Synnex International:

Transforming Distribution of
High-Tech Products

GROUP 8:ANIVESH
KUMAR
B H A R AT
HAJARE
RAHUL
VERMA
RAJARSHI

HISTORY
Started in 1975 as division of MiTAC to distribute Intel

CPUs
Became independent in 1985, named Micro
Electronics Corporation
Incorporated as Synnex Technology International
Corporation in 1988
In 1993, built fully automated warehouse facility and
became a full range channel management company
Became first (and only) distribution company listed on
Taiwan stock exchange in 1995
Began overseas expansion in 1997
Worldwide revenue of US $170 in 2007

INTERNATIONAL EXPANSIONS
Acquired a distribution company in Hong Kong in 1997.

Used it as a springboard to serve mainland China

Took equity stake in the 3rd largest distribution company
in U.S. in 1998, which also covered Canada and Mexico
In 1998 itself, it created its Australian subsidiary that
also served New Zealand
Took partial stake in Indian distributor Redington (36.3
%) in 2004
By 2006, it served 181 cities in 29 countries and had over
35,000 clients

GLOBAL PRESENCE OF SYNNEX

CASE ANALYSIS
We have analyzed the case considering following
points:
Use of innovative business practices by Synnex
Optimal design of a channel structure to accommodate
IT & Telecom products (unique features)
Achieving economies of scale and economies of scope
in distribution
Impact of web technology on distribution channel
Use of web technology in expansion of business

OPERATIONS
Products - multi-brand, multi-category & multi-field

Channels - Sales & distribution

Logistics -Warehousing & transportation

Represented 300 brands, 7000 items in 4 categories :

IC components
Information products
Communication devices
Consumer electronics

SYNNEX DISTRIBUTION STRATEGY

BROAD CLIENT BASE
Catered to small outlets which were neglected by others
NO PUSH FOR VOLUME SALES
Discouraged large volume orders
Increased delivery frequency
NO REIMBURSEMENTS FOR UNSOLD STOCK
Inventory carrying risk transferred to retailers

DISTRIBUTION OF IT PRODUCTS
(TWO ASPECTS)
Supply side distribution:
Parts and components (eg. memory chips)
System products (eg. mother boards)

Demand side distribution:

Computer peripherals (eg. printers)
Consumer electronics (eg. cell phones)

HIGH TECH PRODUCTS: TRADITIONAL

DISTRIBUTION MODEL Rapid drop
High Unit
Value

Product
Characteristics

Manufacturer

Distributor

Retailer

in retail
prices

Short Life
Cycle

Power Structure in a Traditional

Distributional Channel
Upstream Manufacturer
Maximum Power
Downstream Retailers Least
Power

OPTIMAL DESIGN (Channel Structure)

To accommodate IT & Telecom products (Unique

features)
High Tech products (High Retail Price, Speedy
Turnover, Fragile)
Synnex upgraded to Logistic Management Company
Internal trucking operation

Million deliveries every year ( 97% of total shipments)

Shipping errors (< 0.004%)

Fully Automatic logistic Centre

Core competency of Synnex
Real time Networking of Warehousing Facilities

OPTIMAL DESIGN (Channel Structure)

State of the art MIS
Enhanced accuracy of order contents (> 7000 items )
Lowered ordering cost
Linked all operational units
Delivery in 2 half days
Delivery of 3400 orders/daily

THE SYNNEX WAY

Synnex

Manufacturer
(Vendors)

Retailer
(Clients)

Synnex never misused trust unilaterally for short-term gains

Earned trust from Vendors which advocated the Synnex
way outside Taiwan
As a result, a Unique Vendor-driven expansion into foreign
countries

MANAGEMENT INFORMATION SYSTEM

INVENTORY CONTROL
Automatic classification
(shortage, normal, overstock, slow-moving & dead items)
Demand prediction based on Life cycle
Through sales volume tracking, improvement in robotic
packing efficiency

MIS (contd.)
CUSTOMER MANAGEMENT
Client tracking based on business size, transaction volume,
order frequency and number of items in each order
Helped in building long-term relationship with clients

EXPRESS DELIVERY
Small items pooled in a single box
Videotaping of packing process
Verification of order done by store owner

MIS (contd.)
TELEPHONE SALES
Easy availability of customer data to telemarketers
Customer could place order with one telemarketer but make
corrections with another

SERVICE DIFFERENTIATION
One year additional Quality Warranty over original

manufacturer warranty
Reliable after-sales services to end-users for vendors
Accurate tracking of items under repair through
Information system
Advanced Logistics system which enabled it to
repair and return a defective item in only 4 half days
Helped retail outlets to set up service stand

STRAGIES RECOMMENDED

Geographical Expansion

Venturing into unexplored regions like Europe, Africa and

South America through:

Acquiring a stake in existing distribution company or setting

up a new distribution Channel
Setting up a MIS system
After collection of relevant data, setting up warehouse facilities

RECOMMENDATIONS (CONT.)

Implementation of web technology for distribution

channel of Synnex

Michael Porter (2001) has argued that e-commerce can allow

economic actors to significantly reduce their transaction costs.
A reduction in transaction costs then often encourages the use of
markets instead of internal hierarchies in order to organize economic
activities (Malone et al. 1987).
This is argued to increase efficiency not just at isolated firms, but
throughout a commodity chain.
Producer driven chains often are dominated by large corporations
who coordinate the entire network. Such chains are readily observed
in technology-intensive commodities.

A COMMODITY CHAIN

RECOMMENDATIONS (CONT.)
Use of Internet creates a borderless virtual

business platform on which suppliers, customers,

competitors and network partners can freely interact
without going through the pre-defined channels on
the value chain, members of the same business
network or of different networks can by-pass the
traditional interaction patterns and form virtual
value chains

PARTIALLY DISINTERMEDIATED CHAIN

DISINTERMEDIATED COMMODITY CHAIN

RECOMMENDATIONS (CONT.)

Product Line expansion

Supply side expansion
Synnex can venture into distribution of Auto components.
The auto industry is a booming sector today and Synnex can
leverage this opportunity by supplying parts and components
to the Original Equipment Manufacturers (OEMs)
Demand side expansion
Pharmaceutical industry holds a great promise today due to
the booming Healthcare Industry. Synnex can explore this
opportunity to expand its distribution channel in this sector

RECOMMENDATIONS (CONT.)

Providing Logistics support to other distribution

companies

Synnex has presently lots of unused space in existing

warehouses due to extra capacity. This leads to capacity
unutilization. Synnex can provide this space to other
distribution companies and earn some extra revenues

Providing market research solution to other firms

Synnex has a lot of data due to its robust and efficient MIS
system. It can use this information for providing marketing
research solution and analysis to its clients and other firms

THANK YOU