Clients want to know the status of all of their products at any given moment, and distributors need to make it easy for manufacturers to get that improved visibility, says Greg Runyan, a senior analyst at the Yankee Group. Distributors understand that adopting technology such as sophisticated logistics software is a matter of survival, not convenience. Distributors use IT to generate revenue for the company as well. Ingram isn't charging its long-time customers for services they're used to getting for free. But newcomers, especially those in the dot-com sector, are putting up the bucks for logistics services.
Drop shipping is one example of an information-driven service.
In drop shipping, a distributor stores a manufacturer's product such as computer chips. When a customer, say a PC maker, orders that chip from the manufacturer, the chip maker's order-entry system notifies the distributor's IT system. IT systems let distributors pinpoint shipments of goods as well as running the E-commerce engines that account for the business itself. As little as two years ago, less than a third of the product sold through Ingram Micro got drop shipped to the user. The Internet has advanced IT's position of reaching out to customers rather than operating only within a company's boundaries.