At any given moment, there is $1 trillion of inventory across the planet, flowing through the indirect sales channels serving high-value tech and industrial categories – if you could see it.
Better visibility, created when data-driven channel optimization strategies are applied, offers more than the efficiencies and cost savings you might expect in logistics and supply chain management.
The daunting challenge of data continues to grow exponentially as a pivot toward the Internet of Things. What was once an inconceivably diverse array of connected products, platforms, and cloud-based providers continues to define the future of business and, specifically, how to define channel partners.
That connectivity also shapes partner expectations and how optimal customer experiences are created. As more and more businesses are learning, Channel Data Management (CDM) is evolving as quickly as the connected marketplace in which they find themselves.
CDM is delivering the revolution for indirect channels that customer relationship management (CRM) did when it first created competitive advantages for direct sales. Similar to CRM, CDM generates the same intelligence and predictive analytics precision that firms need to succeed.
What’s exciting about the growth in CDM, and the forecasts that adoption will grow 40 to 50 percent each year over the next decade, is the degree to which CDM drives business process transformation and cultural change as surely as the data supports decisions that improve performance and profitability.
A well-done CDM implementation – with training and communication as well as technology – creates efficiencies in a few key areas, including “smart channel” incentive programs, cost-savings in logistics, partner tools to improve user input, how data is collected, and how it is used for business intelligence. Below are three compelling reasons why every manufacturer that relies on channel partners should take a serious look at how the company is managing its channel data.
Partner Incentive Programs Gerry Murray, a research manager IDC’s CMO Advisory Service, described the lack of information predicament for most businesses as if it were a familiar restaurant – except with the lights out.
“They just don’t have the data,” Murray said, speaking at a recent CDM Industry Summit. Murray conducted industry research and wrote a report,”Channel Data Management: Enabling Data-Driven Decision Making”.
Restaurants that work in the dark cannot serve customers effectively, nor can manufacturers work efficiently with their partners if they are in the dark about channel data. CDM sheds light on the channel, especially for huge multinational firms. Here are the folks who need more coffee, the customers who ordered scrambled eggs and toast. With CDM, you are able to see all the partners, and the data is what turns on the lights.
This visibility is especially valuable in cultivating partner relationships, and designing and administering incentives. Historically, partner incentives have been based on anecdotal information and relationships, with expectations about the future based on experiences in the past. Firms often pay their incentives without knowing the true value of the partner’s performance – or truth-be-told, sometimes without even correctly identifying the partner.
The director of channel data for a large computer manufacturer told the CDM Industry Summit audience that her company pays more than $6 billion each year in discounts and incentives, in an operational framework that’s still about 50 percent manual processing. A transformative CDM shift will decrease payment errors, but it’s the visibility into incentives that will help them assess those investments. Reliable, fast, and consistently applied metrics validate the expense of rewarding key partners, and informs decisions about how and when to shift those investments.
Demonstrating the value of CDM by accurately accounting for all partners and managing their incentives is one key to achieving buy-in across multiple business units and at the highest levels of management. Because CDM is a process supported by technology, and not the other way around, that buy-in is critical to creating a culture of channel optimization, which essentially analyzes costs, and benefits, all the time. Partner Data Collection
A common complaint among partners is the difficulty they have in reporting, and that leaves many manufacturers asking the same question: How do we make it easier to do business with us? It’s obvious that barriers are bad for the bottom line when a firm risks losing business because of technology that’s not worth the hassle to a busy reseller, or when a process has too many steps and layers for a VAR to easily ask questions or meet reporting deadlines.
A CDM solution that makes it easy for partners to connect with the firm, using an interface design and tools that remove the pain from the dreaded process, improves communication and compliance, but that’s just one channel management advantage. For example, manufacturers using one CDM solution reportedly see data error rates cut by 98 percent in the first 90 days after implementation, and sales reporting that’s about 40 percent faster.
“Channel data really is the common denominator,” said Frank Martin, senior program manager for Microsoft, “whether it's marketing information, sales, loyalty programs, supply chain management, or financial compliance.” Inventory Optimization In a supply chain, managers are already racing to meet the challenges of a changing marketplace in a cloud-based environment, so integrating CDM to provide the insights they need is welcome news.
The one inventory puzzle where CDM makes the biggest impact, is in reducing the cost of write-offs by up to 25 percent – and that’s not just because you have the logistics to know where inventory is. It’s really because the “new smart channel” enabled by CRM delivers accurate data to smart people, who until now were limited in their interpretation of that data.
If, for example, a spike in orders didn’t really mean a spike in demand but triggered increased production anyway, that mistake is costly. The CDM transformation doesn’t just improve the data; it changes how you see information. These valuable insights impact forecasting, logistics, inventory, and production. It’s All in the Data
Data is the key and a powerful ally to drive decisions. What is truly exciting is that CDM solutions are the key to unlocking a world of previously invisible treasures, and that means opportunity.
As manufacturers learn more about CDM and the clarity it delivers, their partners will reap the benefits, too. With CDM gaining momentum, it is clear that it is not a technology fad nor a niche application, but a mainstream visibility and management tool for global manufacturers. In a way similar to the advances of ERP and CRM in enterprises, CDM users and use cases continue to grow, proving that CDM is a critical element in channel business success.
(About the author: Dan Blacharski is a thought leader, business consultant and industry observer. He has been widely published on subjects relating to customer-facing technology, cloud computing, and crowdsourcing. He lives in South Bend, Indiana, with his wife Charoenkwan, a noted Thai author and journalist, and their dog "Ling Ba.")
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