Successful security companies know how important it is to use equipment suppliers that are highly responsive and always ready to do whatever is necessary to assist. Such suppliers must be able to quickly turn orders around and make delivery within 24 hours. Also, when there’s an immediate need, they must be able to deliver quality customer support whenever and wherever needed.
In a word, it’s how a security dealer or systems integrator buys the goods their company sells and installs that dictates to a large extent whether they become successful at what they do. If you can’t get it, you can’t install it. If you don’t have it, you can’t fix it. And if it takes too long to get, some clients may not wait for it.
There are several channels that security dealers and systems integrators use to purchase the goods they sell. Traditionally, they buy it through distributors or manufacturers. A third option involves a combination where dealers try to derive the best of both worlds.
Traditional distributors are doing plenty to grow their businesses through dealer partnerships, and dealers and integrators can benefit from this effort. There are reasons why some manufacturers sell direct to some installation firms and end users, while others don’t. Despite this, traditional distribution continues to flourish, and some experts claim factory-direct may actually be on the decline.
Defining the New Security Distribution Equation
When you look at the wide breadth of people who buy from the security supply chain, it should be obvious not everyone sees the distribution business the same way. Security dealers and systems integrators certainly have their differences, and it’s especially important to understand what they are in order to better appreciate current trends and past changes that have taken place in the security supply chain (see chart on page 62 of December issue). Where does your firm fit?
Where security dealers primarily buy through distributors, systems integrators will purchase from the manufacturer and distributors.
“I believe that many systems integrators have a perception that they must maintain a direct relationship with their manufacturers because of the need for contract pricing, continuous supply, technical support, training and leads,” says Dave Sherman, sales director for Target Distributing of Germantown, Md.
Where traditional dealers usually stick to those technologies — even specific product lines — they know well, integrators will commonly search for the right product for each specific application.
“Systems integrators will literally look for the right solution for an application even if it leads them into new, unfamiliar product lines,” says Sherman.
When it comes to distributors, traditional dealers commonly require the distributor to stock product for them so they do not have to spend money stocking their own shelves. In addition, the typical dealer requires greater supply and technical support than integrators.
Systems integrators, on the other hand, use distributors simply as conduits of merchandise, says Sherman. What this means is that rather than undertaking the enormous effort of buying each item from individual vendors, savvy integrators have found it’s far easier and convenient to use distributors because they offer such a wide array of peripheral devices.
Changes in Supply Chain Create Factory-Direct Mentality
There is little doubt that the security marketplace has seen its share of changes during the past decade or two. Many of them entail advances in shipping and tracking technologies, while others involve the way manufacturers, distributors and installers do business with one another.
Additional changes have taken place because of the shear size of some of the installations taking place in the commercial and governmental arenas.
For example, standard operating procedure in the security industry for many years was for manufacturers to sell equipment to distributors that, in turn, sold it to installers that, in turn, sold it to end users.
Due to loyalty and a general commitment to partner agreements, this equation has served the security industry well. However some manufacturers, for a variety of reasons, have sought to change it by dealing direct with select installers and even some end users.
“It tends to go in cycles, and it has cut significantly into our business, as it has with many distributors,” says Randy Teague, vice president of marketing with ADI of Melville, N.Y. “However, there are very few times when distribution would not be of value to either the manufacturer or dealer. Even on large systems [casinos, transportation, etc.] where technical complexities require high levels of manufacturer support, the distributor still provides the delivery, fulfillment and terms mechanism.”
Advanced Technology Often Drives Need for Factory-Direct Method
Another reason why a handful of manufacturers have gone to a factory-direct means of distribution relates to the need for advanced technical and programming skills.
“This is the result of needing to have direct communication with respect to system designs, installation techniques, maintenance approaches and user training,” says Joe Freeman, president of J.P. Freeman Co. Inc. of Newtown, Conn., and writer of SSI’s “By the Numbers” column (see page 16 of December issue). “In short, the need for field help desk assistance from the factory is thinning out the way in which suppliers sell and service their customers.”
Where it’s believed that the technical ability of the average security dealer may not be sufficient to tackle a new, advanced system, it’s not uncommon for manufacturers to sell direct to specific installation companies.
In turn, such companies must meet the manufacturer’s requirements for education, equipment stocking, yearly purchasing agreement, and a yearly training schedule designed to keep critical technicians up to date and able to handle their products. In some cases, certification may be required for technicians to show themselves capable in their overall knowledge of the technology and programming aspects.
“As you move toward complex systems with integration, such as access control and video, the dealer/integrator tends to favor the manufacturer,” says Steve Roth, CEO with Tri-Ed Distribution of Woodbury, N.Y. “The manufacturer has pretty much excluded the distributor other than support aid, and it works. It’s a natural division of how the market segmentation should take place.”
Another cause for change in the supply chain is an increase in the number of suppliers.
“Competition has caused distributors to increase services and programs to dealers. The overwhelming emergence of new manufacturers has caused distributors to carry a much larger variety and quantity of stock,” says Greg Bier, vice president of sales and marketing with Video Security Specialists (VSS) of Burbank, Calif.
Convergence Forces Significant Changes in Distribution Chain
Another phenomena witnessed in distribution involves the convergence of security with other low-voltage disciplines, such as home theatre and home control.
“Convergence is no longer a manufacturer’s theory, it’s happening right now,” says Sherman. “Security dealers that are not proactive in other low-voltage markets are losing their customer base.”
Now more than ever, end users can contract with one company to install their alarm system, telephones, home theatre system, datacom and home-control/building management system.
“There are a lot of guys who are doing a great job, but if you look down into the depths of the dealer base, you will find lots of guys who tend to sell products as opposed to selling value,” says ADI’ Teague. “I think that when you sell value, it’s more about the benefits and total lifecycle costs. This also provides a great incentive to up-sell.”
Because many security firms are moving in this direction, watchful distributors have taken steps to provide a comprehensive list of products and services. Proactive distributors have made this move to ensure their own economic future through the everwidening low-voltage mentality the industry is naturally gravitating toward.
Distributors Provide Education Opportunities for Dealers
Advances in technology and more sophisticated software are also driving positive change in the distributor side of the supply chain. Today’s distributors are working hard to help their dealer clients cope with the rapid changes taking place in security technology.
One way to provide this kind of support is through training seminars and schools. There are those who believe that because of the wide breadth of vendors that a typical distributor has, the best selection for this task is the distributor.
In order to help security dealers and systems integrators maintain their prominent position in the residential marketplace, many distributors are working to offer educational programs designed to give the added skill sets needed in order to install and service home-oriented electronic systems.
“We provide training and certification for dealers who want to enter these other areas,” says Sherman. “We bring them to our in-house training facility in Germantown, where they are given a chance to learn these technologies first-hand.”
Jeff Hyndman, marketing manager with Systems Distributors Inc. (SDI) of Atlanta, says dealers need to enter the 21st century along with the end users they serve.
“Security dealers who are not moving into these new businesses are sometimes stuck in the ‘good ole days’ mentality where they sold a burglar alarm and panic buttons,” Hyndman says. “Today’s consumers are often interested in a much broader array of services, especially CCTV and access control.”
Special Events at Trade Shows Drive Dealers Toward Integration
Some distributors believe so much in dealer training that they are willing to hold training classes at industry events, such as ISC Expos and the ASIS Int’l and National Fire Protection Association (NFPA) shows, among others. This includes their own in-house expositions where clients come to see products and technology first-hand and gain knowledge through special training sessions.
“We do our best to help dealers stay current every day. Every year, we hold 39 expo events across the country, and that gives them an opportunity to catch up with the latest technologies,” says ADI’s Teague. “We also have individual training CDs that are manufacturer independent. They provide the basics across all categories of products.”
Roth says that Tri-Ed provides their customers with what they call the Technology Tour.
“We take the Technology Tour from city to city bringing our vendors along with us,” says Roth. “These shows present tour client base a variety of products and the technologies behind them.”
In many cases, distributors like SDI provide help right at home at their branches.
“We just held a special training class on network IP cameras and network storage, which was well-attended,” Hyndman says.
Distributor Hiring Practices Change in Favor of More Local Experience
Another way that distributors are working to assist their security dealer clientele is to hire technology-savvy people at the branch level. After all, these men and women are usually the first point of contact with the dealer.
“We have on-staff systems specialists who have many years of experience in CCTV, fire alarms and access control systems,” says Hyndman. “Many of our clients do large integrated systems and we must have the ability to service them.”
Part of this effort is the assemblage of a dealer-support department where technicians can go for help when they have questions - technical or otherwise.
“A key part of our Value-Added Distributor [VAD] program is our technical staff department. We offer pre- and post-sales and installation support. Our team has 15 years minimum experience,” says Target Distributing’s Sherman.
He adds some of Target’s own vendors have asked to channel some of their technical requests through Target’s dealer support structure.
It’s no easy task to keep the men and women who work for these distributors up to date with technology and products. In fact, some distributors take the commitment they have with their dealer customers so seriously that they are willing to put their money where their mouth is.
“We often send our sales staff to the vendors for factory training,” says Sherman. “It is our policy to have one or more ‘specialists’ on our sales team for our key product groups, and often for specific manufacturers.”