Time for change
Last week Ingram Micro announced it was going to stop subsidising the cost of shipping and pass on the full cost to its customers. HEXUS.channel suggested to Ingram that this wouldn’t go down too well in the channel so its executive vice president and president of its EMEA operations, Jay Forbes (pictured), spoke exclusively to us to give us its reasons.
“There’s a hidden cost that has been borne by distribution and we believe this should be a cost shouldered by the end-user,” said Forbes. “By highlighting it we can look at ways of cutting the cost, such as bundling up orders. We would like to work with customers to look into efficiencies.”
The central point appears to be that Ingram has decided it’s time to create a dialogue with the channel about the cost of overheads. Forbes told us about what he considered to be practices, such as ordering very small numbers of product at a time, that create costly inefficiencies.
He thinks it’s time the rest of the channel took as much responsibility for the various overheads it has traditionally left to distribution to deal with.
“We want to unmask the costs,” said Forbes. “Freight costs relative to most purchases are quite small. The subsidy we provided was only a small part of our value proposition. We believe, as market leaders, that we should safeguard the long term profitability of our industry.
“We have a very long established business practice – that of distributors shouldering the burden of logistics costs – which in the past may not have been as significant compared to margins. But now things have changed and the practice is no longer one that can be sustained.”
He was referring, of course, to the historically very high price of oil and the consequently much higher cost of transport. On one hand, it’s understandable that Ingram doesn’t see why distribution should be the only part of the channel to be out of pocket as a result. It does seem a bit of a low blow, however, for Ingram to withdraw even the subsidies it used to provide in response.