price is not critical, as long as the distributor’s prices are fairly competitive.
Clothier says a distributor’s ability to provide technical support for the products it handles is less important than it once was. Such support is usually third-hand anyway, he says, since the distributor more often than not must go back to the vendor for help in answering customers’ questions. It’s almost as easy to ask the vendor in the first place. However, he adds that distributors can be very helpful when he has a need and does not know what would fill it. It helps to be able to ask a distributor: “I need to do this, have you ever seen a product that would do this?” and get a helpful answer, he says.
Fransoo also values knowledgeable distributors, though he sometimes finds the knowledge lacking. Recently he was looking for a particular network switch. “I knew what I wanted,” he recalls, “but I couldn’t find a distributor that knew where to find it.” That was frustrating, and that sort of problem is the reason why “I look for somebody who knows at least as much as I do,” Fransoo says.
On the whole, though, both Fransoo and Clothier say they are quite happy with the distributors they deal with. Clothier says he occasionally has a problem obtaining an item because a distributor has not kept its stock up, but these are isolated incidents. He praises the distributors he deals with for their customer service. “They’re always ready to help us,” he says.
Fransoo has one other gripe: distributors recommending contractors to their customers. He was unhappy at losing a contract because a major distributor suggested a competi
tor, and argues that distributors should steer clear of such recommendations.
As for the size question, Fransoo says bigger distributors generally have access to more products more quickly, but small distributors often carve out niches where they offer what their larger rivals do not. So Western Electrical deals with all of them — not just because they each have different strengths, but because spreading the business around helps keep the market competitive by ensuring there are multiple, healthy players.
WHAT CONSULTANTS WANT
Consultants work with both contractors and distributors on the installations they design for their customers. The choice of distributors is often up to the contractor, but Alex Kaszuba, director of telecommunications at Hidi Rae Consulting Engineers Inc. in Toronto, says that on many consulting contracts he calls around to distributors to make sure that the contractors bidding on the job are aware of what is available.
Kaszuba says price is not usually a major factor in choosing a distributor, mostly because there are rarely big differences. “The competition among the distributors is pretty cut-throat,” he says. Nor is the quality of goods a key factor, because that depends on the manufacturer rather than the distributor.
The distributor’s location and geographic coverage can be important. “If I’ve got a national project, then we do try to deal with a national distributor,” Kaszuba says. It is easier to obtain materials from the same distributor country-wide than to deal with different distributors in different places for the same contract. That can put smaller distributors at a disadvantage where larger projects are concerned, Kaszuba says.
However, he adds, smaller distributors may have other advantages. Sometimes they have products that nobody else has, either because they have set out to offer a more comprehensive product line in one area or because they are more willing to work with small manufacturers. On projects that require some unusual gear — which accounts for about 10 per cent of the work Hidi Rae does, Kaszuba says — this can be a telling factor.
Kaszuba says he has a good relationship with the major cabling distributors. “They call me pretty much every week or two weeks trying to get a jump on what contracts are available,” he says. Most products are available quickly. If distributors do not have the products in stock, they can obtain them promptly from the manufacturers.
WHAT END USERS WANT
Like contractors, the customers for network gear look at price but are not blinded by it. “This is not an area that you want to sort of buy the discount, 99-cent version,” comments Maurice Gallant, CIO for the city of Fredericton, NB. Gallant adds that market forces can usually be counted on to push prices to a reasonable level, and saving a few pennies is less important than getting the right products in a timely way and having the job done well.
Mike Cuddy agrees. The CIO at Toromont Industries Ltd., a maker of construction equipment and power and refrigeration systems in Concord, ON, says vendors need to be price competitive, but the lowest price is not the most important factor.
Toromont is also not greatly concerned with geographic reach. The company will usually deal with many local installers rather than try to find a national organization that can serve 50 different sites, Cuddy explains, so dealing with the same distributor everywhere is not critical.
The importance of a distributor’s technical knowledge varies somewhat according to the customer. “Typically we would make sure that the organization has some sort of professional standing and a track record,” Gallant says. But Cuddy says he is not concerned about after-sales technical support — he just wants competent installation.
And he is generally happy with what he gets. If there are problems, he says, they most often involve finger-pointing between installers and the telephone company, rather than difficulties with availability or the delivery of products.
So far, evolving technology has not cut out the middlemen in the structured cabling industry, and it shows no signs of doing so. Yet distributors have had to evolve to stay relevant. Their role depends heavily on the logistics expertise that lets them ensure products are available when customers want them, yet keep costs to a bare minimum. Their role also depends on the technical knowledge that lets them help customers find what they want and, at the same time, help the equipment vendors find new buyers for their products. That is, after all, what middlemen are all about.
Grant Buckler has written about information technology and telecommunications since 1980. He is now a freelance writer and editor living in Kingston, ON.