Pinnacle uses distributors for inventory management

By Staff -- Purchasing, 10/19/2000

As a start-up company about 15 years ago, Pinnacle Systems needed a supplier that could provide stocking capabilities and ship small quantities at various intervals. At the time, the only supplier that would take on the fledgling company was distributor Bell Microproducts Inc.

"The company needed the stocking capabilities of distribution and because it was a small company it didn't have the kind of volume necessary for a direct relationship with manufacturers," says Tavy Hughes, vice president of operations for Pinnacle Systems Inc., Mountain View, Calif. Pinnacle makes video equipment.

Over the past 15 years, Pinnacle has kept Bell Microproducts as a key supplier and has added two more distributors, Arrow Electronics and Wyle, to its preferred distributor roster.

Hughes says that the company is undergoing a reorganization that calls for a divisional split by market segment. When that occurs, each division may decide to have their own preferred distributors, she says.

"When the company first started in the mid-1980s, it didn't have established credit. Bell Micro did a good job supporting the company at that time in situations where other distributors weren't really interested because it was a small fledgling operation. So Bell Micro earned our loyalty by supporting us in the beginning," Hughes says.

Today, Pinnacle's North American operation purchases about 90%, or roughly $36 million worth, of electronics products from distribution.

Pinnacle buys from Arrow because it has a broader linecard including passives, uses Bell Micro for its specialization in memory devices and computer products, and relies on Wyle for select manufacturers' lines such as Altera.

In addition to supplying components including memory devices and raid, Bell Micro provides value-added services in the areas of stocking inventory, which helps the company's cash flow, system configuration and product updates.

"Bell Micro does a good job keeping us abreast of what's going on in the drive market; it's so volatile and things are changing all the time. They take care of us and make sure that we know what's going on in the market and that we get enough notice when a product is going end-of-life or when something needs to be qualified," Hughes says.

Although Pinnacle's revenues in the North American operation have grown to roughly $120 million, the company still buys components through distribution to take advantage of its scheduling and shipping flexibility.

"Our products use so many different components that the volume on any one component still isn't that large, and we want to manage our inventory balances. Many times manufacturers will have minimum shipment quantities because they aren't in the business of managing lots of scheduled shipments," Hughes says. "A lot of times a manufacturer will only make one shipment per quarter which has to meet a minimum quantity or dollar amount, but with distribution we have more flexibility," she says.

"Distributors are really in touch with what's going on in the market and if they are good they can keep us informed of what's going on with leadtimes and pricing. They can be our eyes and ears in the marketplace," says Hayes.