Peggy Lewis, Corporate Commodity Manager,Tektronix, Inc.
Introduction. Reality of life from any customer's perspective:
Background. In 1995, Tektronix' source of supply was primarily from original equipment manufacturers (OEMs). The electronics industry was experiencing allocations, and Tektronix was receiving poor performance from its OEM partners. It was obvious that the OEMs could not resolve Tektronix' business issues, so Tektronix began evaluating new and innovative sources of supply. Distributors was evaluated and scored on the following criteria:
These criteria were used to benchmark more than twenty distributors with component lines ranging from semiconductors to passives to electro-mechanical. Additional assessments were completed at customer sites where the Distributors had implemented major programs.
Three Distributors were selected to pilot a program with the following business expectations:
With the difficult industry environment, Tektronix and the selected Distributors faced many challenges. After six months, the Tektronix program dropped from three Distributors to two. The elimination of one Distributor resulted from Tektronix not clearly communicating its business needs and from a lack of a strong management commitment from the Distributor. With the number of OEMs that Tektronix conducted business with and the objective to reduce the supplier base, it was apparent that Tektronix needed to add additional distributors. In 1996, Tektronix added three additional Distributors. With five distributors, the cost of the program increased slightly but now supported 4,000 part numbers, increased inventory turns from three to seven, and improved on time delivery from 59% to 95%. The program was not state of the art, but it enabled a demand fulfillment using standard EDI tools with the enhanced embedded purchase order process. In addition to this program, Tektronix implemented a Distribution Programming Center for Pals/EPROMs, etc. with one of the Distribution Partners. This programming center provided in-house programming for daily production requirements.
Current Program: With the small successes of the Distribution program, Tektronix knew it needed to move further into a Distribution strategy that would bring a larger return to Tektronix and to the Distributor. In 1997, Tektronix increased the number of Distribution partners to seven. Tektronix currently awards franchised lines to all seven and also awards non-franchised lines to one of the seven partners. Additional commodities, such as peripherals, displays, and ASICs, were added to the program, which is now called the "Supplier Integration Program".
1999 Award Information for the Program:
Innovative ways to manage Material: "Think outside the box"
Distribution does work and can provide your company with increased flexibility and improved performance on business metrics. To help gain additional market share, Tektronix asks that its distributor partners also work closely with the OEMs to help assist in engineering with Tektronix' preferred suppliers.
Any company establishing a Distribution program should remember the following:
These suggested guidelines will help you to establish a program that fosters a genuine commitment from multiple Distributors to work together to reduce or eliminate cost adders for the benefit of all.
Open communication is the key to success!
Jorgensen, Barbara, "Conversion Case: An OEM Sees the Upside." Electronic Buyer's News, January 6, 1997, 1 & 88.
Elliott, Heidi, "Keeping Customers Content." Electronic Business Today, April 1997, 60-61.
Elliott, Heidi, "Three Amigos." Electronic Business Today, June 1997, 32
Jorgensen, Barbara, "Taking Cues from the Customer." Electronic Buyer's News, September 7, 1998 E3-E8.
Elliott, Heidi, "Tektronix Dream Team." Electronic Business Today, September 1997, 40.
Carbone, James, "Tektronix Taps Distribution." Electronic Purchasing, February 12, 1998, 67-68.
Lewis, Peggy, "Creative Supply Stream Methods." Northcon 97, September 1997. Wescon 97, October 1997.