Rethinking Distribution: Adaptive Channels

No matter how much inventory a wholesaler carries, when a customer places a rush order, the essential item is often out of stock. No matter how many services a dealer provides, what a customer needs is often one that the dealer has never supplied. And no matter how hard a distributor tries to beef up its capabilities, when a customer has an emergency, the distributor often lacks the skills to respond. A number of companies are experimenting with ways to make their distribution channels more flexible and responsive. They have realized that by sharing resources in novel ways, they can take advantage of opportunities that they could not exploit alone. Business dynamics and emerging technologies make this new approach both essential and feasible. Tough competition is forcing managers to view their distribution channels as an untapped opportunity. The prevalence of strategic alliances has made managers more willing to explore new ways of working together. And developments in shared information systems and integrated logistics systems make such cooperative efforts more practicable. The potential benefits of such partnerships are enormous. As redundant pools of inventory and duplicate service operations are pared back, costs fall. Less business is lost because of stockouts and the inability to respond to emergencies. Moreover, participants capitalize on new business opportunities because they can offer a broader selection of products and services than they could on their own. They can also heighten customer satisfaction by augmenting their own capabilities with those of more proficient partners.