It's all about service

Technology buyers depend on performance of local resellers.

By -- Purchasing, 2/22/2001

As the big computer OEMs proceed with moves to sell their products direct, corporate buyers continue to see value in the relationships they maintain with reseller suppliers.

In fact, 68% of respondents to a new PURCHASING Magazine survey buy computer equipment (desktop and notebook PCs, servers, etc.) through the reseller channel. Other buyers purchase PCs direct from the manufacturer or via the Internet.

For the most part, purchasing's relationships with these reseller suppliers are a rousing success: Eighty-nine percent of respondents to the survey of 1,000 corporate buyers nationwide are satisfied with performance of these suppliers. What's more, nearly 75% have been managing the relationships for at least three years.

It was three years ago that PURCHASING conducted a similar survey on the reseller relationship (PUR: Jan. 15, '98; p. 122). Then, 65% of respondents were buying computer equipment through the reseller channel. Ninety-four percent were satisfied with supplier performance, and 45% were managing relationships that were at least three years old. Little has changed, except for the fact that purchasing and their reseller suppliers appear to be in these relationships for the long haul!

Purchasing responsibility

Seventy-nine percent of corporate purchasing managers responding to the new survey are responsible for the computer-equipment buy at their company. Typically, their involvement includes determining requirements, evaluating and selecting suppliers, negotiating agreements, managing supplier relationships, monitoring supplier performance, and reducing/managing costs.

"We make the final decision on which supplier we purchase computer equipment or software from, and generally we do all the bid work," says Jon Bauer, purchasing manager, Treasure Island Resort & Casino, Red Wing, Minn., of his operation's involvement.

A vice president of purchasing in the Midwest is responsible for the process "primarily from the planning function. We set goals, objectives and budgets as a team. The IS department implements the plan."

Greg Crooks, purchasing manager, Computer Curriculum Corp., Sunnyvale, Calif., "negotiates with suppliers, works with IS & T on standards, and buys to standards."

"After requirements are determined purchasing either writes or approves the statement of work, then issues it to responsible suppliers," says a purchasing manager in Alabama. "Purchasing receives all quotes with the IS department. Purchasing issues contracts."

A purchasing manager in Ohio "bids and negotiates equipment in conjunction with departments and systems group (technical and business applications)."

Of purchasing's involvement in the computer equipment buy, no responsibility is more important than the supplier-selection decision. For 56% of survey respondents, this decision is one shared with the information technology department. Nineteen percent add representatives of user departments to the buying team.

Still, 22% of respondents say the supplier-selection decision is one made by purchasing alone. Three percent say IT typically makes the decision on its own.

That, in fact, bothers one respondent. Thomas Tocco, director of purchasing, Schefenacker, Marysville, Mich., says that until last year the IT department at his company selected computer equipment suppliers by itself. "That's the very reason purchasing now gets involved," says Tocco. "IT should provide specification only, like any other technical support source."

Typical, however, is the process at a steel company in the Midwest where a purchasing director says, "we have a multifunctional team pick a supplier for all locations."

Quality important-to a point

Most often, service and support capability are the reasons purchasing managers opt to buy computer equipment through the reseller channel. It's also why buyers continue to maintain relationships with these suppliers over the long term. Another reason purchasing buys computers from resellers: product availability.

Little has changed in this area since the last time PURCHASING conducted a similar survey. Quality, most buyers say, is a given. Says one buyer, "quality is important only to the point of service and problems." A purchasing manager for Tennessee adds that "quality is not high on the list because we purchase only high-end equipment from such manufacturers as IBM and Dell. Other criteria buyers use to help select a computer-equipment supplier: Competitive pricing and technical capability.

"Ultimate performance of items purchased, adequate maintenance provisions, and realistic responses to emergency needs" top Ernie C. Byrd Jr.'s list. Byrd is a director of purchasing for the Department of Water & Power, City of Los Angeles. For a PM in New York, it's "trust and an open partnership."

Like the previous poll PURCHASING conducted with its readers, computer equipment buyers are managing relationships with reseller suppliers that, for the most part, extend beyond three years. Last time, 45% were overseeing supplier relationships that were longer than three years. Now, 44% of respondents manage relationships that fall into the three- to five-year range. Another 13% are involved in relationships that are five to seven years in length, while 17% say their companies have been purchasing computer equipment from the same supplier for at least seven years.

Key to the longevity of these relationships is close monitoring of the performance of these suppliers by purchasing. Sixty-four percent of respondents say they work closely with their company's computer equipment suppliers on performance issues.

One respondent who requested anonymity says he "meets regularly with suppliers to discuss problems and solutions. Also, much effort is spent to review our processes to either modify them or get support that the supplier can meet our expectations."

"Our staff visits plant facilities to offer suggestions and recommendations for improvements," helps keep performance up to snuff for Byrd of the City of Los Angeles.

Another purchasing manager "schedules delivery for three months based on a rolling forecast. We also supply specification control for equipment being purchased."

A procurement manager in New York "brought supplier order-entry personnel into our location to help bridge the gap between the partners."

"We usually ask them to forward lists of equipment released to us in advance so we can check if there is something wrong before they release the order," says another PM.

Service, service, service

Purchasing's efforts at supplier management are not for naught: Eighty-nine percent of respondents are satisfied with performance of their computer equipment suppliers.

"Service, service, service" is-in the words of one respondent-how purchasing typically measures performance of its reseller suppliers, with several buyers saying they have formal programs in place to track supplier capability to live up to promises. Along those same lines another critical performance metric is on-time delivery/delivery accuracy. One respondent keeps tabs on "billing practice and warranty service," while Byrd watches "ultimate performance of items purchased, adequate maintenance provisions, and realistic responses to emergency needs."

What is the extent of purchasing's involvement in the computer equipment buy?